If a borrower sells chattel property that is security for a direct loan and does not report it, what should be the first action taken?

The best first action to take when a borrower sells chattel property that serves as security for a direct loan, without reporting the transaction, is to make a written request for restitution from the borrower.

This step is crucial because it addresses the borrower directly, allowing them the opportunity to rectify the situation. By requesting restitution, the lender can formally communicate the issue and seek to recover the value of the security property that was sold without proper reporting. This action serves as a precursor to potential further steps, such as legal proceedings, by establishing a record of the lender's attempt to resolve the matter amicably with the borrower.

Additionally, taking this approach often demonstrates an effort on the lender's part to resolve issues through communication before escalating to more severe actions like demanding payment from a third party or initiating legal action. In situations dealing with secured loans, maintaining clear and formal communication with the borrower is essential for protecting the lender's interests.