Changes in the Repossession and Auto Finance Industry over the past Twenty-Five years
Today a client asked me how the industry has changed since I became involved in it. When I thought back, I realized there have been some pretty significant changes in the auto finance and repossession industries over the past twenty-five or so years. Many of these changes are things that have changed the way we live, and some are specific to our industry. Its interesting to look back on the past, and as we test and prepare to release our new software, its also interesting to wonder if what we’ve built can have an impact on our industry in a positive way. From the repossessor in the field to the huge auto finance company, both may be fighting for their lives, but in a different way. I’d like to think the software we’re building could have a positive impact on both.
As I reflected on some of the changes I’ve seen, I’ve made a list. Here it is, in as close to the order the changes happened as my memory would recall:
Chrysler Credit didn’t have computers when I started there in 1982, at least not at our desks. We had a main terminal connected to Detroit, and we printed hundreds of pages from the computer every day to help us manage our delinquent accounts. Even when I was at Mitsubishi in the mid to late 80s, we still didn’t have computers. Sherlock Recovery was the first place I worked that had a computer, and that was in 1989. I immediately saw the potential to streamline work, and to this day, I still see that potential. As we work to finalize our software, I’m still blown away with the ability that technology gives us to improve our daily workflow.
The other interesting thing about computers is they basically wiped out a whole industry. When is the last time you saw someone using a typewriter? My kids are 12 and 16 and neither has ever used a typewriter. Computers have also gotten smaller, the displays have gone from a thick, green screen to a flat screen with full and vivid color, and now I have a computer in my iPhone that I carry in my pocket.
Elimination of the Field Rep
Chrysler Credit hired me in 1982, and my job title was “Field Representative.” My job description was to audit car dealerships, collect payments from delinquent customers at their homes or jobs, and when the need arose, repossess their cars.
The auditing was pretty boring. I’d go to dealerships and count cars, looking for dealers who were floating on their obligation to pay Chrysler Credit in a timely manner after they’d sold a car. Collecting payments from people was more interesting, but that paled in comparison to the rush I got when I repossessed a car from someone who was playing cat and mouse with one of our collectors.
Don’t get me wrong, it’s a drag when you have to take a car from a nice person who is really struggling. That’s not what I’m talking about, or what keeps me coming back to this industry. What I am talking about is the classic deadbeat, a person who has been given every opportunity to pay, and every chance to surrender their collateral, and now they’ve purposely gone under the radar and they’re hiding form the inevitable. More times than not, either I or my people have become the inevitable for them.
Back in my Chrysler Credit days, I wore a suit, drove a “K Car”, and carried a Curtis Key Gun in my back seat. Using a “key code” and a “key blank”, I could snap off a key in about a minute whenever I needed to take a car. We were supposed to call a professional repossessor, or a “Pro”, when the repossession was too dangerous. No one ever called a Pro because that meant you were a sissy. Besides that, Chrysler was coming off a government bailout unlike any our country had seen in decades, and we were supposed to do everything we could to save a buck.
My territory was Reno, and with it being a pretty rough town, I learned one important thing about taking someone’s car. You need the element of surprise because the last thing you want to get is caught. If you get made, you better be able to talk your way out of a bad situation, because that’s what your usually in the middle of when your taking someone’s car, especially in the middle of the night.
After about six months in the field, I got promoted to being a collector. We’d still go take cars from time to time, but as a collector, I had my own field rep assigned to me. I only had to go in the field for training if my rep couldn’t find a car I knew I could locate. As my job as a collector evolved, one of the main reasons I spent more and more time in the field was to skip trace. We didn’t have all the skip tracing tools that are available now, so when you needed to find someone, many times the best way was to get out and ask neighbors and people who lived or worked near the last known address for the person we were trying to locate. Funny thing is that’s still one of the best ways; it’s just not always practical. As our industry evolves, I believe this part of the business will come back into fashion, but with it will come the financial incentive the clients need to pay the repossessor to motivate them to get out of their tow truck and ask those key questions that you can’t ask when your telephonic skip tracing efforts are not producing the results you need. When we ran our repo companies we tried having non repossessors in the field to make contact and find people, but eventually we gave that up as it was difficult to justify when the clients weren’t willing to pay for any investigation or additional fees beyond a repossession. Now that many are losing millions, I believe we can create a model where our better agents will get out of their truck, acting as field reps in a way, because they know if they produce results, its another way to earn commission.
Chrysler transferred me to the Long Beach branch in 1984. I was sent there with a bunch of collectors from every Chrysler branch on the west coast. The task at hand was to help them reduce their delinquency. They had more accounts over 90 days late than the rest of the west coast Chrysler branches combined. When you have a situation like that, that means you have to repossess a lot of cars. Long Beach didn’t have Field Reps, and when I requested we transfer some in, I was told that wasn’t an option. Chrysler had pretty much eliminated field reps by 1984, and it seemed that Sacramento was one of the last branches that employed field reps.. As it turned out, GMAC and Ford Credit followed suit within a few years, and that pretty much was the end of the Field Rep position for large auto finance companies.
A few years after that, a couple companies started field rep companies. They’d charge $75 and send someone out to make contact or leave a note on someone’s door, but I’ve never heard of anyone who really made an impact doing that. It makes more sense if the guy with the repo order can make the contact, as many times that contact results in an immediate lead and the hand off from field rep to repossessor can cause a delay that loses the opportunity to get the unit picked up.
The Fax Machine
This was a big deal. In the old days, when we wanted to assign an account to a Pro, we had to call their office and dictate all the info to them over the phone. I literally remember my hands being tired at the end of the day Friday as that was the big day for a client to call in 5-10 deals at once.
When the first fax machines came out, the fax paper came in rolls. It also was the type of paper that after a few months, the printing disappeared. We all found that out after it was too late.
Next, the fax machines were built to be able to use regular paper, and then they became multi-function devices that could fax, print, copy, and scan. At American Recovery Service we had five high-speed machines that cost five grand each. They could process hundreds of pages a day at lightning speed, but it was still a cumbersome process. We had to manage this process by having a full time person standing by the machines all day.
Now our fax goes to an email so we can save and easily move documents to the appropriate places. We also can fax out using email to those who haven’t quite caught up in terms of technology.
Cell Phones, Caller ID, 800 numbers and pagers
When I was a Field Rep, I’d leave the office in Sacramento on Friday night with a roll of quarters and a stack of deals on people who were late on their payments. I also had the necessary paperwork to conduct a couple dealer audits. That was my work in Reno for the following week. I was supposed to drive there on Monday morning, audit the first dealership, and then start collecting payments in the field from people who broke promises to pay over the phone. The quarters were to use pay phones to call and check in. I don’t think we had 800 numbers then, or if they were around, Chrysler was not hip enough to have one.
This was six to eight years before Cell Phones, and a few years before Pagers, which came just before cell phones. Due to the fact that it was pretty hard to keep tabs on a field rep working out of town, I’d go straight to Reno on Friday night. I’d start working the delinquent accounts, collecting as many payments as I could over the weekend. On Saturday morning I’d show up at Reno Dodge to do my first audit, and on Sunday I’d audit Reno Chrysler Plymouth.
Between Sacramento and Reno is a slice of Heaven on Earth called Lake Tahoe. During the winter, I was one of twenty or so people who paid a few hundred bucks to a guy to have a key to his six bedroom ski house just outside of Squaw Valley Ski Resort. It was first come, first serve on the bedrooms, and if you didn’t get a room, you got a couch.
I love to ski, and because it was so crowded on the weekends, I’d work all weekend so I could ski during the week. I’d usually finish all my work for the week by Monday or Tuesday, and then I’d have the rest of the week to ski. Without Caller ID, I could call in from a pay phone at the lodge at High Camp at Squaw Valley Ski Resort to check in, and because I had finished my audits and collected most of my payments (or the cars) of those who couldn’t pay, I had the job figured out. I’d still have to make an occasional trip back down to Reno to collect a payment on a deal they would give me over the phone if someone’s check bounced, and as long as they didn’t live in Winnemucca or Battle Mountain, it was no big deal. The most difficult part of the job was explaining the goggle tan I got during spring skiing. With Cell phones, having this type of freedom, with this type of job would have been impossible.
When pagers first hit, they were good and bad. The good part was you now had a connection to people working for you, so it made them more accountable. The bad part was they could drive you crazy. You got a page, pulled off the freeway and struggled to find a pay phone. When you finally found one that worked, you called in to the person who paged you. Anyone old enough to remember these certainly recalls the “911” pages you’d get, especially if you were in the repo industry. Of course, as soon as you got back on the freeway the damn pager would go off again and you’d have to pull off and look for another phone, which was a bitch in South Central L.A. a place that must hold the record for most non-working pay phones.
I remember the first time I ran into a bunch of gypsy accounts in LA in the mid 80s. These guys used pagers and they installed a pay phone in their house so the number was harder to trace, break, pull tolls, whatever. In the old days those practices were common place when skip tracing, but not any longer.
Once cell phones hit, all bets were off. You became accessible at any time, and it helped us quite a bit as we could use them to get help on a repo when you needed it. By then I became an entrepreneur, so now I could keep track of my guys who would have been goofing off like I used to do.
I remember the first repossession software I used. It was about 1988 and it was called PROS, or Professional Repossessors Operating System, I believe. When we went from a manual system to tracking everything about a repossession assignment through PROS, it improved workflow two fold.
When we started our first repo company, we wanted to write our own program. While doing some research, we ran across a programmer in Vegas who had written a program for a friend of mine who owned a repo company there. We bought his program at Crown Recovery back in the early 90s and when we sold our half of Crown and started River City Auto Recovery in Sacramento in 1993, we purchased another version and started working closely with the programmer to enhance the system. The first one was called Recovery Management System (RMS) I believe, the second one was eventually called eTracker, and the web version was called WebTracker. It’s a decent software, and the guys at Digital Matrix, Dennis and David, are first class.
By 1998, we were starting to realize the limitations our software placed on what we wanted to do with the business. While we were one of the first to send and receive large amounts of data via email (assignments and updates) we knew we needed to build a web portal to more efficiently handle the way we communicated with our clients and with the hundreds of repossession agents we contracted with.
I got a call in mid 98 from a guy named Todd Hodnett, asking if I’d be interested in meeting with him to discuss an idea he had. He was a lawyer from Texas and said he already had Letters of Intent from nine of the largest repossession companies in the country and he heard we were the largest repossession organization in the industry and he wondered if we’d be interested in being a part of what he was trying to do.
Initially, he said he was trying to help his Dad sell an American Lenders Franchise in Texas, but as he researched the industry, he realized two things. First off, he wasn’t going to be able to help his Dad sell his business as repossession companies were not the easiest businesses to sell. Secondly, and the reason he was calling me, was he figured out during his research that there was an opportunity to “Roll Up” the repossession industry, as many other industries around us were doing , or attempting to do. He cited an example of a company in the process of their own Roll Up; United Road Services. He said they were a towing and transport company that had put together ten “industry leaders” and some were getting as much as 30x value for their businesses. Obviously, that caused my ears to perk up. I’d just finished selling the Concord branch of River City Auto Recovery, and had previously sold our half of Crown Auto Recovery, but neither generated a 30x return.
Todd and I had many conversations over the next few weeks, and I flew around the country to meet several of the other players in the deal. During this process we hired a CEO with Wall Street experience, John Chapman, and it was decided that our site would become the national HQ once the IPO was completed. John asked if we would do this as we were larger than anyone else, and he felt we could coordinate the anticipated volume. Besides that, we had just built a brand new building and we had a five person IT department at a time in the industry where there probably weren’t five dedicated IT people working as employees for all the other repossession companies in the country combined. Our industry has always been behind the curve when it comes to IT, both on the client and vendor side, and unfortunately, it still is that way to some degree. I can’t tell you how many times I’ve seen eyes roll or heard sighs when I ask a client about getting their IT department involved to help us streamline the exchange of data.
Todd and John flew out to our site in June of 1998 and after a tough negotiation, we signed a letter of intent to sell our company for 5 ½ times earnings, which was a long way from 30x, and had I known then what I know now, I wouldn’t have signed that type of a deal. We also were getting half cash and half stock once the IPO came out the gate, and they showed me how the United Road deal had since gone public and those guys who got half stock that was priced at $15 now had stock sitting above $30 a share, so they’d “doubled their money”. That’s another story, because I still am wiping my back side ten years later with that United Road stock that ended up becoming worthless, but we can talk about that in another Blog.
When John and Todd left, they asked me to write a detailed business plan about how we would manage the ten companies, how we would identify acquisition targets, and most importantly, how we would build the software to run the company. I wrote that detailed business plan over the next two months, sharing it with John and Todd, and in that plan I wrote the outline to build a web based software platform we would build to allow clients and repossession agencies a place to meet and share information on the web.
The concept was called Tow America, and we were going to roll all these companies into one nationwide repo agency via an IPO we had planned for October 98. Unfortunately, the stock market dropped noticeably in Sept 98, and our IPO fell off the table. The deal went from a public IPO to a potential private money deal, and after meeting with a couple sets of Harvard Investment banker types, we were out of the deal on Christmas Eve, 2008. Within a year, that deal completely fizzled and all the other nine companies still own and operate their own businesses, and the best part was I formed a couple great friendships with two or three industry leaders. We, on the other hand, found out United Road Service had silently purchased a small competitor of ours in Sacramento and when we inquired to see if they would be interested in acquiring another repo company, they said they were. On March 23, 1999 we sold our business to United Road, and we were their 66th and final acquisition. Little did I know that I’d just stepped on board of the Titanic, but fortunately I had a great lawyer and he negotiated an almost all cash deal for us, and we were the only company of the 66 who didn’t end up with half stock. The stock I did get is what I still wipe myself with when I use the bathroom, as that’s what its worth. Within a year and a half I’d reached my level of frustration in working as a United Road Service employee, and after nearly twenty years in the auto finance and repossession industries, I got out.
Two interesting things happened a few years later. Todd Hodnett came out with a software product called Recovery Database Network, or RDN, which looked and felt a lot like the software I’d written into our business plan in the late 90s. I’m assuming he got the idea from our discussions as prior to our meeting his knowledge of the repossession industry was admittedly “limited to watching my dad run a business I never wanted to be involved with”. When I started Find John Doe I signed up for RDN after a client required us to do this if we wanted to get their business. I called Todd and congratulated him on building a successful business and I commended him on taking an idea the industry needed and running with it. Another interesting thing happened when the other repo company United Road purchased, PK Willis, purchased my company back from United Road. Now were competing against our old company, which is kind of weird, but no big deal.
When we started Find John Doe, we were pleased to see the eTracker program had also evolved into a web-based software, and we’ve been using that for the past two years. Our clients go to our web site and they can see exactly what we do, in a transparent and real time manner. I think that’s important for the clients to know their deals are being worked, and its important to make sure the work is documented before things happen, i.e. “He paid as a result of our contact” is easier to claim to a client when the phone call and conversation is clearly documented in your software five days before the payment hits and the account closes.
While many financial institutions now use different web based programs to manage the repossession process, we think there is room for improvement that will continue to improve the workflow process. In addition to finance companies, there are still a great deal of repossession companies who need to improve their technological capabilities, or they may face a loss of business to those competitors of theirs who can meet the finance companies increasing demands to share information via the internet, email, etc.
The formation of Mega Call Centers
When I was at Chrysler, we had California branch offices that staffed from 20 to 50 people each in San Diego, Orange County, Long Beach, West Covina, The Valley, a couple in the Bay Area, and Sacramento. I don’t remember how many branches we had across the country, but it had to be at least 100.
I’m not sure which company was the first to start consolidating these branches into large call centers, it may have been American Honda, but within a few years almost all the major finance companies had gone from multiple branch offices to large call centers.
This certainly had an impact on the repossession industry. In the old days, you had closer relationships with your repo agents because they were right down the street and they came in your office. When Chrysler moved from California to Kansas City, it was pretty tough for the small repo guy to get his foot in the door if it wasn’t already there, and even then, many times they got squeezed out.
I’m not positive if it was a combination of the elimination of the Field Rep and the consolidation of branches into Call Centers, but at Chrysler, the companywide delinquency rose quite a bit after these call centers were formed. In Sacramento, for example, we used to carry a delinquency of around .25 of 1 percent, or 25 people out of a portfolio of 10,000 who were 30 days late on any given day. They’ve never seen numbers like that again, and today, it’s unheard of to carry delinquency below one percent, not just at Chrysler, but with any finance company.
The creation of Skip Tracing Companies
At Chrysler, I’d never heard of a skip tracing company. We hired repo companies to find the people we couldn’t find, but their resources were limited and if the skip moved from their service area, that was usually the end of the hunt for them. Besides that, the finance companies felt skip tracing was a part of the price they paid the repossessor for getting the car, so billing anything extra was out of the question.
While at Chrysler, I got recruited to work at Mitsubishi Acceptance about a year after they’d hired Chrysler to help them start their finance company. American Motors and Volkswagen had hired Chrysler to manage their finance companies, so this concept wasn’t new, but instead of hiring Chrysler Credit they retained Chrysler First, which turned out to be a huge mistake. Chrysler First was a division of Chrysler that financed everything but cars, and their inexperience in financing cars showed clearly by the time I arrived as Mitsubishi’s Branch Operations Manager in 1986. At Mitsubishi, I saw more skips my first day than I’d seen in the year I spent cleaning up the mess that was at the Long Beach Chrysler Credit branch prior to my arrival.
At Mitsubishi, I lobbied management to create a skip tracing department within the collection department. They allowed me to do this, and within a few months I had a about a dozen skip tracers working the most difficult accounts. Irene “Hot Rod” Rodriguez, if you somehow read this, give me a call.
In 1988, my wife and I started our first business and I believe we may have been one of the first exclusive auto finance skip tracing companies in our industry. The movie Ghostbusters had been a favorite of ours, so when it came time to name our new business, Skipbusters seemed like as good a name as any of the others we came up with. We sold Skipbusters in 1999, and we started Find John Doe in 2007, our second skip tracing company. Besides those two, there are now over 100 skip tracing companies that service the auto finance industry.
Changes in technology by manufacturers in the ignition systems of cars
In the late 80s I managed Key Auto Recovery and then Sherlock Recovery. While the majority of our repossessors used two trucks, there was a guy at Sherlock named Paul Campione and he could take more cars in a night than any guy I”d ever seen, or have seen since. Paul didn’t use a tow truck. He trained himself to be a locksmith and in doing so, he got into cars with a slim jim. Based on the make and model, he’d do whatever it took to get the car started, from picking the lock to forcing the ignition on with a special “force tool” or he would tear down the steering column in less than a minute and he’d drive the car away using a set of vice grips in place of a steering wheel, after he started it with a screwdriver. He was amazing, and when he asked me if I’d put Skipbusters on hold to be his business partner at Crown Recovery Services, I knew we’d make a great team. By adding my wife to handle the finances, and to keep us in check, we were off and running.
Paul, our other repossessors and one of my buddies, Phil Heithold, trained about a hundred guys to take cars with their hands over the next few years. I sold my half of the business to Paul and my wife and I and Phil moved to Northern California and we started River City Auto Recovery, and in doing so, we would repossess hundreds of cars a month and we still did it without owning even one tow truck. That’s unheard of for a repo company now, and it was pretty rare even back then.
Starting in the mid 90s, auto manufacturers started adding computer chips to keys, and then they started making locks unpickable. By the time we sold River City of Concord in 1998, and then the other River City branches in 1999, we had a tow truck in every branch and the company was on the verge of needing to add more trucks immediately. At fifty grand and up, that’s a lot of money tied up in tow trucks. Nowadays, a decent sized repo company almost needs a fleet manager and an in house mechanic.
Besides the expense and liability of towing cars, we never liked repossessing with tow trucks as they made the element of surprise much more difficult, but given the way they make cars these days, you really don’t have a choice.
The creation of Forwarding Companies
At Skipbusters. we had developed contractual relationships with hundreds of repossession agents throughout the United States. In my prior jobs at Chrysler Credit and at Mitsubishi Acceptance, I’d managed the same process in the Sacramento and Los Angeles areas, so setting up the management of a group of repossession agents was something I was familiar with. To anyone who has ever done this job, you know how complex it can be. For starters, you have to identify as many repossession agents as possible, and then you have to choose the best one’s. Then you have to check references, licensing, workers comp and liability insurance, and a variety of other factors which determine if hey qualify to receive your work.
The process of locating agents has become easier as the Internet has evolved. Back in the day, we would use the phone book, word of mouth, or one of the four repossession associations (Allied, ARA, NFA or Time Finance) who provided guides to the financial community that encouraged the finance companies to use the members of their associations. This seemed like a good concept, but for me the problem I’ve always had with these associations is they would usually charge more money than other agents I found in the area, and I always felt there were conflicts of interest. An example is that some of these associations would charge prospective members tens of thousands of dollars to join, which is a way to keep the membership low so the agents in the book would have less competition. As an entrepreneur, I believe competition makes your business better, and a lack of competition makes your business weak. Another example just happened to me the other day. I had a problem with a repossession company we used who was a member of one of these associations, so I called the associations HQ for their assistance. They referred me to the head of the grievance committee, which happened to be a competitor of the company we had an issue with. After we spoke about the problem I was having with their competition, the head of the grievance committee suggested that next time I use his agency and then I wouldn’t have these kinds of problems. If that’s not a conflict of interest, I’m not sure what is.
Once you locate an agent to use, you need to agree on fees, and then you ask for a copy of their Liability (and Workmans Comp) Insurance and you make sure the limits meet your needs, the carrier is a legitimate Insurance company and not some fly by night offshore carrier, and then you have to follow for a certificate naming you as an additional insured or a certificate holder so if the policy cancels, you are notified in advance of the cancellation. Then you need to discuss your service needs and expectations, and ideally you want to enter into a contract so the relationship and liability issues are clearly spelled out. The next step is make sure you know their service area, and then you need to be able to handle the flow of work, from assignment through repossession. If the repo agent doesn’t get the car right away, you need to communicate with them to find out why they haven’t repossessed the collateral, ideally helping them in any way you can. Finally, you would also want to set up tracking methods to insure they are doing the job as per your expectations. As you can see, it’s a complicated process, especially given the challenging nature of every assignment and the importance of having the best possible repossession agencies working your accounts.
When VW Credit split from Chrysler in the early 90s, they hired Duetsche Bank to do what Chrysler had been doing for the prior 10+ years, manage every aspect of VW Credit. When they split from Duetsche bank, VW hired many of their employees and they started their own finance company. It was still called VW Credit, but for the first time it was owned and operated by Volkswagen. At the time, I was working with Paul starting Crown Recovery in L.A., and when the opportunity arose, we handled all the VW repossessions in the L.A. area, one of their major markets. After Crown, we did the same for VW in Northern California, handling their repossessions exclusively through River City. We also did the majority of their skip work through Skipbusters, and when we saw they were struggling in the repossession process in other parts of the country, we suggested they consider allowing us to use the network of repossession companies we had contracted with through Skipbusters to manage their repossessions in the remainder of the U.S.
They agreed to try it, but before we took the plunge, I called a manager I found at Manheim Auto Auctions to ask him about their experience in managing the repossession process. A couple years earlier, they tried to manage the repossession process for some of their clients, and the guy I got a hold of said they failed miserably because it was too difficult to find good agents, they still had several lawsuits they were dealing with, and “the trouble wasn’t worth the effort.” Manheim had done it to “drive more cars to their auctions”, he said. I was a little nervous after hearing some of his war stories, but since we had confidence in our agents, we told VW we could handle it.
In 1994 we formed American Recovery Service, or ARS as it became known. I’ve since discovered that another large repossession company, Minnesota Repossessors, had entered into a similar arrangement with one of their largest clients at the same time we formed ARS. To my knowledge, we both were on the cutting edge of the formation of what is now commonly known as the “repossession forwarding industry.” I refer to it as an industry, as I would estimate that at least 25% of all repossession assignments, possibly as high as 40%, now go through forwarding companies. Interestingly enough, one of the companies who got back into forwarding a year or so after we started was Manheim, and they were followed shortly thereafter by the other auction houses.
By the late 90s, the sub-prime auto finance wave had hit and we picked up several more clients who needed this type of services. By the time we sold ARS in 1999, we were the largest repossession organization in the country at the time, handling over 4000 assignments per month. Today, I’ve heard a handful of forwarders handle over 10,000 assignments a month. I think the main reason this industry within the repossession industry has become so popular is due to the complexity of the repossession management process, and the fact that it’s so difficult and expensive for clients to manage, and the forwarding companies can provide a valuable service for the lenders.
We used to charge a $75 fee for every assignment, and we would send a copy of the repossession invoice to our clients with our bill so they knew how much we paid each agent for every repo they performed. In looking at this industry recently, it seems as if some of the forwarding companies are now marking up the repo agents bill by amounts that can be two or three times the $75 we used to charge. I think that’s a shame, and it certainly wasn’t what we had in mind when we cut our first few deals with our clients. I think the management of the repo process by repossession industry insiders can be a valuable tool for lenders, but I also believe if a client is willing to pay $450 or more to a forwarder, they owe it to themselves to know what the forwarder is paying the agent, and if its under $300, which I hear is still happening, then maybe they should re evaluate what they are paying the forwarder.
Forwarding should be a service with a set mark up, with some incentives for overall performance, and the repossession agents should be rewarded with a fair price, and more business and some financial incentives when they perform at or above expectations.
Before the Internet made a large impact on the repossession and auto finance industry, there was email. Obviously the Internet came before email, but it was through email that we first began to realize how to communicate effectively in a way that didn’t include a fax machine.
We had a client in the mid 90s who serviced many portfolios of sub-prime paper for Wall Street investors. In fact, they were the largest servicer of sub-prime paper in the country at the time. Mitchell Sweet of Loan Servicing Enterprises (LSE and later MSA Solutions) was a very innovative businessman, and when he told me in a meeting that it was my problem and not his that I didn’t have the capability to communicate electronically with his company, it made me realize that this was the beginning of how finance companies and repossession or skip companies would be communicating. That was 1998, and surprisingly, as were now in 2009, I’m amazed that many large finance companies still haven’t embraced the need to advance themselves in regard to technology in a way that can increase their efficiency by a margin that will significantly exceed the return on their investment in adding IT staff and additional resources.
At the time, we were receiving thousands of deals a month and they all came by mail or fax, mostly fax. We had just started using email, probably through AOL, and I had no idea that we could send deals in a spreadsheet through email, eliminating the fax. With LSE leading the way, we got down to one fax machine as he sent us the deals by email and we sent him back the updates every day by return email, and we wrote scripts to automatically populate our systems with the data we were sending each other. It saved us hundreds of man-hours a week, and thousands of dollars.
The other thing about email is the whole dynamic of how its changed our lives, how we communicate in business and in our personal lives.
Mobility, Portability and other cool technological advances
My office phone forwards to my cell, or it goes to my voice mail and sends me an email on my iPhone. This is one small example of a way to make sure I stay in touch with my clients, 24/7.
You can now get your calls and email outside your office, and no one outside your company knows your not at your desk. The freedom that gives a person makes their lives easier in many cases, but it also can cause a hardship on your family life when you don’t know when to “turn it off”.
I went skiing in Vail for Spring Break and found it interesting that I could ski down long runs and then manage my emails on the lift back up the mountain. My bro in law gave me a hard time for not getting away from work, but his company is 10 years old and mine is 2, and as a start up, I still feel the need to be involved on many things and by having the email access on my phone like that, it actually allowed me to relax while being away for a week, versus wondering what's going on.
Click to dial, screen pops, Trap Lines, soft phones, broadband versus dial up, etc, etc.
As you can see, there are many things that have come to market that have increased the productivity of the repossessors job in the field as well as the repossession companies ability to work more efficiently.
I mentioned phone breaks earlier. In the old days we used to break phone numbers every day. We hired a guy who told us the address to a phone number, etc. Since starting FJD, we havent done that once, which amazed me at first, but there have been laws written which just dont make the risk wrth the reward, and with all the info available on line about people, its not as important as it used to be.
Now that we’ve looked at the things that have changed, what will the future hold for our industry? We’ve been working on a new software program that we believe will have an impact. I also wonder how much longer state governments will continue to allow repossession in the form its currently in. It seems a bit like Cowboys and Indians to go steal someone’s car legally in the middle of the night. In these times were seeing more repossessors getting assaulted and that’s scary. I would think that at some point the courts would take over the process, unless the customer surrendered the unit voluntarily, but the lenders may have enough control to prevent that from happening for a long time.
We’ve seen one or two attempts at bringing a web-based software to market that let’s the finance community communicate over the web with the repossession community. This is an idea that has been around a while, it just hasn’t really taken off in the way I believe it can. The current versions kind of look like what I envisioned back in 1998. While it’s better than how we used to do it, I believe there’s still quite a bit of room for improvement in this area.
Can we get a little respect, please?
For too long the repossessor has been treated unfairly. They put their life on the line, and they are true professionals, skilled tradesman. They perform a thankless job, where every one of their customers is unhappy to see them and yet, they still perform night and day, weekends and holidays. When they do perform at a high level do they get an extra reward? Rarely. Are there performance incentives from clients to get collateral that’s closer to charging off, or has a higher value, usually not.
The compensation a repo man or a repo company receives sounds crazy to people who don’t know our industry. A guy repossessing a 1982 Ford Escort worth $500 gets paid the same for that repo as he does for a ninety thousand dollar Mercedes S550 he may repossess in the same night. Why is that? Who created that rule? I think it’s about time that changed, for the benefit of the finance companies as well as for the benefit of the repossessor. The collector may want them working the Escort as hard as they do the S550 because it may mean the same thing to them, a reduction in their delinquency. I guarantee if upper management took a harder look at this scenario, they’d realize it would make more sense to incentivize them to work harder to get the S550 as it will cover the loss of 100 Ford Escorts.
Lately, it seems as if the prices being paid are going down, which is crazy. While we may have had a hand in the creation of the forwarding industry back in 1994 when we started ARS, we never envisioned the price war that’s going on now. Forwarding Companies are fighting for business, and somehow the prices keep coming down. I heard the other day about a forwarding company charging $310 to repo cars nationally. What are they paying the repossession agents, and how are they finding reputable companies to do their work? I’m guessing they aren’t, and they’re using companies without sufficient insurance, manpower, technological capability, etc. It’s the old price vs cost equation, and I guarantee the finance companies overall cost will go up by their trying to lower the price of the repo.
By now most of you have heard about the forwarding company that hired a tow company to pick up a voluntary and the tow driver ran over a person and killed them and then took off.
Many forwarding company have had questionable things happen on other accounts assigned for repossession, and from my experience, these problems happen when you try and hire companies or individuals who are not qualified to do this type of work. This almost always happens when the hiring decision is based on price, i.e. who will do it for the least amount of money. If a collection manager was going to have surgery, would they shop for price, or try and find the most qualified person to do the job?
License Plate Recognition
This has potential, but in order to see the traction needed to have an impact, the stars have to line up in a number of areas. For starters, lenders need to actually record the plates on the cars they finance and then make them available in a manner that allows repossessor’s to know at 3am if that car is really still out for repo. It also will help if someone can strike a deal with the DMV’s in state’s like California who could make the process more effective if they’d allow an export of their database on financed cars when the lenders don’t have the plate recorded. Last, there needs to be a more comprehensive effort to get more camera’s out there recording plates. When there’s a camera on every UPS truck recording all the plates they see in a day, and there is a centralized database where finance companies can go to see if their unit has shown, and then they can recover the unit for a reasonable price, this could be a viable product.
Repossession Company Consolidation
As I detailed earlier, in 1998 we were part of one of the more serious attempts to consolidate the repossession industry.
As the repossession industry has evolved over the past ten years, we’ve seen some regional repossession companies that have grown to levels that the industry has yet to see. We used to think it was a big deal to repossess a few hundred cars a month, and now some of these companies are repossessing thousands of cars a month, with multiple branches that handle several states at a time.
Given the track record of other industries that have rolled up multiple companies to form mega companies that handle sizeable amounts of volume in their industry, I believe its just a matter of time before that happens in the repossession industry.
Geospatial Mapping Technology
We all have seen Google Maps and every other mapping product, and while its cool to see your house up close on Zillow, there is a lot more that can be done with this technology that will help our industry. When I managed or owned my own repossession companies, I always believed the secret to our success had as much to do with the routes I put together for the repossessors as anything else. Nowadays, it seems as if a lot of companies have a guy cover a territory and they leave it up to each of them to route themselves. I’m sure some repossessors can handle this, but a person can only work so many hours. The organizational skills needed to efficiently manage a large queue of accounts in a specific area, where deals have to be ran at all hours of the day and night, must be a challenge for many repossessors and repossession agencies. As an example, we had day, swing, night and weekend shifts, and every one of those was given a specific route of where to go, which was based on our needs, or our clients needs, on any given day. For this reason, I can see where mapping technology can start to play a more important role in the efficiency many repossessors and repossession agencies gain as they begin to merge this technology with their repossession management software.
We’ve seen where you can put a tracking device on your car to monitor where your kids are, so I’m guessing it’s just a matter of time. The product is out there, has been for years, but its never really caught on because the amount of loans that default is so low it doesn’t make financial sense, with the exception of deep sub prime lenders.
Additionally, GPS has all but eliminated the need to use Thomas guides or other mapping books that repossessors used to use to create their routes, or to locate an address.
Also, there are some pretty cool tracking programs that work on iPhones where you can track where the caller is at, if they’re calling on an iPhone. We watch the laws closely and try and find ways to stay a step ahead of the skips, but it’s a challenge.
The iPhone continues to grow in terms of its penetration of the market. There are so many tools available to the repossessor who carries an iPhone, or in some cases a Blackberry or another form of PDA that doubles as a pocket computer. From GPS to location tracking to email to its camera functions and the ability to easily email a status update or a photo of the collateral they just repossessed, or the house they just checked, I believe you will see agents in the field becoming more efficient as they use their iPhone or another similar PDA for some of these features.
Phones with wires
I guess if I’m mentioning iPhone I should mention that all phones used to have to have a cord to attach the handset to the phone.
The elimination of forwarding companies
In the past several years we’ve seen the growth of many mega-agents, repossession companies who cover whole states, multiple states, or who have multiple branches within one state. Years ago we saw American Lenders try to give the impression that they were a true nationwide option, but given the fact that they were independently owned and operated, each branch was only as good, or as bad, as the person who owned it. For hat reason, American Lenders is basically a non player in the repossession industry.
As more large companies like these expand, or are formed, it means that the finance company now has a smaller number of agents to manage, making the process easier and that should result in their decision to pay someone to manage their repossession process less likely.
Another factor is fees. I believe you will see more companies bringing that process back in house versus continuing to outsource it to a forwarding company. Why pay a forwarder so much to manage a process that you can manage yourself as the software options to manage the process improves, and the need to have several hundred agencies decreases.
We’re rolling out a hybrid of skip tracing and forwarding called “Skip Forwarding”. We pay the repossession agents more than the forwarding companies instead of less to repossess and to generate positive resolution of the accounts. We don’t have a desire to get back in the forwarding industry, but since we skip trace and since we see many forwarding companies calling an account a skip when it really isn’t, we see a need for a service to handle these accounts that fall in between repossession assignment and skip tracing. Eventually, we’d like to see the clients using our software to assign these type of assignments direct, as we don’t really need to be involved in the process. The idea is to incentivize the repossessor to work the deal harder just before charge off, which means paying more money. We’ll see how this goes and I’ll report back in a few months.
I’m sure I forgot a few things, but it was fun thinking back about the things I’ve seen that have changed, and I enjoy thinking about the future of our industry and what it could evolve into.