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Wednesday, November 16, 2011

Don't shoot the Messenger

OK, first off, don't shoot the messenger. In the early 90s, Forwarding wasn't even a word in our industry. Art’s points, and the logic behind starting Relliance are both spot on, in my opinion, but first, let me digress… Manheim Auctions had tried to manage the repossession process in about 1990-91 and after 1-2 years of "getting our lunch handed to us" as an Executive later told me, they had exited the process of trying to manage the repossession process to drive more cars to their auction. To my knowledge, no one else was doing this “Forwarding” practice at the time. A few sharp repo guys may have been doing one off deals with clients who trusted them, but it certainly wasn’t an industry on anyone's radar as is the case today. To understand how it got to where it is today, lets back peddle a minute. In 1988 we had started one of, if not the first skip tracing companies in our industry; Skipbusters. In doing so, we first repo'd our own cars in LA through a repo company I also co-owned called Crown. As we got locates out of our area, we subbed out the work to companies I had known through my prior experience as a Collection Manager at Chrysler Credit. After Skipbusters grew, one of our clients, VW Credit, asked if we could help them manage the nationwide repossession process they were struggling with. Between the time we started Skipbusters and when VW came on, we learned a few valuable lessons. First, you have to find qualified agents and not just the cheapest one’s. They had to be able to understand, sign and stick to the terms of a contract, and they had to be held accountable. You also needed a back up in case something went wrong. You also had to give them a healthy volume of work, they had to be able to make money, and it was a two-way relationship. VW of America in the 70's and 80's didn't have any employees as they hired Chrysler to make and collect loans for them, same as American Motors and Jeep did. Kind of like how Mitsubishi Acceptance (who I worked for later, not sure the exact name of their finance company now) does with a servicer they hire to represent them these days. Anyway, VW decided to start their own finance company after they switched from Chrysler to Deutsch Bank (wonder why they picked a German Bank?) and then realized they were no better with Deutsche than they had been with Chrysler, so then in the early 90s they hired their own employees and created VW credit, their own captive finance company. Through all this transition, Skipbusters was VW's sole skip vendor, and when they kept calling us to ask what repo agency to use in XXX city. We then worked with their Sr management (RIP George, miss ya!) and we created American Recovery Service to manage the repo process for them for a flat $75 per assignment. Before starting ARS, I called Manheim as I knew they had exited the repossession management business, and the guy gave me one word of advise..."RUN". We started ARS in late 1993 and soon after this the sub prime auto finance industry took off, and so did ARS, and Skipbusters. We sold and exited the industry in 1999, just as the word "Forwarding" was becoming a common term in repossession management. The auctions, including Manheim, had jumped back in, as did many other private companies. By the time my non compete expired and I took another look at our industry in 2004, it had changed dramatically. When we started Skipbusters in 1988, not one of the top 20 lenders utilized an outside firm to skip trace their accounts, except for their trusted repo agency whom they were willing to pay a $75 skip fee to. When we built the "Forwarding" model around VW's needs, other lenders who now use forwarders laughed at us, "You want to manage our repossession assignments? That's what we do, and we'd never outsource that responsibility to anyone!!". As lenders consolidated to large call centers, and the national management of repossession vendors and the work they did became more complex than they envisioned, Forwarding took off, as did skip tracing. Now it's almost 2012 and a great deal of large lenders now use Forwarders, and all large lenders use skip companies, so I guess we had a couple good ideas in one sense, but in another, I agree that it has been treated as a commodity and somehow the value of the service has become greatly overlooked, as pointed out in Relliance’s press release. The logic behind the formation of a Forwarding company by Repossession Agencies is a good idea in my opinion, but ONLY if they measure themselves in an agnostic manner against other companies in their service areas. I'm not saying every repo agency deserves a shot at being in Relliance, but if Relliance truly wants to be the best Forwarding company and improve the industry, I believe they, as well as any solid forwarding model, must accept applications from companies who wish to do work for them at a fair price, and the companies who do the best work should earn the lions share of the work from the lenders who hire them. If not, it would just be another association, which does not solve the problems our industry is seeing, from a repo agency and a lenders perspective. For the past five years we have been building a software called masterQueue. Some of you use a limited version of it, some have heard of it, some haven't. This is a collection, skip tracing and repossession assignment management software for Lenders, Forwarders, Skip Companies, Repo companies through interfaces with their Repossession Agency platform, and a variety of other companies associated with our industry. It's a common ground, and one of the most important things it does is show the lenders and Forwarders/Skip Companies who is doing a good job, who is driving ROI to the lenders bottom line, and who isn't, and who is in compliance with the lenders growing list of requirements and who is putting them at risk. It's not a model that's built around charging repo agencies to receive assignments, and we are open to interface with any software, as we have already done with iRepo/RePros and several other platforms, and are starting to do with lenders software platforms. What made us successful at Skipbusters and ARS back when I owned those companies is we were able to leverage technology to improve our client’s business needs. With this in mind, we created masterQueue. I believe the technology in our industry, with a few exceptions, but for the most part, is years behind the times. masterQueue helps bring it up to speed, and it provides lenders a way to see the dollar value that the repo companies who service their accounts can earn them, or cost them when they aren’t doing the job. It also gives them a way to stay compliant to help insure they keep their customers safe, and their names out of the paper, which as we all know is their foremost concern. The reason I bring up masterQueue is without a common software platform, one that really solves all of the needs for Lenders to identify actual performance and compliance, our industry will continue to struggle in my opinion, especially as it relates to working the difficult accounts. masterQueue gives everyone a fair shot at earning business because they are the best at what they do, not because they took someone to the Super Bowl or have a hot looking sales rep. A lender shouldnt care about PRICE, they should worry about COST, which is measured in Full balance skip charge offs, missed opportunities, poor performance and things no software I've seen to date does, except masterQueue.Sorry to sound like a commercial, but you don't see us doing press releases, or even attending many trade shows, but you will see us in forums like this, and hopefully you're hearing about us by word of mouth, from people who understand our industry and whose word you trust. With a little bit of luck and some good code, I think we can help bring Forwarding back to where we envisioned it could be when we first started doing it in the early 90s. Everyone be safe out there, and value your repo agents, the job they do should never be underestimated or treated as anything less than a skilled art, unless you're dealing with some company who doesnt deserve that respect, and if so, your software should be telling you that's an issue before it becomes a problem!

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