Find John Doe

HEADLINE RISK 2012

2012-01-15T09:22:00.000-08:00

As we enter 2012, it still amazes me that companies are not moving faster to mitigate HEADLINE RISK. HEADLINE RISK? It’s the risk that a major event or story will spread throughout various media publications, and will negatively impact a company’s stock. The risk is due to the harmful nature of the story, even if the news is not justifiable. • CEO OF XXX Bank resigns after vendor loses laptop with two million customers social security numbers.“I take full responsibility” says John Doe of XXX Bank. I should have: 1. Paid more attention to my Risk and Security teams2. Hired better people to manage my Risk and Security teams3. Asked tougher questions so our customers identities were always protected to the best of our ability4. Hired better vendor managers to audit our vendors. They made the audit trips, but in hindsight, (after seeing the pictures of them golfing and partying on Facebook) I may need auditors to audit my auditors in 2012. When I started Find John Doe in 2007, I spent Ten Grand to have Fulbright & Jaworski give me a legal opinion in writing on what I could and couldn’t do when it came to skip tracing. I started the first skip company in 1998, and ten years later, I knew the rules had changed, and so had the www dot playing field dot com, so I figured I’d lawyer up and get an opinion. As we enter 2012, it amazes me the now obvious things I was told then that I couldn’t do are still common occurrences by companies that range from Large First Party Lenders, to their Servicers, and mostly, by the vendors whom the large, medium and small lenders hire. Why don’t the lenders pay more attention to the HEADLINE RISK they face?• No “PHONE BREAKS”, as now the person requesting it is just as liable as the person providing the info, thanks to Private Investigators hired in 2006 by Hewlett Packard leaking details to the media about how they allegedly were hired by the Chairwoman of the Board of HP to access the phone records of the other Board members and Nine Analysts who covered the company. After Congressional Hearings and President Bush Signing the Telephone Records and Privacy Protection Act of 2006, hiring companies to break phone numbers is just as illegal for the person doing the “break” as it is for the collector, or his boss, who authorized it; wink…wink. • No “UTILITY BREAKS”. Yes Mister CEO, your collectors still do request this information brokers who illegally access the utility records of public and private utility companies to see if your customer still lives at the last known address. This should make every CEO, VP of Operations, Risk Manager and anyone accountable for the protection of their company to ask and INSURE their company, or the companies they hire are not doing this, or THEY might be the one the DA goes after and puts in jail, and it’s a ten year sentence, BTW. This leads to the obvious question…Is your Collection Supervisor or those accountable really on top of Privacy, Risk and Security when it comes to how you manage risk and how you work your higher risk accounts? As we hit 2012, those still breaking phone numbers have significant issues, but ladies and gentlemen, the bar has been lowered, and if you are not in the fire yet, get ready, because it’s scary, and it should be as there are bad people out there and they will mess with you, AND YOUR CUSTOMERS, if you give them the opportunity. Ask yourself, and your staff some questions, but don’t take the answers at face value. Do some in depth auditing and find out the real answers, and make sure your auditor is craftier than the skip tracers, repossessors, collectors, collection supervisors, risk managers, operations managers etc. are, or better yet, promote your best skip tracer to the Risk audit team.Some other questions to ask within your organization are : Do you still access public records data on your customers via web-based sites? YES,…Oops. That’s Old school….and a huge RISK.Do you have printers, or worse, can these documents be stored and downloaded en mass on a zip drive, or emailed, and if they are emailed, do you even know what your new employee is emailing from their CPU? These reports are accessed through the data providers web site and they come in the form of a .pdf report that can be fifty pages long. It’s a challenge to read a fifty-page document on a 15” screen, so many times I see these reports printed and sitting on people’s desks, or in a “file” in their drawer. A file is a large envelope that is used to hold papers, its what people used to use in business back before there were paperless requirements put in place by the companies who avoid headline risk like the plague. Walk on your collection floor and if you see papers, you have issues. Are you tracking everything your staff is doing during the collection process?Are you auditing your vendors who do collections, skip tracing and repossession? Oh Really, good for you. How often do you visit them? Quarterly, Annually, Semi-Annually? Is it dinner and drinks, or an actual audit? How in depth is the audit? Is it a surprise, or planned with a list of what they want so it’s “easy on everyone”?I hear one of my competitors down the street knows when the audit is coming and they hire temps to make them look like a bigger company than they are to help convince the large lender they can handle their business. Would your auditors catch that? Apparently not, as they keep growing. How detailed is the audit? How do you dig to find out what they really do? Do you use vendor managers or auditors, or should you use a skip tracer or at least bring one along? What web sites do they visit? Oh, you let them access Facebook, cool. That’s a great site to get info from people who don’t protect their privacy. What about the people who mark their Facebook pages private. Do you let your employees or Vendors “Friend” people? Of course not !Really, how do you know? Well…How do you REALLY know? Ok, let me be frank….if your people have access to Facebook and if you have no record of what they’re doing, you have …. MAJOR HEADLINE RISK. Google “Facebook Collection Agency Lawsuit” to see what I mean, lots of HEADLINE RISK opportunities here. You may still subscribe to the “old school theory” of what goes in the TOP SLOT and comes out the BOTTOM SLOT is OK, as long as “I don’t know what happened in between”. OLD SCHOOL. The Telephone Records and Privacy Protection Act says you are not only responsible to know what is happening, you also can spend TEN YEARS in the slammer if you are accountable, but if I’m a CEO of XXX Bank, I can care less about the Three Years my Ops Mgr got in the pokey, because I just lost my job because I didn’t know what was going on. How do they “Friend” people on Facebook? They log in with an account they created that is only used for finding people. Oh, you didn’t think they would do that cause you told them they might get fired? Are you giving them a bonus if they find more people? Are you in a city where there are more jobs for collectors than there are collectors? If you fire them will your HR department tell the company calling for a reference that they got you in a class action lawsuit over Friending hundreds of people on Facebook and then repossessing their cars, hammering them for payments, posting on their walls and embarrassing them? If they’re looking for a guy, your collector will have a site with a hot chick’s picture, and if it’s a chick they’re looking for, it’s a photo of some dude with a six pack; abs not beer, well, maybe beer. Chances are there are a lot of “friends” on each page who have already been repossessed, or know someone who got repossessed. Class Action. In my next blog I’ll talk about Repossession and the HEADLINE RISKS here as this is even worse as the stakes go up, and so do the lawsuit settlement amounts and HEADLINE RISK potential as people get killed, customers and repossessors.

Don't shoot the Messenger

2011-11-16T10:28:00.001-08:00

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!

Is it just me?

2011-09-18T16:57:00.000-07:00

Has the Auto Finance Skip Tracing business gone the way of the Auto Repo business?

It's brutal out there.

We always relied on Lenders making bad loans and then not doing a very good job on finding their skips, but that's changed. The gravy is gone.

Skip Companies- If you are not working in an environment where you can measure and manage your business every minute of every day, you can fail. If you fail, your clients fail, but I guess that doesn't really matter to you cause you failed.

Are Lenders looking as closely as they can at what Skip companies they hire; I doubt it. Can their Skip Companies go toes up, damn straight they can, and trust me, they will.

Attn Lenders: Please start lending money, and please start taking some risk, and please take a closer look at who you do business with. If your Skip Company has lost four of its five biggest clients in the past few months, there is a problem. If you google your skip companies name followed by the word "LAWSUIT" and there is more than one page of results, you are a sitting duck.

C'mon, there are people out there who need loans and you are all overstaffed and you can handle it. You may need masterQueue to help organize your collection department, but you know your people's Queue sizes are way down, and you have the people to handle the deals, so dont wait for the paper buyers to tell you its coming, force the issue, tell them you can handle it.

Of course, come of those skips will fall through the cracks, but you will make so much off the deals that pay you know that it wont matter, and our industry needs some bread crumbs.

EVERYONE will win.

Social Networking and the workplace, i.e. friendships at work, one year later....

2011-06-12T10:17:00.000-07:00

A year ago I posted a blog about Facebook and making friends at work. Here is a follow up a year later....

Technology has affected the relationships our employees form with each other, and this is especially true as it relates to Social Networking.

While social networks have existed since the beginning of man, it is something that has grown by significant proportions with the evolution of technology. It started with computers, then email, then cell phones, then My Space, and in the past few years, it has exploded due in large part to the ability to easily communicate with more people through texting, Twitter, and the most popular social networking site to date; Facebook.

Many people spend as many or more hours with co-workers than they do with their families, and many people spend more hours in a week with co-workers than they spend in a month or more with their trusted friends. Due to this, we have seen friendships in business turning into friendships in people’s personal lives. In recent years, I’ve witnessed this happening more frequently, and with more negative effects than I have seen in prior years, or pre-technology, if you will.

I’ve participated in, managed, or encountered many types of relationships with co-workers I’ve worked alongside, or people I’ve managed, or employed, during my 35+ years of working. In all this time, and through all these relationships, I’d like to think I’ve learned a little bit about the dynamics of employee/employee, employee/employer and even client/vendor relationships.

One of the first rules I was taught, but it took me a few mistakes to understand why it’s a common saying you have all heard is……… “you don’t mix business with pleasure”.

I’ve partied with co-workers and then realized that wasn’t the best idea, especially when something happened when we partied, and now I knew more about that person than I cared to know, or needed to know, and it changed our relationship.

I’ve made decisions regarding employees that were affected by my personal relationship with them, and they’ve almost always ended up being bad decisions.

A person I thought was a good friend turned out to not be such a good friend.

The negativity of a person I got too close to started to cause me to become negative myself, and I like to think of myself as a positive person.

“Don’t they ever have anything good to say” or “Why do they work here if they always complain”?

I’ve gone out with co-workers and later figured out they weren’t someone I’d normally associate with, but when they asked me to go out I felt it would have been rude to say “no”, but then the relationship became uncomfortable at work when up until then my professional relationship at work with that person had been great. I should have just said I had a prior commitment.

Does any of this sound familiar? We’ve all been there.

Technology has given the average worker new challenges through their constant availability with their cell phones, texting, twitter, and through social networking sites like Facebook.

In doing some research, I found an appropriate comment about Facebook on a person’s blog:

“For every long-lost chum who reaches out to me on Facebook, there's a guy who beat me up on a weekly basis through the whole seventh grade but now wants to be my buddy; or the crazy person who was fun in college but is now kind of sad; or the creepy ex-co-worker who I'd cross the street to avoid but who now wants to know, "Am I your friend?" yes or no, this instant, please.”

I think the co-worker example above may seem exaggerated to many people who have co-worker friends on their Facebook page, but from my experience, it’s just another step in the direction of mixing business relationships with personal relationships at a stage that is way too early in a "friendship", and that's where the problems that can result are not worth the risk.

On the client/vendor front, I know companies have witnessed a conflict of interest when an employee of theirs and an employee at the client/vendor are friends with each other, and it can or does affect their business relationship. We see some clients who can not even accept a box of chocolate from a trusted vendor at Christmas, which may be a bit over the top, and we see some who recognize that when the sales rep or owner of the vendor takes the vendor manager or decision maker to the Super Bowl, that may influence their decision to give that company work, and rightfully so, they put the kibosh on those types of activities. For this reason we do not allow our employees to be friends with our clients outside work, even on social network sites. It's a conflict of interest for our company, and likely for the client in most cases.

As technology evolves, I now see a new twist happening through social networking sites. A few years ago, clients and vendors interacted on social network sites, but now that has moved to professional sites like Linked In, where conversations are kept to a professional level. Most vendors want people to use their services because they do a good job, not because they like how they look in their profile photo, or because their people socialize with that client’s employees outside work, and are friends who converse regularly on Facebook or Twitter.

I have a Facebook page, and at first I felt awkward when a person at work “friended me”, asking if I’d join their social network on Facebook. I kind of looked at it like when a seventh grade friend of my son sent me a friend request on my personal Facebook page. I like the kid, and didn’t want to seem rude, but I think it best if my relationship with this kid remains as my son’s father, and not as a friend of mine on my personal Facebook page.

I saw the person at work the following day and told them I appreciated their asking me to be their friend on Facebook, but I preferred to keep my Facebook page separate from work. They said ok, and I think they understood.

When I go back and read the “friend” definition on Webster’s, I realize I have personal friends, business friends, family friends, etc. Sometimes my family or personal friends cross over into people I place in my social network, and I have them on my Facebook page, but when it comes to work, I prefer to keep my work relationships at work, or on Linked In or other work sites that contain some social elements, and to me, those are almost always relationships with “business associates”, otherwise the mix of business and personal becomes to consuming. It’s already become more difficult to separate work and personal with the availability of email on cell phones, etc. and adding Facebook and otehr web sites makes it even more challenging.

In my career, I’ve learned there is a time and a place for business, and the same goes for pleasure. I enjoy working, so I get pleasure at work or while working, but I dont do it by doing non work or non business activities. When I go to work I work, period. When I'm done, I spend time with my friends and family and I dont work, period.

While I think there is a time and a place for mixing business and pleasure, based on my personal experience, I’d try and limit my outside of work relationships with my co-workers to company events that are not work related, i.e. company picnics, holiday parties, etc. As the owner, or as a manager or a person of responsibility over others within a company, it is a different landscape than with a co-worker-to-co-worker relationship. While we realize people will become friendly and over time will develop friendships at work, and those may carry over to outside work, the best advise I can give is to take your time, and really get to know the person and make sure that your relationship with them outside the job is based on their being a “trusted friend”, and to me anyway, it takes a significant amount of time, usually a year or more, before I place a friend in that "trusted friend" category.

For this reason, I personally do not consider it a good idea to mix your friendships at work with your friendships in your personal life until a significant amount of time has gone by. I can give you a hundred examples where things went wrong, and in almost every case, it was when a person rushed into a relationship with another person without really knowing them. They placed the person into a position of trust, and many times they got burned. I’d have to think really hard to come up with examples where a business relationship turned into a personal friendship within a few months of the people knowing each other and it benefited both parties, and the company.

On the other hand, I can think of a small amount of examples where a relationship built over a significant amount of time, mutual respect, and trust, evolved between two co-workers and it carried over from work into their personal lives and both employees, and the company, benefited. It’s rare, but when it happens, it really adds value to his or her jobs, and to the company.

This is a difficult rule to keep. I enjoy working with everyone at my company, and I’m sure I’d enjoy skiing with many of them, or going out for dinner, playing a sport or just going to lunch and chatting, however, if I do that, then in my situation, others may feel as if I am playing favorites. Also, what if we become close friends and I have to discipline the person, or promote someone over the person I have become close with and that move upsets them?

From a co-worker standpoint, you have the same issues. “Why does she go to lunch with him every day?” What if you see someone you become friends with doing something you know is not right, will that influence your decision to say something that would be in the best interests of the company? If a joke goes to far at work and it carries over to Facebook and now the whole world can potentially see the joke, is that a good idea?

Oh, that will never happen, I have my privacy settings so only "my friends" can see what I do on facebook. If you check your privacy settings every day, you're half way there, but Facebook makes changes daily and some of those changes have affected people's privacy settings, or lack of privacy settings, and then its wide open. Googling "Facebook privacy" gets you hundreds of pages about Facebooks privacy issues.

What if a "friend" copies and pastes the post you thought was private, or their privacy is open and people can see it, then its not private any longer is it? It happens, believe me, we see it as that's what we do when we're developing tools to gather info off the web on people using their open source web based info, which in many cases they thought was private. The best rule to follow is that if you post something you think someone would have a problem with, then you better not post it cause once you do, its permanent and it can and many times will come back to bite you.

There are other problems with social interaction in the workplace that have been around for ever, but are magnified with on line social networks. If the time comes for a promotion, will your boss feel as if you have developed too many personal relationships with people you’d be supervising and then you get passed over? Will someone spread rumors about you because they are jealous of your relationships with co-workers, or they misunderstand your intentions, even if they are completely trustworthy and honest? Those are just a few examples of the risks involved with developing relationships that move from business associate to friendship at work. When they happen in a matter of weeks or even months, the risk of a problem is elevated. When they happen as people really get to know each other, and as each person cements their position within the company, the risk becomes reduced.

Another reason I feel the mixing of your personal and work life should be approached with extreme caution is the simple fact that you need to charge your batteries when you’re away from work, and the best way to do that is to leave work at the office and come in fresh the next day. If you spent an hour on the phone at home after work speaking with a current or an ex-coworker and work was discussed, yours or theirs, that’s not usually a healthy phone call for your psyche. Are you talking about good things? “Oh, I love my job” and if it’s an ex-employee you’re speaking with, what do they think of that if they are no longer there? Are you complaining to each other about something that bothers you, and how does that negativity affect you? Or what if you’re happy and your new personal friend from the office isn’t, will they call and tell you how they love their job or will they call to bitch, or worse yet, post it on Facebook?

Here are some interesting questions to ask yourself when making friends at work :

• If your friend left the company, would you still be in touch with her in a year?
• If you had a personal emergency, would you consider asking your friend for help?
• Do you hang out with your friend outside the office? (Weekday lunch, happy hour, and business trips don’t count.)
• Have you met your friend’s significant other? What about her friends outside the office?
• If your friend received the promotion you were banking on, would you be genuinely happy for her?
• If you ran into your friend in the grocery store, would you be able to talk to her for 10 minutes without mentioning work?
• Have you seen where your friend lives?
• Do you and your friend have anything in common besides your age and your job?

Thanks, and I hope my experience and thoughts on this challenging topic help you in your quest to become the best you can be at work!

masterQueue and Find John Doe

2011-05-22T08:36:00.000-07:00

On May 10th, we launched our proprietary, web 3.0 software masterQueue at a conference we were selected to participate in for new Financial Services Software in SF called Finovate.

We started Find John Doe in January of 2007 with the purpose of building a software product that could address the needs of the Auto Finance industry as it relates to the process of gathering, organizing and tracking the massive amounts of public records data a company needs to process to run more efficiently.

Once we started gathering Public Records more efficiently, we then realized we needed to analyze this process to determine what data and what data providers got us the most right party contacts, helped us find the most people, and ultimately provided us with the best ROI.

When we started getting into ROI on data, we realized that employee and vendor performance metrics also needed to be factored into the equation to see the impact of this data on our goal of locating people who did not want to be found.

Once we gathered and factored in this information, we then realized the importance of the outside vendors, from data providers to repossession agents to the software we were using to manage the assignment and recovery process. With this in mind we built a full repossession assignment platform, and instead of also building a repossession agency management platform, we approached the two largest software providers who already had repossession agency management software built, and one liked what we were doing so we identified the need to build a strategic relationship with RePros to interface masterQueue with Repros to help the repossession agencies work more efficiently using public records data, and through our metrics platform that measures the entire repossession process, soup to nuts.

It still amazes me how lenders, and the parties they outsource the repossession assignment process to, do not fully grasp the importance of using the most qualified repo agencies. Many lenders just give all their deals to a forwarder or a skip company and they don't care, or they don't have the tools, to make sure their assignments are being forwarded to a qualified, properly insured, experienced professional. If lenders could see who some of the unlicensed, unprofessional clowns who represent their companies in the field actually are doing, I guarantee they, and their shareholders, would cringe. Actually, for an idea of what likely may be happening on their assignments, they can turn in to Tru TV and watch a Repo Reality TV show.

With this in mind, we built the vendor management piece of masterQueue, so now lenders can easily see when a forwarder or a skip company, or their own internal staff when assigning direct, do not use a qualified, licensed and insured professional. For those using forwarders or skip companies to manage your assignment process, do you have a system in place to know when their vendors insurance doesnt meet your requirements, or is canceled, or they're using an agent prior to having a contract and insurance with them in place? Are they using licensed agents in states requiring licenses? Is their proof of this in the software you use to monitor them, or is it too difficult because you use five software platforms to monitor ten companies? Are the licensed agencies licensing all their repossessors, or are they having cars picked up by repossessors working off expired or questionable temporary licenses, as was the case in a recent death involving a woman whose car was repossessed a month or so ago. The civil suit on that situation will likely cost the lender a great deal of money, if the atty representing the woman digs deep enough into the practices of the lender and the repo agency and possibly into the state that allows this to happen without more stringent monitoring, and that precedence will likely open the door for more costly suits to follow.

We had also started realizing in 2008-09 that open source, web based public data that customers were providing on the internet on themselves was important in the skip process, so we began building ways to capture and analyze this data, which ranged from blogs people were posting, to the bar they were visiting that night as posted in public view on a social networking website.

Building algorithms around this data was the next step, and to make sure we had the best algorithms possible, we sought out an algorithm expert. In January of 2011 we brought on a strategic investment partner who was the creator of algorithms built around public records for a two billion dollar, ten thousand person company that successfully identified risk in the mortgage industry just before the bubble burst, something he accurately predicted well in advance of the dam bursting. Unfortunately, the wheels were already in motion and few listened to his predictions, but every top lender bought his data and had access to the information before the crash.

Auto lending is in a different environment. Lending to anyone with even a hint of risk is all but non-existent, but we all know that wont last for long. In the past few months I have visited a sampling of the largest and smallest lending institutions in the country. EVERY one of these companies has a need for a new software platform to help them better manage risk. Some of the more forward thinking one's realize this, and they are moving to masterQueue. Others are still hesitant to get off their old legacy, Dos-based systems, even though it will never be easier than now as delinquency is at twenty year lows and once the need to lend more aggressively becomes apparent, making that switch will become more costly and more difficult.

Find John Doe provides lenders an opportunity to see masterQueue operating in a test environment, with our team of talented skip tracers using the most current tools to identify and manage risk by gathering, organizing and tracking results on loans once they become delinquent, from one day late through charge off. By working your accounts in masterQueue, apples to apples to what your current vendor or internal staff is doing, we provide a benchmark for you and a view into what your company will look like if you start using masterQueue internally.

For a demo of how the combination of Find John Doe and masterQueue can take your company from Web 1.0 or Web 2.0 to a Web 3.0 environment, with little or no IT support needed, please give me a call at 916 730 3335, or email me at jlewis@findjohndoe.com and I'll set up a demo for you.

We can help you remove the fear of lending, and all you need is access to the web through a browser.

ChhChhChh..Changes...

2011-04-30T10:17:00.001-07:00

FJD site down until Sunday night due to maintenance and changes...

How about a positive spin on things for a change...

2011-03-15T16:08:00.000-07:00

I privately met with several of the largest repossession companies last summer and we brought in a PR Person to discuss some of the strategies involved in mounting a positive PR campaign around our industry. This person had successfully raised public awareness for industries that faced similar challenges, not quite as difficult, but I feel she can do the job, and she has no connection to anyone, and being located in the capital of the largest regulated state in the country, she may be in the right place.

Her ideas included:

Integrated marketing plans
Key Messages/Logo/Business System and Brand Developments
Media outreach
Media and presentation skills training
Advertising and media buys
Community outreach and public involvement
Web
Email/ VIP outreach list
Email blasts, special programs, etc

I’m running a skip company; Find John Doe, and getting ready to launch a software to hopefully help improve our industry, masterQueue by Intellaegis, so my time is limited at best, but I would participate on a board level if we could form an interest list and then a board and then select a leader to oversee this process.

Forget about the associations running this, if they wanted to do something they would have acted years ago and getting them to work together seems to be a challenge in itself. You need an independent board of entrepreneurs who can represent the industry, and I’d say the qualifications would be:

10 years exp in the repo industry

Verifiable personal experience repossessing cars themselves in the field, and I’m not talking about a ride along

Running a business in this industry that currently generates at least $1m in annual revenue

I’d also include 1-2 client members and I’d invite Kevin as a media rep

1 rep from each association responsible for being the liaison for their association and responsible for collecting dues to fund this program and sharing info to/from their members- and non assoc members would have a liaison for the companies not in associations

A paid independent admin to handle the day to day and budget

email me privately if you are interested in participating:

jlewis@findjohndoe.com

John Lewis

The State of the Repossession Industry -2011 - Part 1 of 6

2011-02-28T10:42:00.000-08:00

The State of the Repossession industry: 2011

Part 1 of 6

A friend asked me, “Can you explain the repossession industry?”
“Funny you should ask”, I commented, “because after reading blog after blog, and comment after comment about all the in-fighting and grandstanding that’s been going on in the repo industry lately, my knee jerk reaction was “Wow, that’s a loaded question”.

“Why is that? she asked.

“Well, for starters, repossession in general has always been a highly fragmented, mom and pop kind of industry, but it appears to quickly becoming more corporate, and those who don’t take the steps to keep up may find themselves left in the dust. We seem to be on the verge of a great deal of consolidation activity as larger players have emerged and they need market share to survive,” I said.

“In the past couple of decades, and especially in the past ten years, many of these mom and pop operations have grown, some due to a passing of the torch to a younger generation within the same family, and some due to new blood coming into our industry, and many of these “newbies” are not afraid to take the risk required to rapidly grow their organizations, ” I explained.

“Ok, so why the fighting?” She asked.

“Well, that’s the tricky part. Let’s start by looking at the players:

• Lenders- this is where it starts- these companies loan money and they range from small finance companies in your local shopping center to credit unions to small, medium and large banks as well as companies built to finance a certain manufacturers car, and these companies are called “Captive’s”. General Motors Acceptance Corporation (GMAC) was a captive that always used to finance only GM products, or sometimes other models if they were sold used off the GM dealer lot, but like many companies they got in trouble. Our Government helped them out last summer by making them an offer they couldn’t refuse; “Become a bank and be open to financing anyone, and help out Chrysler btw, and if you do that we’ll give you TARP funds and you will succeed if you follow the plan”. They followed it better than anyone expected, probably because unlike most start up banks they had the deck stacked with GMAC veterans, and their catchy marketing plan and 24 hour internet based business model came on the scene at just the right time and now they’re either on pace to pay all the money back or they’ve already paid it back, and they’re positioned to do an IPO later this year.

• Repo Companies- There’s somewhere between 2500 and 5000 companies in the US that perform this service, most are reputable, a handful are not. The larger they are the better chance they’re reputable, but even the big one’s can take part in questionable business practices at times. A few states license and regulate this industry, most don’t. Most of these companies are small, one-location mom and pop operations doing less than $500K in annual revenue. The larger one’s do in excess of fifty million in revenue, some may even double that. The larger ones cover large areas of a state, all of the state, multiple states, or in a couple cases they cover most of the country. From my experience, running a repossession company has to be one of the more difficult businesses to manage. Finding good people to work in the field is extremely difficult, and training and managing them is even tougher. Your customers who give you work: lenders and companies they use as “middle men” can be demanding, and they’re not usually very loyal, although good repo companies build “brand name loyalty” by providing above-average levels of service. The lenders clients, and people whose cars are being repossessed are rarely happy, and you’re better off avoiding the debtors at all costs, when it’s practical to do so. If you are going to own a repo company you should not have high blood pressure, you shouldn’t be afraid of working 24/7/365 and you need a good lawyer, and a mentor who knows the industry if you’re just starting out, or if you’re struggling. You also better have kick ass software these days or you’ll get left in the dust by those who do. Many people think LPR- License Plate Recognition (see below) technology will change the face of the industry. I’ve seen the industry change with forwarding and skip tracing, and LPR seems to have the same potential impact as these innovations, but as is the case in many businesses and in our lives, (think Facebook and Google) Software as a Service is what will define the future of the repossession industry and without the best software available, repo companies who don’t have it will struggle to compete with those who do, and its as simple as that.

• Repossessors- The un-sung hero’s. Most are male, most drive tow trucks, and most are pretty resourceful. These guys are performing a job that ranks right behind the repo company owner in terms of degree of difficulty. Like the company they work for, they’re paid for results, and unfortunately only certain results count, which usually means no car, no commission. There are a handful of legendary, great one’s, many good one’s and many who are mediocre or just flat not good and in many cases a liability to the company they work for, and to themselves and the general public for that matter. This is a job that requires risk, but when those risks are not calculated, things can go wrong in a hurry, and that can be deadly.

• Forwarders- These are companies who receive all or a portion of a lenders repossession assignments and their job is to manage the repossession process. This includes picking a repo company they contract with and assigning the account to them for repo. They’re supposed to assign accounts only to companies that are licensed (if applicable), insured, and reputable, with the key word being “supposed to” as for some reason many lenders don’t do a very good job of insuring their Forwarding companies are using only reputable repossession companies. After the Forwarder assigns the account to the repo company, they follow for the progress through a series of written updates and phone calls between the forwarder and the repo company. Once the account is repossessed, or after the account closes due to the customer paying, or something else happening including the car not being located, the forwarder bills the lender for their services when that result is positive (repo or paid) or if the unit is not located there is usually not a bill generated; this is called contingency, one of a handful of “four letter words” in the repo industry. In addition to the repossession fee from the company they hire, Forwarders also charge a handling fee on the assignments they successfully conclude. This sub-industry within the repo industry has gone from barely a blip on the radar when we started American Recovery Service in 1994 to a major force in the industry where as many as 40-50% of all repossession assignments now are assigned to forwarding companies. The model has also changed, for the worse in my opinion, and many forwarders don’t use reputable companies to send work to, and for some reason many clients don’t seem to care who the forwarder uses to represent their company, which I think is crazy. The most dangerous job a bank is responsible for is likely repossession, so one would think they would want to insure the person doing the job and representing the bank is a professional, licensed, insured, reputable, trained repossessor. That’s not the case too many times, and if you Google “repo death” you’ll find examples of what happens when it goes south, and in many of these cases there is a Forwarding company involved.

• Skip Tracing Companies – When the finance company doesn’t know where to assign the account for repossession, they hire a skip tracing company like Find John Doe, or dozens of other companies like this who do the same thing; locate people who are trying not to be found. Back in 1988 when we started Skipbusters, I’d never heard of a skip tracing company and I’m not sure if there were any out there. I thought of the idea when I worked at Chrysler a few years earlier. I’d been sent to different branches to find people who had loans that those branches were trying to stop from charging off. The only option we had back then were finding these people ourselves or utilizing repossession companies and some were great at finding anyone, but for some reason we weren’t allowed to pay repo companies for skip tracing, or if we did it was limited to like $75. I’d heard the reason was the repo guy got caught with his hand in the cookie jar too many times and they didn’t trust them to bill for skip tracing as sometimes they’d charge for skip work and they really didn’t do anything that warranted a fee. Nowadays, skip tracing is a big industry, and a big part of the repossession process, and in many cases they also perform the same service as a forwarder when they coordinate the repo process for the lender.

• Skip Tracers – aka Investigators, these are the people who are good at finding people. They utilize public records and information they gather from a lenders notes, from a credit application the debtor filled out when they bought the car, and they gather info through the Internet. Then they contact friends, relatives, neighbors, landlords, ex-places of employment and a variety of other sources, or leads, as they attempt to gain pieces of information on where the customer and/or collateral are located. They are also skilled negotiators, as many times they will make contact and convince the debtor to surrender their unit.

• License Plate Recognition Technology Companies – This is a somewhat new concept, high speed cameras mounted on tow trucks and cars that scan thousands of plates a day. The scanned plate and its GPS location are downloaded into a computer and then the unit is either repossessed right there on the spot, or the lender is notified and asked to pay a fee for the location of the unit. I’m not sure how the second part bypasses laws like the one in California that says its illegal to do this:
(j) Soliciting from the legal owner the recovery of specific collateral registered under the Vehicle Code or under the motor vehicle licensing laws of other states after the collateral has been seen or located on a public street or on public or private property without divulging the location of the vehicle. The fine shall be one hundred dollars ($100) for the first violation and two hundred fifty dollars ($250) for each violation thereafter.

• Transporters – These are the companies who pick up the vehicles from the repossession yard after they’re repossessed, but they’re just bit players in this story.

• Auctions – After the unit is repossessed the debtor is sent a letter and they have a right to pay off the unit, and in some cases they can get it back by paying the past due payments. If they don’t reinstate the loan or pay it off, the unit is transported to a private auction and it’s sold.

• Repossession and Collection Software Companies – In 1998, I wrote a business plan that detailed the development of a repossession software to allow clients and repossession companies an internet portal to send and receive assignments, to update accounts, to process repossessions, to coordinate the transportation of the unit to auction and to document the sale process. Prior to that, I’d been involved in some enhancements of a repossession software called eTracker, and I’d used one of the first repossession software’s called Pro’s, but as of 1998, we were just barely starting to email assignments and updates, so the internet was not on anyone’s radar as a way to manage the repossession process. We ended up selling our company in 1999 to a different company than the company I wrote the business plan for, but a few years later the idea I’d written about came to be in a software built by one of the principals and it became the dominant software in our industry; RDN. There have been others written since then, and some have gained market share, and now, thirteen years later, we’ve finished our own software called masterQueue, and we’re preparing to bring it to market in the Spring. We believe it has the potential to change the face of the lending, repossession, forwarding and skip tracing industries, and most of all, I hope it can help repossession agencies manage their businesses more efficiently, because if anyone deserves a break it’s the repo guys. We’ve also written over a dozen interfaces with other software companies and were hoping that other software companies in our industry will follow our lead in working with each other, as no one wins when we don’t all cooperate and work together, and hopefully RDN will also interface with us to make everyone’s job easier.

Next Chapter tomorrow – Part 2 of 6 – Repossession Terminology

The last blog of 2010

2010-10-17T17:21:00.000-07:00

This will be the last blog for FJD for 2010 as I'm moving my blogging to www.Intellaegis.com, which is our software development company.

For the past three years we've been working on developing a software for the Financial Services industry, and it's finally ready to rock and roll.

masterQueue is a web-based product that requires ZERO IT footprint.

SaaS in the Financial Services industry is behind the curve, and we've developed our first product around this need.

Reducing charge off expense and "taking the fear out of lending" is what we hope to accomplish for lenders with our first product; masterQueue, a risk identification and workflow tool.

Follow our progress up to and including our launch in 2011 at www.Intellaegis.com

John Lewis

LPR Technology

2010-09-27T09:45:00.000-07:00

A person posted a question on Linkedin - asking for opinions on dual assigning a repo assignment to two companies at once. I then raised the question about LPR (License Plate Recognition) and the fact it seems to go unnoticed that this also creates double assignments.

The LPR process puts a camera in a vehicle and hundreds or thousands of license plates are scanned each night. Lenders upload lists of the license plates on cars they are looking for and when an LPR camera spots a unit the Lender is looking for, each of the 3 companies with the camera's has a different process they follow, and most, if not all, allow a Lender to have one of their accounts double assigned to more than one repo company at a time- a deadly practice. The problem could be eliminated if the LPR companies required the Lenders to become accountable for each assignment as most of these accounts are already assigned to a repo company when the Lender gives the list of wanted cars to the LPR company, who then distributes the cameras and coordinates the assignment process when a camera spots a unit.

The owner of a LPR company posted a comment to explain LPR, however the same question remains. Here is his comment and my comment that followed - I think this is a challenge the repo industry faces with the advent of LPR

Here is a comment from Scott Jackson, owner of MV Track:

Scott Jackson • "The MVTRAC system is a real-time alert, so the moment an ALPR unit scans a plate the alert goes off and the agent can print an assignment. We do not view it as a "double assignment" In the early stages of research and development, lender white-board sessions brought this scenario up:

Agent #1 is assigned the account by the lender by fax or database and have been running the addresses for 14 days. Day 15, the VIN hits the MVTRAC systems Nationwide and Agent#2 drives by the vehicle which happens to be located at an originally assigned address assigned to Agent #1 and at that very moment, Agent #1 happens to be at the address as well. In this scenario, Agent #1 has the assignment and Agent #2 can print the assignment after his ALPR system hits on it generates a repossession order.

In this scenario, most would say it's a "Double-Assignment" Technology has definitely changed the playing field for us all. Statistically, the above scenario, the odds of it happening are very-very high (but of course it is still possible) You see, Agent #2 is unaware of the assignment, up until the very moment his system hits on the plate. Agent #1 would most certainly be in the process of recovering the vehicle and Agent #2 would see this, or Agent #1 would be down the street setting up for the recovery if it took some planning.

In the end, this is the scenario for a "double-assignment" with MVTRAC ALPR systems, which in the end comes down to the professionalism of the agents because the danger here is Recovery Agents "fighting" or "arguing", some altercation over the assignment and the recovery. MVTRAC's MVRecovery division maintains an approved vendor list of over 530 Recovery Agencies and as many readers here know, the packet is over 30 pages and very extensive. We're also working developing a Recovery Industry University for the individual agents to attend and become certified, that will cover this scenario and a quite a few more. Collectively, with greater awareness of the challenges of new technology, coupled with professionalism and continuing education, the Recovery Industry will evolve and develop further.........and again...... "

Here is my response...

Once LPR gets dialed and risks are reduced, AND when communication between ALL affected parties improves, it will have an even larger positive impact.

Two agents fighting over a repo is the exact situation our agents are running in to when our skip company, Find John Doe, assigns a locate. It has happened more than a few times , especially in L.A. Multiply that by the potential for a 3rd or 4th LPR Company to get an assignment from a lender …

In one actual case, we gave our agent a locate in a remote area, the unit didn’t show and our agent didn’t want to make a second trip, so they kicked it in. The guy didn’t even know his car was repo’d, so it was awkward, but could have been dangerous if the debtor was confrontational.

The biggest problems will happen when the debtor comes out and stops either the original agent or the LPR agent with a threat and the agent leaves without the unit. Later that night, the second agent spots the unit, and having no idea of the prior confrontation, they begin the repo and this time the debtor may be waiting with their shotgun. This is EXACTLY how my guys were killed several years ago.

Accidents will happen and when they do and there is an injury of some form, lawyers get involved. A review of large suits has proven that when something happens and there is accountability, i.e "In the early stages of research and development, lender white-board sessions brought this scenario up", the Punitive $ add up fast.

There is no doubt LPR is a powerful tool, however, until something really bad happens and a Lender is held accountable, my guess is not much will change. The scary thing is it still may not change, as history dictates with the explosion of the Forwarding model. The issues caused by using inexpensive, sub-professional repo agents to save a buck. i.e. several deaths and injuries caused by Forwarders using the cheapest guy they can find and Lenders turning their head because the contract passes on liability to the Forwarder is well documented, and it still goes on.

The decision to change the current LPR process of double assigning will be based on who is ultimately responsible when something really bad happens? Is it the lender for assigning a plate when they know that almost always it’s a double assignment, or the LPR company for not insuring their agents are protected from double assignments? It certainly can't be the agent in the field’s fault, unless there is something I am missing?

BTW, I like the alert going off concept and the agent being able to immediately take the car idea, but it would be nice if you could also assure that agent that already has his life on the line just by doing the job he does, that he doesn't have a second repo man pulling up when he's in the middle of hooking up, or worse, have a second repo man working "his deal" that already has had a confrontation with the debtor he's about to hook, or kick in.

This is where clients should get involved as I believe that they have the ultimate accountability on this, and if they're passing that liability to the LPR company through some language in a contract, I think LPR companies need to really work to get on top of this before it comes back on an agent in the field. LPR companies have the data, you hold the cards, so it shouldn’t be that hard to tell a Lender they cant risk people's lives and double assign deals. Before LPR, some Lenders double assigned deals, they got in trouble ,and then they stopped. Technology and the volume it will drive will only increase the odds of a problem, so why is it OK now?

If the contract says the LPR company agrees to defend and hold the Lender harmless, that's not a good thing as the LPR company didn't double assign it, the lender did. I’m curious to know how that part works Scott, who is responsible?

The information age

2010-09-02T09:36:00.000-07:00

Some people call it Public Records, some call it Data, and in our business we call it a lead.

I call it information.

In the current state of the skip tracing industry, we have a tremendous amount of information at our fingertips.

Since we live in the Information Age, we should always be striving to find better ways to process and use available information to make better decisions.

In the old days, I would get so excited when someone went to Battle Mountain, or any remote location, and they brought me back a local phone book. Suddenly, I had the information I needed, at my fingertips, to crack a tough case. I had a book of leads.

The amount of data available on people these days is amazing. It's the closest thing we've seen to Big Brother.

What's important is to find a way to take that information, streamline the identification of the most relevant data that's available through Public Records, which includes everything about a person that's available on the Internet, and put that into a format that can improve the process of skip tracing.

That's skip tracing in 2010.

How was your weekend?

2010-06-12T07:12:00.000-07:00

When building a relationship with another person at a company you do business with, the temptation or opportunity to move that relationship beyond a business relationship can occur. It can be initiated mutually, or by one side when there is something that side perceives they will gain. Schmoozing is what best describes this form of communication. The definition of Schmooze is:

Main Entry: Schmooze
Function: verb
Inflected Form(s): schmoozed or shmoozed; schmooz·ing or shmooz·ing
Etymology: Yiddish shmuesn, from schmues talk, from Hebrew shĕmu'ōth news, rumor
Date: 1884

intransitive verb : to converse informally : chat; also : to chat in a friendly and persuasive manner especially so as to gain favor, business, or connections transitive verb : to engage in schmoozing with

— schmooz·er \ˈshmü-zər\ noun

A solid business relationship is built when each side has an equal amount to gain from the relationship, and when one side gains an advantage, problems start, and the relationship will usually falter.

At a high level, executives get to know each other outside work all the time. Many companies frown on this, and while I agree with the initial perception of a conflict of interest, I can attest that some of the strongest and most valuable business relationships I've formed have been when both companies provided equal value to each other, and when the executive level staff spent enough time together so they built a trust of each other, knowing when a problem occurred, they each could fall back on the relationship they'd built to move past the issues, getting the business relationship back on track. If a catastrophic problem happened, the business relationship may be fractured, but the business bond these individuals had formed would usually transcend the companies they owned or worked for, and their paths would again cross as a result of the individual bond they'd built. The other component to this relationship is talent, allowing a bond to form by two peers with common interests and solid values, and their ability to solve issues and always strive to move their organizations forward without compromising their integrity.

At a staffing level, the playing field is similar, yet the need to communicate more frequently and the inexperience of the staff members in situations like these can make the situations that may arise a bit trickier.

How much small talk is too much? What do you do when the relationship moves from purely business and an innocent comment like "how was your weekend?" to "will you be my Facebook friend?", or "we should get together sometime."

As an employer, those last two scenarios can be seen as harmless by some, but in many cases they can be the beginning of the end for what the Executives thought was a solid business relationship. If my employee becomes friends with your employee will that influence their business decisions? If they're sleeping together and then one pulls the plug, will that affect my business relationship I've built on a high level with a client who sees value in our product or services? Is one of those people capable of having a hidden agenda that could really cause problems?

In thirty plus years of working in offices, I've learned some lessons the hard way, and my philosophy nowadays is to keep my business and personal life as separate as possible. I encourage our employees to do the same. I love hearing my people did a great job, and I know when you do enough great jobs you'll start getting closer to a client, or vice versa, as it will influence the amount of work that flows between two companies. I'd always prefer to be judged on what I do, and not on what I said I could do, or in a way which could be perceived as a conflict of interest in a manner which could affect my relationship with my employer, my client, or my company.

So, what do you do when a relationship that was friendly starts getting too friendly?

Find easy ways to identify these situations and without offending the other person, drop hints that hopefully they will understand over time:

1. Find things to say when the conversation goes in the wrong direction, i.e.

A) "I've got a call coming in on the other line, can I get back to you?"

B) "Can you hang on a minute?"

Place hand over mouthpiece on phone and say
"Just a minute"

Remove hand and say:
"Sorry about that, can I give you a call back later, I've gotta run.."

C) If my wife heard you talking like that I'm not sure who would be in more trouble, you or me.

OK, just kidding about the last one, but you get the idea. Find ways to catch the tone going the wrong direction early and find a way to move on. Don't avoid the person, keep consistent with your desire to be friendly and occasionally chat on an impersonal level, but at all costs, avoid getting into your personal lives other than you have a great family or you are happily single or whatever. I tell my people to stay away from the details or the next thing you know you will be sitting in someone's office listening to something you don't want other people to hear as the conflict of interest or the content of your conversation will clearly indicate this got way beyond the point of "how was your weekend?". That can cause more problems than you want to deal with at your job, and how would you feel if the other person got fired and you initiated the conversation, or you played along.

Business is business, and your ability to develop a reputation for delivering a product or service will take you places in your career. If you can do that while having a little personality, being a nice person with good morals, you will succeed in business. By not crossing the business to personal line, you will be ahead of the game. When it happens and you didn't initiate it, be prepared to control the situation with the fine art of bringing it back to business when it crosses the line. This is a trait you want in your tool box and it will help carry you a long way in your road to personal success in your business career.

What makes a good repossession agent / agency?

2010-05-22T17:33:00.000-07:00

I've been starting to focus my attention on the repossession business again, and in doing so I find myself examining the qualities that make up a great repo agent, and a good repossession agency.

First off, the definition of "great" contains several descriptions that should apply:

Wonderful; first-rate; very good

Unusual or considerable in degree, power, intensity, etc.

Notable; remarkable; exceptionally outstanding

Enthusiastic about some specified activity

Skillful; expert

Consider the degree of difficulty it takes to be a repossessor, and magnify that by the challenges an entrepreneur faces in running a repossession agency and you have a profession that is as difficult as any there is. Combine that with the restrictions placed on the repossessors and repossession agencies, from strict laws, compliance issues and rising expenses to cost cutting measures that have affected the industry and forced many great companies either out of business, or to not be as great as they could be if they weren't facing so many challenges, and you have an industry that is at a crossroads that paints a picture that continues to offer additional challenges as the job keeps getting more difficult to perform.

For this reason, we believe there needs to be change in the industry and the first step in this process is to clearly define the solid, professional repossession companies from those who perform at lower levels. Once this process is started, those performing at a lower level will need to improve, or they will face additional challenges as those identified as "great" will dominate the industry. This identification process also needs to include the identification and elimination of Repossession Agencies, Repossession Agents, Forwarding and Skip companies who place the public, our clients, the people who employ them and themselves at risk.

We are moving forward in this process and in the coming months, I look forward to sharing some additional insight with you on how this process can start to help improve our industry.

Social Networking and the Workplace

2010-03-06T13:56:00.001-08:00

Social Networking and the Workplace - a Blog posted for our employees

As technology evolves, we’re seeing social situations develop in the workplace that can present a challenge to workers and companies.

I’ve always believed that solid inter-personal relationships between co-workers, based on mutual respect and a shared belief that they each can have a positive impact on the company, can add tremendous value to a person’s job. I’ve also witnessed that when this occurs within an entire company, all of the employees performance will almost always increase, which allows the company and its employees to reap great benefits and rewards over time.

In a 2004 article on this subject, USA Today wrote:

“The Gallup Organization surveyed 5 million workers over 35 years searching for what magic makes some workers engaged, and others not.

Engaged workers are more likely to receive regular praise and are given an opportunity to do what they do best every day. But what Gallup has uncovered about best friends at work stands out as novel:

• Among the 3 in 10 workers who strongly agree that they have a best friend at work, 56% are engaged, 33% are not engaged and 11% are actively disengaged to the point of poisoning the atmosphere with their negativity.

• Among the 7 in 10 who do not strongly agree that they have a best friend at work, 8% are engaged, 63% are not engaged and 29% are actively disengaged.

In other words, those who have a best friend at work are seven times more likely to be engaged. Those who don't have a best friend have slim 1-in-12 odds of being among the engaged. Worse, the best-friendless stand a one in three chance of being actively disengaged. That means they may threaten sabotage or otherwise become a serious drag on the company's success. Those who don't have a best friend can consider themselves far more likely candidates for dismissal.

In a separate study of 161 employees of an unnamed large telecommunications company near San Francisco, Columbia University organizational behavior associate professor Francis Flynn found that workers who do a lot of favors for each other are more productive than those who focus strictly on their own jobs. Favors must be a two-way street, however. Those who do a lot of favors for each other are more productive, but not those who do favors but get little in return. Small favors that are reciprocated build trust that leads to an exchange of bigger favors, Flynn says

We’ve begun to see a transformation happen at our company in the past year, and especially in the two months. Our productivity has increased significantly, and while a large part of this has to do with the proprietary software we’ve built and have been using, and in part to our merging two locations back into one, a large part also has to do with our staff, and their level of engagement in their jobs. This causes me to reflect on how we got to where we are, and how can we continue to improve as we move forward into the next chapter of our organization.

While I doubt that we have a lot of employees who can say that their absolute “Best Friend” works with them at our company, I know we have a few examples of that, and I am one of them as my wife and I are partners in this business, and we’re “Best Friends”. For the purposes of the Gallup Survey, I believe they viewed the term “Best Friends” as a person who has many “Best Friends” in their lives, with some being at work.

We also are a relatively new company, and as time goes by, and as we build a staff of like-minded people with similar goals and values, I hope we can see a point where 3 of 10, or even more people in our employment are working with their “Best Friends”. With that said, when I think about the term “Best Friend”, I would hope that anyone considering another person to be their “Best Friend” would only do so after knowing that person for years, and not weeks or months.

As I started to think about how we’ve built prior companies that have achieved a significant level of success, I soon realized that the playing field has changed a great deal since then. Specifically, technology has affected the relationships our employees form with each other, and this is especially true as it relates to Social Networking.

Wikipedia, or the online version of Webster’s Dictionary (for any old timers reading this), describes a Social Network as:

A social network is a social structure made of individuals (or organizations) called "nodes," which are tied (connected) by one or more specific types of interdependency, such as friendship, kinship, financial exchange, dislike, sexual relationships, or relationships of beliefs, knowledge or prestige.

Social network analysis views social relationships in terms of network theory consisting of nodes and ties. Nodes are the individual actors within the networks, and ties are the relationships between the actors.

While social networks have existed since the beginning of man, it is something that has grown by significant proportions with the evolution of technology. It started with computers, then email, then cell phones, then My Space, and in the past few years, it has exploded due in large part to the ability to easily communicate with more people through texting, Twitter, and the most popular social networking site to date; Facebook.

The description above talks about an interdependent connection forming the foundation of a person’s social network, and the first example it lists is “friendship”.

I went back to Websters to get the definition of a “friend” as Wikipedia is an on line dictionary/encyclopedia that anyone can edit and change. Websters creates definitions that have stood the test of time, rarely changing, and when they make a change, they have studied and made sound decisions on why the definition should change.

Wikipedia, on the other hand, can be changed by JoeBlow@gmail.com because he wants to.

To really drill down on the different type’s of relationships people form at work, and in their lives, I thought the synonyms of the word acquaintance from Webster’s formed some appropriate categories.

I think it’s interesting to look at these categories and see where the people in your business social network, and in your personal social network fit in:

—Synonyms
1. Acquaintance, associate, companion, a person with whom one is in contact. An acquaintance is someone recognized by sight or someone known, though not intimately
2. A Casual Acquaintance. Or an associate is a person who is often in one's company,
3. A Business Associate. A person who shares one's activities, fate, or condition usually because of some work, enterprise, or pursuit in common
4. A friend is a person with whom one is on intimate terms and for whom one feels a warm affection
5. A Trusted Friend. Familiarity, awareness.

Many people spend as many or more hours with co-workers than they do with their families, and many people spend more hours in a week with co-workers than they spend in a month or more with their trusted friends. Due to this, we have seen friendships in business turning into friendships in people’s personal lives. In recent years, I’ve witnessed this happening more frequently, and with more negative effects than I have seen in prior years, or pre-technology, if you will.

I am fifty years old and I have been in business for over thirty years. I’ve been an employee, a co-worker, a manager, and for the past twenty years I’ve been a business owner who has employed as many as 125 people at once through several different businesses my wife and I have started.

I’ve participated in, managed, or encountered many types of relationships with co-workers I’ve worked alongside, or people I’ve managed, or employed. In all this time, and through all these relationships, I’d like to think I’ve learned a little bit about the dynamics of employee/employee, employee/employer and even client/vendor relationships.

One of the first rules I was taught, but it took me a few mistakes to understand why it’s a common saying you have all heard is……… “you don’t mix business with pleasure”.

www.freedictionary.com defines this as:

Mixing business with pleasure:

To combine work with social activities or enjoyment

(usually negative)

I didn’t put in the “usually negative” part, BTW, but I totally agree.

Believe me when I say I’ve been there. For example:

I’ve partied with co-workers and then realized that wasn’t the best idea, especially when something happened when we partied, and now I knew more about that person than I cared to know, or needed to know, and it changed our relationship.

I’ve made decisions regarding employees that were affected by my personal relationship with them, and they’ve almost always ended up being bad decisions.

A person I thought was a good friend turned out to not be such a good friend.

The negativity of a person I got too close to started to cause me to become negative myself, and I like to think of myself as a positive person.

“Don’t they ever have anything good to say” or “Why do they work here if they always complain”?

I’ve gone out with co-workers and later figured out they weren’t someone I’d normally associate with, but when they asked me to go out I felt it would have been rude to say “no”, but then the relationship became uncomfortable at work when up until then my professional relationship at work with that person had been great. I should have just said I had a prior commitment.

Does any of this sound familiar? We’ve all been there.

Technology has given the average worker new challenges through their constant availability with their cell phones, texting, and through social networking sites like Facebook.

In doing some research, I found an appropriate comment about Facebook on a person’s blog:

“For every long-lost chum who reaches out to me on Facebook, there's a guy who beat me up on a weekly basis through the whole seventh grade but now wants to be my buddy; or the crazy person who was fun in college but is now kind of sad; or the creepy ex-co-worker who I'd cross the street to avoid but who now wants to know, "Am I your friend?" yes or no, this instant, please.”

I think the co-worker example above may seem exaggerated to many people who have co-worker friends on their Facebook page, but from my experience, it’s just another step in the direction of mixing business relationships with personal relationships at a stage that is way too early, and where the problems that can result are not worth the risk.

On the client/vendor front, I know companies have witnessed a conflict of interest when an employee of theirs and an employee at the client/vendor are friends with each other, and it can or does affect their business relationship. We see some clients who can not even accept a box of chocolate from a trusted vendor at Christmas, which may be a bit over the top, and we see some who recognize that when the sales rep or owner of the vendor takes the vendor manager or decision maker to the Super Bowl, that may influence their decision to give that company work, and rightfully so, they put the kibosh on those types of activities.

As technology evolves, I now see a new twist happening through social networking sites. For the record, we are drafting our own social networking policy and this will also be a “no-no” for us. I want people to use our services because we do a good job, not because they like how we look in our profile photo, or because my people socialize with our client’s employees outside work, and are friends who converse regularly on Facebook or Twitter.

I have a Facebook page, and at first I felt awkward when a person at work “friended me”, asking if I’d join their social network on Facebook. I kind of looked at it like when a seventh grade friend of my son sent me a friend request on my personal Facebook page. I like the kid, and didn’t want to seem rude, but I think it best if my relationship with this kid remains as my son’s father, and not as a friend of mine on my personal Facebook page.

I saw the person at work the following day and told them I appreciated their asking me to be their friend on Facebook, but I preferred to keep my Facebook page separate from work. They said ok, and I think they understood.

When I go back and read the “friend” definition on Webster’s, I realize I have personal friends, business friends, family friends, etc. Sometimes my family or personal friends cross over into people I place in my social network, and I have them on my Facebook page, but when it comes to work, I prefer to keep my work relationships at work, and to me, those are almost always relationships with “business associates”, otherwise the mix of business and personal becomes to consuming. It’s already become more difficult to separate work and personal with the availability of email on cell phones, etc.

In my career, I’ve learned there is a time and a place for business, and the same goes for pleasure, which I think is not the right word as I enjoy working, so I usually find it a pleasurable experience.

I think a better analogy would be business and personal. While I think there is a time and a place for mixing the two, based on my personal experience, I’d try and limit my outside of work relationships with my co-workers to company events that are not work related, i.e. company picnics, holiday parties, etc. As the owner, or as a manager or a person of responsibility over others within a company, it is a different landscape than with a co-worker-to-co-worker relationship. While we realize people will become friendly and over time will develop friendships at work, and those may carry over to outside work, the best advise I can give is to take your time, and really get to know the person and make sure that your relationship with them outside the job is based on their being a “trusted friend”, and to me anyway, it takes a significant amount of time, usually a year or more, before I place a friend in that category.

For this reason, I personally do not consider it a good idea to mix your friendships at work with your friendships in your personal life until a significant amount of time has gone by. I can give you a hundred examples where things went wrong, and in almost every case, it was when a person rushed into a relationship with another person without really knowing them. They placed the person into a position of trust, and many times they got burned. I’d have to think really hard to come up with examples where a business relationship turned into a personal friendship within a few months of the people knowing each other and it benefitted both parties, and the company.

On the other hand, I can think of a small amount of examples where a relationship built over a significant amount of time, mutual respect, and trust, evolved between two co-workers and it carried over from work into their personal lives and both employees, and the company, benefitted. It’s rare, but when it happens, it really adds value to his or her jobs, and to the company.

This is a difficult rule to keep. I enjoy working with everyone here, and I’m sure I’d enjoy skiing with many of you, or going out for dinner, playing a sport or just going to lunch and chatting, however, if I do that, then in my situation, others may feel as if I am playing favorites. Also, what if we become close friends and I have to discipline the person, or promote someone over the person I have become close with and that move upsets them?

From a co-worker standpoint, you have the same issues. “Why does she go to lunch with him every day?” What if you see someone you become friends with doing something you know is not right, will that influence your decision to say something that would be in the best interests of the company? If the time comes for a promotion, will your boss feel as if you have developed too many personal relationships with people you’d be supervising and then you get passed over? Will someone spread rumors about you because they are jealous of your relationships with co-workers, or they misunderstand your intentions, even if they are completely trustworthy and honest? Those are just a few examples of the risks involved with developing relationships that move from business associate to friendship at work. When they happen in a matter of weeks or even months, the risk of a problem is elevated. When they happen as people really get to know each other, and as each person cements their position within the company, the risk becomes reduced.

Another reason I feel the mixing of your personal and work life should be approached with extreme caution is the simple fact that you need to charge your batteries when you’re away from work, and the best way to do that is to leave work at the office and come in fresh the next day. If you spent an hour on the phone at home after work speaking with a current or an ex-coworker and work was discussed, yours or theirs, that’s not usually a healthy phone call for your psyche. Are you talking about good things? “Oh, I love my job” and if it’s an ex-employee you’re speaking with, what do they think of that if they are no longer there? Are you complaining to each other about something that bothers you, and how does that negativity affect you? Or what if you’re happy and your new personal friend from the office isn’t, will they call and tell you how they love their job or will they call to bitch, or worse yet, post it on Facebook?

Here are some interesting questions to ask yourself when making friends at work :

• If your friend left the company, would you still be in touch with her in a year?
• If you had a personal emergency, would you consider asking your friend for help?
• Do you hang out with your friend outside the office? (Weekday lunch, happy hour, and business trips don’t count.)
• Have you met your friend’s significant other? What about her friends outside the office?
• If your friend received the promotion you were banking on, would you be genuinely happy for her?
• If you ran into your friend in the grocery store, would you be able to talk to her for 10 minutes without mentioning work?
• Have you seen where your friend lives?
• Do you and your friend have anything in common besides your age and your job?

Sources for this blog are:

http://www.wetfeet.com/Experienced-Hire/On-the-job/Articles/Work-Friends-vs--Real-Friends.aspx

http://www.usatoday.com/money/workplace/2004-11-30-best-friends_x.htm

http://boingboing.net/2007/11/26/facebook-will-sink-u.html

www.wikipedia.com
www.dictionary.com

Why Forwarding?

2009-11-30T14:20:00.000-08:00

I just received this note from a TFA member about the state of the forwarding business.

Having helped create this industry within our industry, its a subject I am passionate about, as you can tell by some of my other blogs. He raises some good points and I've copied his letter below for your reference.

I agree with most of what he says, but I disagree with his statement that the reason lenders went to Forwarders was gouging? Maybe on a few occasions, as is the case with any industry, but lenders are paying more now for a managed process, so it is doubtful to me that it was a cost issue, or a gouging issue.

I witnessed first hand the transformation of Chrysler Credit from a hundred or so branch company to a 3-4 call center company. That is one reason lenders went to forwarders as it became difficult for these companies to manage so many relationships after they went to a national call center model. It killed the days of getting to know your local repo man. When I was a collector in the Sacramento branch, and a collection manager in Long Beach and Cerritos for Chrysler Credit, I knew all the agents in town, and I knew who to use, and who not to use. Being the president of some association didn't automatically qualify a repo company as being good in my book back then, or even now. I respect those who serve the industry, but for me the bottom line is always the bottom line, and that's performance.

Good luck knowing your local Wyoming repo man if your at a call center in Dallas. Relationships are built on trust, and that's tough when you've never even met the person who owns the repo company. Relationships as difficult as the one between a lender and a repo company are more complex than most business relationships, and in many ways, they're built on trust and hard work. When we brought on a new lender to handle their forwarding back in the 90s, each of those relationships had evolved over years of trust being built.

IMO, the second reason forwarding became common was inexperience. How many clients had departments or people managing the repo process on a national basis? At Chrysler, the agents you approved was a decision made at the branch level back then. We were successful at ARS with our first client in 1993-94, VW credit, for this exact reason. We had started Skipbusters in 1988 and for the prior six years, we'd been managing a group of 300 or so agents, and believe me, it wasn't easy getting the number whittled down from 2000 to 300 of the best agents in the country. We were repossessors and we understood that business, so it was easier to manage, but it took six years to get it right. We'd also been skip tracing and managing the VW skip repo's for several years and we had built trust with them.

Back then we charged a reasonable fee of $75 per assignment, and the next reason lenders outsourced this process is the cost was less, and by cost in the VW example, it was driven by actual cost and also productivity gains we showed over the results they were getting before they were using ARS, so their bottom line improved. If more lenders looked at "cost" as a bottom line number and not a line item repo expense, we wouldnt be in this mess. It still blows my mind the same effort is expected and the same price per repo is paid for a car worth $1500 as one worth $50K. That certainly doesnt make sense for a finance company, but that's the way it is, and that's another topic for another blog. I could also ask why a client pays the repo man less, or in most cases nothing, when they make contact and the customer pays from their contact. If they took the car the lender suffers a several thousand dollar loss, but if their efforts get the customer to pay, they dont lose that money, so why wouldnt they reward an agent for dong this, versus penalizing them as they do now?

The next reason I believe forwarding became so popular, at least for us at ARS, was the explosion of the sub prime market. Companies like LSE were jumping into servicing and they didnt really understand the repo assignment model and they were getting eaten alive with wrongful repossessions, inefficient vendors, volume, etc. We handled a then industry record 50K repossessions in 98 and most were sub prime loans serviced by companies like LSE, Harvest group, and a bunch of other names I don't remember as they're all long gone. We knew the decision makers they hired from prior business relationships we'd established and we gave them an immediate solution, at a fair price. We also paid the repo guy back then $275. It blows me away when I read things like this that say the fee is still $275, or less. We didnt even have tow trucks or computers back then, and now you need all that and more, wages and insurance is much higher, but the price per repo is still being driven down? Why dont lenders see repossessors as valuable commodities to improve their bottom line? FWIW, we pay all our agents $375 a repo, and a $75 to $150 close fee for positive resolution, which we believe is still below what it should be, but at least we have a few clients who see the results and agree this is a fair price.

The next reason is it became attractive for a lender to push the liability to the forwarder as it gave them an extra layer of insulation if something went wrong. This is still the case, and will always be, but the liability exposure from a PR and actual dollar standpoint pales in comparison to the losses some of these lenders are taking by using the current forwarding model. When he says now clients are driving down the price for forwarding, that's to be expected, it's the same thing they did to us as repossessors when I ran my repo companies in the 90s. Clients see expenses as something that should be reduced, and although you can reduce your line item repo expense by making the repo guy charge less, is it really improving your bottom line? No it is not. I guarantee it.

Finally, the selection and management of agents is a process that's difficult to manage when doing it manually, and when you add in metrics, it's still something very few, if any lenders or forwarding agents have a good handle on. Most lenders or forwarders want the cheapest guy and the rest of the details are less important. The one's who measure performance are only scratching the surface of what really needs to be measured.

You cant manage what you cant measure is never more true than when applied to a difficult business like skip tracing and repossession. Just because an agent recovers 60% of the cars does that mean he's great? He may get a better percentage than others, but does that have more to do with the agent or the paper, the area he is in or the quality of the collection work and the assignment preceding the repossessors work in the field? I want to know what an agent does by zip code, how they do overall in all aspects of the job, especially when they have multiple offices.

I can guarantee you J&B Recovery in LA pulls more cars and resolves more accounts out of South Central and Compton than most of the other three dozen guys who advertise in those areas, and that's because Jake gets out of his truck and knocks on doors. The thing is, recovery percentages in South Central have to be low, so if his numbers only show 50% is that bad? Everything is relative, and measurement of as much of the repo process as can be measured is the name of the game when it comes to managing the process, from a lender standpoint, down to a repo agency standpoint, and especially down to an repossessor standpoint so they can become accountable to themselves as well as to their boss.

This is the exact reason I have spent three years re-entering this crazy industry. I believe a change is in order, and if I'm right, lenders will gladly pay more money for results that improve their bottom line, which will start going direct to agents again, as it can be a process they not only will be better able to manage with our software, but after seeing how we manage the process, there is no way they would ever again consider outsourcing such an important decision to a company ran by guys who don't have their best interests in mind, i.e. most forwarders today.

John

Here's his note:

Something new and very interesting is happening.

Chrysler told PAR they would no longer pay more than $350 per repossession. That's $350 total to PAR. In response to this PAR is contacting every agent and cutting their fee to $275 per repossession (Los Angeles agents were given $25 more). PAR wanted to make the cut even greater and tell agents they would only get $250, but they figured too many agents would quit so they settled for $275. At $75 per assignment PAR can't make enough money to make it worthwhile to forward. They also get fewer services from agents, poorer quality of agents and more incidents as they use less experienced and cheaper agents.

How long is Chrysler or anyone else going to use the forwarders when their recovery rates are dropping every year? Some companies are seeing recovery rates as low as 20% from forwarded accounts.

If Chrysler paid me $350 to pick up a car, I'd still do it for them and do them a good job, but how good a job can I do for $275? As you know, I work for most of the forwarding companies and have a good relationship with them, but I'm firing more companies every month. I tell them they want a top of the line agency, but they want to pay for a grease monkey with a sling truck. It just isn't going to work.

PAR made another change a short time ago. They doubled the number of assignments their employees must work each month. They have a quota and if they don't meet it they are gone. Consequently, the employees don't have time to verify addresses, locate new addresses or even talk to the agent in the field about an account.I see this happening more and more often with the forwarding companies.

I've long said the pendulum swung away from agents because they were gouging the lenders. It was our own fault the forwarding companies ever got started. Now, the pendulum is going to swing back toward direct agents and it will be the fault of the forwarders.

I believe in 2010 you are going to see a few of the lenders leaving the forwarding companies and going back to direct agents to get their recovery percentages back up.

The biggest change in the Auto Finance Industry has been...

2009-10-28T12:33:00.000-07:00

WOR.

You may have no idea what WOR means, unless you've been around since the early 80s.

When I started at Chrysler Credit there was a clause in most auto finance contracts called "Recourse".

Recourse meant that the customer, the debtor, the guy buying AND Financing the car, was ultimately the responsibility of the dealership if he went beyond the point of basic delinquency.

It's been a while, so my memory may be a bit rusty, but I believe most deals were 90 or 120 day recourse. That meant that when the customer bought the car at the dealership and they sent us the credit app and contract to consider the customer for a loan, we knew that the dealer was also a part of that credit decision as they would be on the hook for the FULL BALANCE if the customer went into default beyond 90 or 120 days.

When we got to day 60 of the delinquency we would notify the dealership that the customer was late on his payment(s) and they were being put on notice, and that we could, and would, be asking for a payoff of the loan if that delinquency was not immediately corrected. Sometimes we let the dealer slide a few months and we allowed them to make a payment or two versus having to pay off the entire loan.

Can you imagine the ramifications of this in today's market? Think about how that would have affected the sub prime mortgage industry if the brokers would have ultimately been responsible to the bank if the guy buying the house defaulted. Would they have been so quick to falsify the documentation to get the loan approved if they knew they ultimately could and would be responsible? Of course not. Would they have been selling everyone who could walk, talk and sign a contract a house, if they would be responsible of the person went into default? Of course not.

At Chrysler, our dealers were our partners. When WOR, or With Out Recourse paper became the rule instead of the exception, that partnership went away. It started to go to WOR when some finance companies offered WOR as an alternative to Recourse contracts, and the rates were competitive enough that the dealer would start placing those loans to finance companies offering WOR contracts. Pretty soon, Chrysler and all the other major lenders had no choice but to offer WOR contracts.

With WOR, the dealership no longer had any interest in what deals they sent us, how those loans would perform, how we collected payments on their customers, etc. Once the deal was financed, the dealer was off the hook, so what was their motivation to make sure they got good reference numbers, valid POE info, a Co-Signer who could and would pay, etc? There was no motivation, and when that happened, the quality of the paperwork dealerships would collect in terms of customer documentation started to decline.

I believe the dealerships were also responsible when we repossessed a car before the 90 or 120th day. We'd bring the dealer the car instead of taking it to an auction and the dealer would pay off our contract.

At the same time this happened, Chrysler and all the other major lenders started consolidating to large call centers, another major change. This further segregated the finance company from the dealership.

It's interesting to see Chase getting back to a local branch model in regard to their auto finance collection strategy. As time goes on, I believe you will see this model succeed for them, and you may also see other lenders try and look to copy what they've done when they acquired WAMU and took over their branches, in many cases setting up auto finance collection centers. I've often wondered if they thought of this as a pre-acquisition strategy, or as a "what do we do with all these branches?" after the acquisition strategy?

As banks and lenders continue to keep their belts tightened, will we ever see Recourse paper come back?

If it does, I think it would be a way to rebuild the bond between car dealers and finance companies, especially for captive lenders who so greatly rely on each other. I believe the industry should revisit the benefits this relationship used to bring each other, and maybe this could be the catalyst to rebuilding a stronger auto finance model in the future. Now that banks hold more cards in regard to lending, there may not be a better opportunity to revisit recourse lending.

John Lewis
President
www.FindJohnDoe.com

Repossession assignments and fine wine; a case study

2009-09-29T09:53:00.000-07:00

The Auto Finance summit is convening in a couple weeks, and while I unfortunately won't be able to attend, I have replied to a question by the organizer of the event who asks what challenges does the auto finance industry face as we enter the 4th quarter of 2009.

Here is my reply:

A huge challenge lenders continue to face is in regard to assessing and managing risk; i.e. high risk loans on their books that go delinquent.

I have been on the cutting edge of the back end of our industry for nearly thirty years, and when you ask about challenges and solutions, I believe I have identified the challenges many lenders face on the back end, and I have worked very hard and invested a significant amount of my own capital to come up with a solution that can assist lenders, and one that can reward, instead of punish, the solid repossession companies, which is the direction I unfortunately have seen our industry headed in the two and a half years since I got back into it.

We have been working diligently to create an opportunity through a software product that assesses and manages risk, and we will be launching it in 2010. We have an immediate interest in adding one lender to our team of three external financial institution beta test users in Q4 2009. There is no cost to the lender during testing, and if our software works as we project, it can save a lender millions of dollars in annual losses.

As the person who started the first exclusive Skip Tracing company for the auto finance industry in 1988 in SkipBusters, and the first forwarding company to handle more than 50,000 assignments a year in American Recovery Service in 1993-94, I have re-entered this industry after my five year non-compete expired, and my goal was to create a software product that could assist lenders to identify, and better manage, their high risk accounts.

We have finished our internal beta testing of the new software and in a 90 day contest against two of the largest skip companies in the country, working a captive lenders oldest, most difficult charged off skip accounts, we won this contest handily. The results are a direct reflection of the power of our new software. In this 500 file per company contest, we've more than doubled the amount of repossessions the 3rd place company has gotten, and we've gotten 40% more repossessions than the second place company. We also helped our client get twice as many accounts paid in full than the second place finisher, with the last place finisher getting zero paid in full. These paid in full accounts are a direct reflection on the work done by our approved and contracted outside repo agents as they get paid a close fee when a customer pays, and they are not working on a strictly contingent basis.

As a comparison, we also beat these same two skip tracing companies in the last contest that ended July 1st, but we only were using the new software for the last 30 days, and in those last 30 days, we came from last to first to win by 10%, which happened as soon as we started using our new software.

These results are not a reflection on our two competitors as both are leaders in the skip tracing industry and I'm sure they do a fine job overall, in fact, I personally trained the owner of one of those companies when he used to work for me. These results do show that when utilizing the proper software, you can increase your efficiency and if you're a lender using this in a pre-charge off environment, you can reduce your losses significantly.

How many of you are on an old legacy software platform that isn't much better than using a green screen when it comes to measuring and analyzing data?

How many of you cringe when you or your collection managers need to deploy resources from your internal IT department?

Those are some of the major challenges our industry faces today, at least from what I've seen through the interaction I've had with some of the largest lenders in the industry in the past two years. I've created a back end solution for this problem, and so far, the results are positive.

In addition to these internal challenges facing lenders, they also are facing new challenges posed by two relatively new industries, and one older industry; Skip Tracing, Forwarding and Repossession.

When we started Skip Busters in 1988, there were no skip companies that exclusively handled skip tracing on delinquent auto loans. Now there are dozens, and its a several hundred million dollar a year industry. While this helps lenders, it also opens them up to risk as they now have outside vendors working their files by phone, and between FDCPA, SOX, GLB and many other federal and state laws, plus ID Theft issues, this is now a greater risk to lenders who outsource this work then they've ever faced. Due to this, you need a solid software program that analyzes and manages this risk. If your customers ID is compromised at a vendor level, you need specifics answers and metrics to back up those answers, otherwise, the liability and exposure you and your vendor face can be in the hundreds of thousands to millions of dollars range.

When we started exclusively managing the repossession process for VW Credit on a national basis in 1993, Manheim had just closed its doors on a division they had started a few years earlier that did the same thing. There were a few other industry leaders from the repossession industry, i.e. Minnesota Repossessors, who had gained market share through trust in terms of direct repossession assignments as we had done with Skip Busters, and through our No Calif repo companies; River City Auto Recovery.

As a result of our growth, we were starting to get requests from clients to help them manage their national needs. The industry had grown from individual branches to large, national call centers, and the managers of these places were now facing new challenges in identifying their best repo companies on a national level, and not as they used to on a local level. Almost immediately after we started seeing success, ADT got in and soon they were purchased by Manheim, and many others followed suit on what we were doing for VW Credit, and then for a number of large, new sub-prime lenders; managing their repossessions.

They now call it Forwarding, a term I never really liked as it implies there is little or no skill involved. Our idea was to "manage" the process by paying the repo company a fair price, and then we would charge a flat service fee based on our work. We charged a $75 mark up back then. Nowadays, you'll be hard pressed to find anyone doing over 20% of their forwarding work for less than a $100 mark up per repo.

When I got back in the industry in 2007, I was shocked to see how much traction the forwarding business had gained, and I was also shocked by what it had done to the industry. Most forwarders now make their money on the mark up they get by charging the lender as much as possible, and by paying the repo agent as little as possible. This raises the stakes to the finance company significantly, and it's not just the cost of the insurance claim, it's now also the exposure on CNN they may someday get, something every lender would be more concerned with if they could see what's really happening on their repo assignments placed with most forwarders.

Repossession management was a good idea, and it still is on a limited basis, but only when lenders hold the forwarder liable for their actions and when they audit them to insure their practices are within the best interests of the lending institution. Are all their outside repo agents contracted? Do they have proper insurance? Do they drug test their employees and do the repo agents they hire hold their employees to certain standards? Do they perform background checks and do their agents? Do they allow repo companies to use independent contractors versus hiring employees? Do they get out of their truck to kick in a deal, or is it not worth it because they are being paid on a contingent basis and there is no commission for the repo man when he tries to help the lender resolve the account, unless its through repossession.

"Oh, but we pay our guys $25 on every deal they close".

Show me the documentation.

I challenge you CEO's out there reading this to pull a report on the average amount of days your repossession assignments are assigned to the agent they are currently with, forwarder or direct. If it's higher than two weeks on average you have a problem. Accounts need to be moved through queue's, followed up on, and managed to the point where there is always some form of forward progress. I don't mean the type of backward progress we see in our end of the industry when a collector runs a bureau or a public records report and throws the last three, or six addresses reported for the customer at the repo agent to run "and kick in hard", making the repo agent do the work the collector or skip tracer should, and can do with a couple phone calls to verify first if the address is good or not. Those are the challenges a lender faces, and if you have a high charge off percentage, you might want to start by analyzing those trends and numbers.

High risk accounts need to be identified and worked diligently, or they will become more difficult with age in the same manner a fine wine becomes better with age, by sitting around and aging. The difference is your customer is driving and causing your collateral to lose value with every mile whereas your wine is sitting in a wine cellar aging gracefully, increasing, noty decreasing in value.

Many forwarding companies do a good job, but if they're paying a tow jockey with marginal, if any insurance a $175 repo fee and then charging the client a $475 repo fee so they can make their margin that they're losing because 50% of their deals are being worked on a contingent basis, the client, and the successful repo agent who doesnt get the deal are the one's taking it in the shorts, not the forwarder. I"m not saying a repo agent needs to get paid on every close, but they should expect to get deals with verified addresses, one address at a time (two if there is a POE) and if they resolve that address in a positive manner, they should get something for their effort. This allows you to move the account to the next queue, and by doing so, you are addressing and not pushing aside your risk.

Forwarding, as it currently is being used, and from what I've seen, is not good for the finance industry, yet accounts are assigned to Forwarders thousands of times a day. Forwarders now control a material portion of the repossession assignments, which is scary when you see how most of them are operating their companies. That's a challenge lenders face, and the solution is to re-establish direct relationships with solid repo companies they identify, and then use software and training to manage the process. I know why Outsourced Repossession Management made sense in the 90s, but as I see how it's evolved, I believe it has trended in the wrong direction and that's a challenge lenders who use Forwarders face.

Some things were meant to be outsourced, and while early stage collections on an account that is not a high risk is a good idea, outsourcing the management of your entire repossession portfolio without a clear understanding of the relationship between the Forwarder and the repo agent and the metrics behind that to verify what you are being sold is accurate, its a recipe for disaster. I think the assignment and verification of specific pieces of your portfolio like impounds and assignments in remote locations is an idea worth paying a mark up for, but there is no reason to pay the mark up to a guy pushing the paper when you can, and are better off, making those decisions yourself.

If you are a lender and agree with some of what I've said and would be interested in speaking with me about becoming a beta test user for our software, please contact me at 916 730 3335 or jlewis@FindJohnDoe.com

OK JJ, now you can ask your programmers to limit the replies to people's posts to xxx characters. Sorry for rambling about a subject I'm passionate about, but this industry has been good to my employees, my family, and to my wife and I, and if we can somehow give something back, we're hoping it can be through the technology we've created with the software we've written that's based on thirty years of experience as a lender, a vendor, and an outsider who is now back in.

John Lewis
President
FindJohnDoe.com

Direct Repossession vs Forwarding - Price vs Cost

2009-06-23T18:08:00.000-07:00

Repossession Forwarding – Price vs Cost

Newspapers and TV crews love to tell stories about Repo Men, but the stories I’m seeing lately seem to be more about the Forwarding Industry than the Repossession Industry.

FROM USA TODAY 2/29/2009

Violence up between Repo Men, Car Owners

HALSELL, Ala. (AP) — Alone in his mobile home off a winding dirt road, Jimmy Tanks heard a commotion at 2:30 a.m. just outside his bedroom window: Somebody was messing with his car. The 67-year-old railroad retiree grabbed a gun, walked out the back door and confronted not a thief but a repo man and two helpers trying to tow off the Chrysler Sebring. Shots were fired, and Tanks wound up dead, a bullet in his chest.

The man who came to repossess the car, Kenneth Alvin Smith, is awaiting trial on a murder charge in a state considered a Wild West territory even by the standards of an industry that's largely unregulated nationally. Since Tanks' death last June, two other repo men from the same company Smith worked for were shot, one fatally.

Smith worked out of Birmingham with XXXXXXX Recovery (Repo agency) , a subsidiary of the Chicago-based XXXXXX Services (Forwarding Company). The same recovery firm employed a repo man who was shot and killed on Jan. 8 in Birmingham, as well as a third worker who was wounded while towing a vehicle in the city on Feb. 10.

I removed the name of the Repo Company and the Forwarding Company that hired them because my point is not to bad mouth a specific company, but to make a point about the state of the Forwarding Industry.

Before I do that, let me give you a little bit of history. I know a little bit about the “Forwarding Industry”. I started a company in 1994 called American Recovery Services, or ARS, as it’s known in the industry. It was one of, if not the first large volume Forwarding Companies, handling upwards of 50,000 assignments for repossession a year in the mid to late 90s.

We started it by accident. We had formed one of the first Skip Tracing companies that exclusively serviced the auto finance industry in 1988; Skipbusters. By the early 90s, we had several hundred Repossession Companies across the United States under contract to repossess the cars we located on the skip accounts we worked for large financial institutions.

One of our clients was VW Credit, and ironically, I had been one of the first VW Credit employees back in the early 80s when they first started financing cars in the US. VW had hired Chrysler Credit to manage the finance and collection process, and I was a Chrysler employee. By 1994, VW had split from Chrysler and they had gone out on their own, and I had done the same.
I’d landed VW as a client at the first repossession company I had started in 1990 with my wife and a business partner; Crown Recovery Services in L.A. By early 94, we’d sold our half of Crown and we’d started River City Auto Recovery at several locations in Northern California. We were doing all of VW’s repossessions in Northern California, and we were also were handling several hundred skips a month through Skipbusters.

While visiting VW’s HQ they asked us if we would be interested in managing their repossession process through our nationwide network. We did some research and formed ARS within a few weeks. We never called it “Forwarding”, in fact, we never even gave it a name other than ARS. By the late 90s, all the national auction houses had jumped in and started similar companies, and even Manheim got back into the business with their acquisition of ADT in 2000, even though in 1994 when I first started researching the formation of ARS, they told me they tried it a few years earlier on a small scale and almost immediately got out because it was just too difficult a business to manage. Interestingly, I heard last week they were recently sold to XXXX Forwarding company, probably a smart move on Manheim’s account, if they got a good price and didn’t have to guarantee revenue. It’s tough to run a successful Repossession company, and running a successful Forwarding company is even more challenging, in my opinion.

So yes, I know a little bit about the Forwarding Industry, and what I’ve seen recently is not something I’m proud of when my name is mentioned as a pioneer of this industry.

Here’s another recent, similar story:

From NBC Augusta, GA. 4/13/2009

Repo Man wanted for murder of Augusta Man

MARTINEZ, Ga. - A vehicle repossession turned deadly. The man called his lender to have his vehicle voluntarily repossessed. "As the reposessor was attempting to leave with the truck, he was causing damage to Mr. Jacob's vehicle, it was a van," said Captain Steve Morris with the Columbia County Sheriff’s Office.

"When the truck came forward, he hit me. I was able to push off and get out of the way," said the man. His friend of 20 years, William Jacobs, wasn't as lucky.

"They went diagonally across my front yard and I saw Bill falling and I saw the guy turn and he ran over him...and he never slowed down," said the man. Jacobs was taken to the hospital, where he died.

Now the couple who hit and killed him is on the run and wanted for murder.

Columbia County investigators are working with the repo company, (XXXXXX Forwarding Company) and XXXX (Tow Company) to help find XXXXX and XXXXXXX.

And here is another one…

Tow Truck Driver Arrested, Charged With Hit And Run

By RNW Staff Writer Hayden Jennings • on June 15, 2009 (Rome, GA.)

Police arrested a local tow truck driver for felony hit and run after he ran allegedly ran over a woman in what police are calling a car repo gone wrong. Residents began giving the driver problems after he failed to produce any paperwork dictating the repo. As the situation continued to escalate, the driver reportedly brandished a hand gun and jumped into the wrecker. At that time the victim, Tina Ferguson, 41, of the same address, walked in front of the wrecker and was struck by the front bumper. The collision sent Ferguson into a barrel roll beside the truck before she rolled under it and was struck by the rear wheels as the wrecker left the scene.

The common denominator is the unprofessional and downright criminal actions of the repossession agents in question. The other common denominator is the fact that most, if not all of these accounts were assigned by the finance company to a company they trusted to handle the management of the repossession process for them, i.e. Forwarding.

In 1994, I believed Forwarding was a good idea, and even today, it still makes sense for some clients who struggle with the repossession management process. The problem is that like everything else, costs of doing business have gone up, and as a result, many forwarding companies are lowering the rates they are willing to pay the repo agent in the field to make sure they can make their needed, or desired margins. I’ve heard some repo companies offering their prospective agents $225 or $250 a repossession, and half that on a voluntary, which very well may be why there are two towing companies mentioned in the stories above.

If you wanted to get Lasix surgery on your eyes, would you hire someone who doesn’t use the best equipment, isn’t licensed, or doesn’t have a successful track record with solid references? Repossessing a car isn’t performing surgery on someone’s eyes, but if I own a finance company and I know what I have learned in the nearly thirty years I’ve spent in this industry, I’m not hiring a tow truck driver to pick up a voluntary just because he will do it for less than a qualified repossessor. I’m also not hiring the cheapest repo guy in town unless I’ve made damn sure he is also the best in town, and those two denominators do not usually mix.

I believe Forwarding companies hire these second class repo and tow jockeys because the deal they cut with the finance company is based more on price than it is on results. They also do this because the finance company doesn’t hold them accountable unless a serious problem arises, and the finance company doesn’t perform the due diligence they should be doing before they give them their first assignment. If they did, many of these Forwarding companies wouldn’t pass the test, and then the one’s who do Forwarding would only be able to perform the services at a certain rate, because otherwise they would go out of business as it’s not inexpensive to properly run a legitimate Forwarding business, Skip Tracing Agency, or Repossession Agency for that matter. The Finance Company would also make sure they knew exactly who the repossession company was contracting with, and instead of not wanting to know, they would demand to know not only who their approved agents are, they would audit them and ask to see the contracts, their insurance policies and the endorsements naking the Forwarding company, and they would perform an acid test on their Forwarding companies policies, procedures and practices to insure that an assignment to a sub-standard repossession agency, or an unlicensed or unqualified tow company would never happen on one of their assignments.

Since I started in this industry in 1982, most clients I’ve known have been focused on getting their repossessions performed for a lower price. I was trained this way at Chrysler. Once I started my first repossession company, I started to see the other side of the picture. Through the years, I’ve built relationships with a few forward thinking clients who have allowed us to charge a fair fee that could be evaluated and renegotiated as we delivered or exceeded their desired results. As I’m building Find John Doe, I’m trying to work with clients who think this way, and I applaud the vendors we do work with who hold their companies to the same core business values. If a client asks us to perform a skip locate for less than our normal rate, I tell them that I just can’t do it as I’ve built an organization that produces results, and we have a level of expected results we have to meet or we would go out of business. Lowering our revenue by even a few dollars makes it that much harder to meet our expectations, and our employees expectations. We work from a results-driven fee basis. If we don’t find people and get the collateral recovered, we make no money. This means I have to build an organization that finds people, or at least enough people to make up for the one’s I don’t find.

Many repo agents say contingency is bad, and while I agree to some degree, it is the way our industry has been built. It will take a long time and some forward thinking clients to make a change. I believe if the repossession fee is high enough to cover the accounts that are not repossessed, and if there is a secondary fee that can be generated for the agent who gets out of his truck and generates a positive resolution, and most importantly, if the repossession company gets a positive resolution on a majority of the accounts they receive, they can make a profit. If they spread themselves too thin and try and cover too large a service area, the chances of making a profit are reduced. If they take on more work than they can handle, the chances of making a profit and building lasting client relationships are reduced. Based on my experience, I’m confident that if the agents we contract with can track their results and build relationships with our company based on results and trust, they can grow a solid business.

The only problem with this is there are times when our industry makes no sense, and then it’s almost as if we have to start all over again in trying to legitimize what we do. A typical example of this is when a client assigns an account for repossession and lets say the balance is $20K. If the agent repossesses the car, the client pays them between $325 and $395 on average, and then the car goes to auction and they lose around $10K. If the repo agent makes contact and as a result the customer pays the account current, avoiding a repossession and a potential $10K loss, the client doesn’t pay the agent more money, they usually pay them considerably less, and in some cases they pay them nothing.

As I approach my fiftieth birthday and the twilight years of my career in this industry, it would be nice if I could have a hand in helping clients see the benefits of building relationships with their vendors that are results based, with fair fees paid to the vendors that are justified by a solid ROI for the client, and for the vendor.

In another example, I had an agent tell me the other day that they had a client giving them about 100 accounts a month for the past several years and they were charging somewhere in the range of $350. They tracked their stats and were getting close to 90% of the accounts either repossessed, or the people would pay from the direct contact they were making in the field and they charged them a $150 cure fee. The agent said they were considering asking the finance company for a 5-10% raise because the cost of fuel, state of the art technology, health and unemployment insurance increases and now that their staff was more experienced, their staffing costs had gone up and as a result of these expenses, their profits had been reduced to barely above a break even at $325 a repo, even when they got 90% closed or recovered. The agent called and asked for my opinion and I suggested they open their books and show the client how their margins had been cut, but their performance had been consistent and even if they couldn’t raise their fees enough in one year to make up the difference, maybe they could get a 5% raise, and an extra 5% if they increased their positive resolution to 92% from 90%.

I didn’t hear back from the agent and about a month later I put in a call to follow up. Unfortunately, what I heard was not surprising. Before they made that call they got a call from the new collection supervisor who said they would have to reduce their price to $325 or they wouldn’t receive any more business as they were going with a national forwarding company who was charging $325 a repo.

This is a typical example of a story I hear many times over. If the Forwarder is charging $325, then what are they paying the repo company and what is the quality of the repossessor they’re getting for $225 or $250 - see above stories for the correct answer. How much will the lawsuits in the above stories cost the finance companies? I guarantee it will be seven figures, plus the intangible bad press every finance company seems to be most scared of.

In this example, if the forwarder still got them a 90% recovery rate on an annual basis, they would be saving $25 per repossession, or a total of $27,000 for the year. I’ll bet the average charge off this finance company pays for every full balance skip charge off is about $15,000. So, if the Forwarding company got them a 70% recovery rate, which is a high rate for a typical forwarding company, that would be 20 less repossessions a month, or 240 less a year. At $15,000 per charge off, that’s a loss of about three and a half million dollars a year.

As I’ve said, using a company to help you manage the repossession process can be a benefit, but make sure you hold them accountable. If you have a repossession agent that’s getting you 80% or higher and they meet your other requirements, use the forwarder in the areas where your percentages are less, or in remote areas, and keep the company who has earned your trust and find a way to incentivize them to get an even higher percentage and pay them what they’re worth.

“Is it Price you’re concerned about, or is it cost?” One of the most famous sales consultants of our time, Zig Ziglar, wrote the gospel to this question, and ultimately it’s answer. If you haven’t heard him speak on this topic, please take the time to Google his name and listen to one of his podcasts, which are available on line for free. It certainly can be applied to the Repossession and the Forwarding industries.

2009-05-02T08:08:00.000-07:00

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:

The Computer
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.

Software
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.

Email
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.

The Future:
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.

Web-Based Communication
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.

http://www.nbcaugusta.com/news/georgia/42931402.html

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.

GPS technology
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.
iPhone

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.

Skip Forwarding
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.

John

Identifying Risk

2008-09-27T08:08:00.000-07:00

I've been skip tracing my whole life.

I think most decent skip tracers have.

I didn't realize it until I was 21 years old and working for Chrysler Credit as a collector.

I'd been hired as a field rep, but that type of work was closer to the shenanigans I used to pull as a kid growing up in the suburbs of Chicago. I never stole a car or anything like that, but my buddies and I were pretty mischievous and we did some crazy things when we did sleep outs in the summer. When I realized that my new job involved dressing in black and taking someone's car in the middle of the night, it wasn't too far off my radar screen.

When I got moved inside, I quickly realized that being a field rep was pretty easy because I usually knew where the cars were at, so all I had to do was take them.

Finding the cars proved to be a different challenge.

Each collector had a group of dealerships they represented -meaning that everyone who financed a car for that dealership was in my queue. Fortunately, 90% of the people paid as agreed and I never had to pull their files out of the drawer. Of the 10% who didn't, we usually got that down to between a quarter and a half a percent by their 30th day of delinquency. The month before I got promoted to be a collection supervisor, I kept my queue at zero delinquency for thirty straight days. It was a big deal to "Zero Out" for the day, meaning that no one in your queue with that due date went over thirty days late on that day. Doing it for a few days in a row was hard work, but once I'd developed a plan to identify my riskiest accounts, it really wasn't that big a deal to "Zero out" every day.

Identifying the risk of your queue as a collector is the name of the game.

My territory was Reno, and my "more challenging" customers were involved in the gaming and prostitution industries. I knew some of them from when I was a field rep working their accounts and collecting their payments in the field. Our field reps were like a pick up service. The collector didn't accept a promise to pay, they made an arrangement to have the customers payment picked up. By knowing my customers, I knew who would push me to the 29th day, so I started collecting their accounts when I received their last months payment. Besides being a collector, I was on a first name basis with my regular customers and many times I would have to dig deep into their financial situation to make sure I would get my payment each month.

Nowadays, I think most collectors know their customers about as well as we know the skip accounts we are assigned; not at all, or at least not on a monthly "Hi, how ya doin Mike, hows the job going? Did your daughter have her baby? BTW, when do you think you can get that payment to me as I noticed I didn't get your check as we agreed I would last week".

When field reps were eliminated in the mid 80s, controlling delinquency became more challenging. In the late 80s, when the personal touch went by the wayside to computers, growth, sub prime financing and collectors changing jobs like pro athletes changing teams, it suddenly became more challenging to collect car payments. Using skip tracing companies was almost unheard of when I started SKIPBUSTERS out of my apartment in San Gabriel with my wife in 1988. Now, its becoming a more common tool as collection departments identify risk and realize they need help in resolving the more difficult accounts they have not made progress on.

Identifying Risk. It's still the key to understanding, managing and controlling a queue, a portfolio, or even when broken down to one account. In fact, it should be broken down to one account.

These days, when a customer goes delinquent and you can't find them, you have a number of on line resources you can chose from to develop leads to call to locate your customer. Unfortunately, this information is not perfect, and what's even more unfortunate, is that many collectors will run a credit bureau or a public records report and they'll see an address they didn't have, and without verifying if its good or not, they'll "Shotgun" it out to a repo agency to have them check the address. What's worse is some inexperienced collectors will send out multiple addresses to the repo agent, making their job more difficult because it costs money to check all these addresses. To further complicate the problem, when the car doesn't show, then they'll ask the agent to "Kick it in", make contact, or more directly, do the skip tracing the finance company should be doing on the phone, or hiring someone to do if they are not capable of doing it, or don't have the time or resources to do it themselves.

They've identified the risk, but they've tried to resolve it with a step that delays the job that needs to be done, rolling up your sleeves and finding the customer, and the collateral. I think the main reason they do this is because they don't know how to really skip trace, or they are so overwhelmed with volume that they don't have the time. I also know first hand that while many of the tools available to find the leads are helpful, the sheer volume of this information can also be overwhelming, causing it to not be used properly for its ultimate purpose, to find the lost customer and the collateral.

Risk on an auto loan is identified by a variety of factors:

Balance of the loan
Perceived value of the collateral
Age of the loan
Payment history
Credit History and a sudden change
Employment
Demographics
The quantity and quality of all available leads that can be used to skip trace

Once you identify the risk of an account, you must allow that file the time it needs to be worked to be resolved in a positive manner. It always amazed me that a company would charge off millions or billions in full balance skip charge off losses, but when it came time to drill down and see how they could reduce losses, the obvious solutions seemed to go by the wayside.

A good skip tracing company can give you an outside benchmark to where your staff is in terms of your ROI with each employee. Let me give you an example. After you throw in facility fees, employee benefits and misc. overhead, lets say your cost per collector hour worked is $35. I think this is a pretty low number when you really add everything in, but we'll go with it. Then lets say that collector is working a queue of 100 charged off accounts at an average charge off rate of $18K, for a total queue size, in dollars, of $1.8m. Lets say they locate and recover 25% of their files each month, and the average car they recover brings in $10K at auction. You just spent $6066 in wages to recover $250K. Not a bad ROI.

If you gave a skip trace company a like group of 100 files and your cost to them was an average locate fee of $400, if they got you the same 25%, then your cost would $10K, which is not a good deal for you if both sides get you 25%. Now lets say the skip company gets you 35%. Your cost would increase to $14K, but your recoveries would increase by an extra 10 cars, or $100K if your getting $10K per car at auction. Now you've spent $14K to recover $350K, versus doing it in house at $6066 to recover $250K. You also don't have the burden of the extra employee, and you made an extra $92K. If the skip company can get you 40% or better, then you are really ahead of the game.

Besides the numbers, what you've also gained is an invaluable resource, a work in progress monthly benchmarking challenge to your staff to raise the bar. By collaborating with your skip vendor through regular meetings and constant communication and measurement of the numbers, down to a granular level, you now can forge ahead with a relationship with your skip vendor to improve your numbers and theirs, making it a win-win for both sides.

and when I was hired to

Skip Tracing Preparation

2008-08-06T23:54:00.000-07:00

Skip Tracing File Review Worksheet

The purpose of this worksheet is to show you how to prepare yourself to work a skip file.

Working a queue of files means you have to know how to get in and out of files in a hurry. You need to be quick, yet thorough, in your review of an account before you work it. This step should take no more than 5 minutes, and many times the last minute or so is done when you’re dialing the collector who gave you the assignment, and then when you are waiting for them on hold, you are looking at the last things to review. The skip tracers who multi task this way have proven to be the most effective I’ve come across.

These are the things you want to review BEFORE you make a call on a new file:

1. Client
2. R/O and COX names
3. Collateral
4. Address
5. Delinquency
6. Credit Application and Contract
7. Collection notes
8. Client contact

1. Client- who is the client. Clients operate differently, so first see who the client is and then make sure you understand how they want their accounts worked.

2. Names - Look at the name of the R/O. Is it an easy name to pronounce, do they have a nick name, an American name if they are foreign? These are things you want to determine as its much easier if you know what name your subject goes by. If someone is looking for me and they ask for Johnathon Lewis, everyone they come in contact with will be suspicious. If the subject you are looking for is named Scott Reid and he goes by Scooter, you need to find that out- so when you start working the file- ask people you come in contact with, whom you feel you have their confidence and they will tell you….“Does he have a nick name or does he go by Scott?”

3. Collateral –its important to know what you are looking for. Many clients now don’t include the color of the collateral, the license plate, and some times its difficult to know what the collateral is. The other day we had an agent running an address looking for what they thought was a Honda Jet Ski. The way we received the deal, it had a code for the type of collateral and it was a motorcycle we were looking for. We told them their update said they were looking for the wrong type of collateral, and we got the bike the next night. Go to Google and look up the unit so you can see what it looks like. When you’re calling a neighbor or asking a relative if he drives a little white car, that’s better than asking of they drive a Ford Escort. When you call the client, use that opportunity to ask them if they have a plate or a color.

4. Address – compare the address from the client to what is in the public records you have access to. If a new address pops up in public records, ask them if they had that address, and if not, tell them you’ll confirm it and let them know if its worth giving to a repo agent to run. Clients have a tendency to see a new address pop up in Public or Credit records and they just assign it for repo without verifying the address. We are professionals, and were expected to verify an address as much as possible before assigning for repo, and every assignment needs to have the reason why its being assigned to that address, which you cant do without some form of verification.

5. Delinquency- Many clients don’t provide this information, and some provide bits and pieces. Some accounts are assigned before they charge off and some are assigned after they’ve charged off. These are important things to know. When you speak to the client, if they’re a client who will share this info with you, its helpful to know the following information:

Date last paid - This is important as it tells you how long ago they paid, and many times when someone stops paying, there is a reason that’s worth investigating- did the unit get wrecked? Did they give it to a 3rd party? Did they lose a job? Foreclosure?

Date past due – This tells you how long they have been delinquent. If a person is two payments down versus five payments down, that makes a huge difference in regard to how you approach the way you work the account, and what you say if you speak with them.

Amount past due – This is important if you speak with them and they ask how much do they owe. Many times these customers have not had anyone speak with them for months as they’ve been on the lamb. If you happen to get them on the phone, you may only have one chance to resolve the account, and if you don’t know how far past due they are, in exact numbers, you lose credibility.

Monthly payment amount – This is important as they may have another payment due the following day, so its good to know how much that will be.

Balance – This gives you an idea what the difference is between the amount in full they owe (with interest) versus the actual value of the car. Many times this can have an impact on the customer’s decisions regarding the loan, and the collateral.

Charge off information - When applicable, this is critical information to know. First off, if the loan hasn’t charged off yet, but is nearing charge off, the actual charge off date is important, as that is usually the last date the customer will have an opportunity to make any payments. After a loan is charged off, loan payments are normally not accepted, which means the only payment options after charge off are to pay off the full amount of the loan, including expenses, less interest. The charge off date is also important as many files will close with the skip agency when the loans charge off, so if you are close to resolving the case, it may not matter to some clients as they have to close the file with the skip agency when it charges off.

6. Credit Application and Contract. When available, this can be very valuable. Successful Skip Tracing involves working with actual data, factual information. The credit app and contract are the two documents that were filled out on the day the customer bought the collateral, so this is when the trace starts. The app gives you valuable references, usually people the customer knows well. The numbers may have changed, but just knowing their names and an address can help you skip them down to see if they know your skips whereabouts. The credit app also tells you where the skip was living and what date, how long they were there and sometimes who their landlord is. This information is available in public records, however, many public records have distorted dates as they are only as accurate as what someone entered in a computer. This gives you a starting point, and the more recent the date of the contract the easier it is to trace their steps after they bought the car. It also gives you the customers place of employment information, and sometimes a prior job or address. There are also boxes the customer checks that ask if they’ve ever been convicted of a crime, filed BK, committed a felony, etc.. If you find out they lied on their credit app that technically means they committed a form of fraud, and is something you can use in your investigation.
The contract is the binding legal document between the finance company and the customer, and while you usually have the necessary information it contains, it sometimes can give you important information like a color, the dealership contact info, or the payment amounts. IF YOU DON’T HAVE A CREDIT APP IN THE FILE WHEN YOU REVIEW THE ACOCUNT, ASK THEM TO SEND YOU A COPY OR READ YOU THE INFORMATION FROM IT.

7. Collection notes. Unfortunately, these are not always available, and yet they are possibly the most important part of the pre file review. If you know what has transpired on an account, it’s much easier to work a file, and it can save you a lot of time. While you don’t always take the work someone else has done as the gospel, if the client assigned an account to run an address that looks interesting to you and the repo agent reports they made contact with the guy who just bought the house and he says he bought it out of foreclosure, there is no point in running that address in the field. If the client says a relative is cooperative, or not, that is helpful to determine how you approach the call to that relative, versus going in blindly.

8. Call the client to review the account - This is an important part of how you prepare to work the file. It’s a good idea to introduce yourself if you don’t already know the collector, and even if you do, a couple minutes on the phone discussing what they know about the file and what they’ve done, and asking for the information you need, can all make a big difference in your success.

Skip Tracing 101 : Turn Over Every Rock

2008-01-10T07:36:00.000-08:00

Skip Tracing 101 : Turn Over Every Rock

Hard work pays off

This common saying can be applied to any business, and Skip Tracing is no different.

Through the years there have been many times when a skip tracer or a collector has come up to me with a file they claimed they were at a dead end on. Because there has yet to be a program written that allows a supervisor to quickly look at a file to determine if the collector or skip tracer has pursued all the available leads, this was not always the easiest claim to agree or disagree with.

“What have you done so far?”

“We’ve had it assigned for repo to the last known address, but he’s moved from there. His parents are covering for him, and the references are no help, I’ve spoken with a couple neighbors but they don’t know anything. I’ve pulled a credit bureau, but he’s late with everyone and when I tried to call the other finance companies, they won’t speak with me due to privacy concerns.”

I’d then take a look at the notes and there were plenty. When I looked at the expenses on the account, we’d spent the money to run the bureaus and we’d paid for several different public records reports. The file was an inch thick, the guy was six payments down, and everyone else had charged off their debts.

Back at Chrysler Credit in the early 80s, when I was the one asking for permission to charge off the loan, we had a “skip worksheet” we had to fill out before we brought the account to our supervisor. I think some companies still use a manual form to do this. It was a four-page document to confirm we’d contacted every reference, neighbor, relative, job, landlord, the post office, the local grocery store, you name it.

In hindsight, it was a valuable exercise, but it was too difficult for the supervisor to really know if the account had been worked properly, and it wasn’t nearly as comprehensive as it needed to be. It also was a document that could easily be skewed.

To find a skip, one needs to have several factors working in their favor:

I. The person looking for the skip must be positive that they have a chance to find the person. If you are not optimistic, you’re in the wrong profession.

II. A good skip tracer must be confident, and confidence comes from life experience, followed by skip tracing experience.

III. A good skip tracer must also be a good sales person. My first boss once told me a valuable piece of information when he compared a collector to a salesman. He said you must sell yourself to the person your collecting money from so they have to buy what you are selling, which as a collector was getting them to pay me ahead of everyone else. As a skip tracer, its getting people to tell you what they know, even if it’s the smallest detail.

I can remember one time I was looking for a lady that no one could find. I knew the parents knew where she was, but every time I spoke to them, they claimed they didn’t know her whereabouts. The day before the loan was going to charge off I was probably filling out one of those skip worksheets when I’d realized I hadn’t called every neighbor, and I’d remembered we’d gotten in a new Criss-Cross guide for an address where she used to live. After speaking with a couple people who didn’t have a clue who I was asking about, I found a lady who knew exactly who I was asking about, but unfortunately she had no idea where my customer had moved. I was running out of questions when I asked

“When was the last time you saw her?”

“I saw her a few weeks ago at the gas station” She was getting ready to have a baby”.

That one piece of information cracked the case for me. I thanked her, and then asked a female colleague of mine to call the Mom back.

“Hi, Mrs. Wilson, this is Mary. I just got back to town and I’m so excited for Debbie, has she had her baby yet?”

Many skip tracing calls can be based on one question, and how the question is asked, which leads me to the next point.

IV. You must be a good actor. The girl I had make the call was one of twenty in my office, but she had the voice, and the personality, to make the call pay off. She didn’t know it, but I did.

“Hi Mary. We’re so excited. She just had the baby and her and Dan are at Mercy Hospital in Folsom”.

This of course, also turned out to be where the car she hadn’t made a payment on since she bought it almost a year ago was sitting.

The next three factors are probably the most important ones.

V. You must find every rock, sort them in order of importance, and then be prepared to turn them over. You never know which rock you turn over will lead to the person you are looking for.

VI. Ask the right questions. It’s pretty simple. Who, what, where, when and why.

VII. Listen.

The key to skip tracing is finding people who know the person you are looking for, i.e. rocks. Once you find these people, you need to use your acting skills, thrown in with a little data analysis, to quickly understand whom you are speaking with. You will definitely speak differently to a person who thinks and talks fast compared to a person who thinks and speaks slowly; an 18 year old versus an 80 year old; a Harvard grad versus a backwoods hick.

Once you understand the person you are speaking with and you set your tone and dialect, you then need to ask the right questions. Your tone and dialect will set the person on the other end of the phone at ease, and then after each question, you must listen and not interrupt. Most people love to talk, and fortunately, some don’t know when to stop.

The other important part about the person you are speaking with is to quickly determine if they are a friend or foe. Ex-spouses, ex-neighbors, ex-landlords, and ex-employers are great sources of info, especially when the skip didn’t leave on the best of terms.

Nearly everything a person who actually knows the skip discloses to you becomes a lead. A good skip tracer will piece these leads together to crack the case, and they will remain confident and optimistic throughout the process.

WSJ Page 1 article Dec 6, 2007 "Surge in Auto-Loan Delinquencies.."

2007-12-06T16:53:00.001-08:00

From the front page of today's Wall Street Journal... Subprime average delinquency on 2006 loans hits 12% in Sept 2007, up from 11% in Aug 07, and Prime DQ goes from 2.9% to 4.5% from Aug 2007 to Sept 2007 - those are some pretty sharp increases.

Here is the article:

Surge in Auto-Loan Delinquencies
Is Latest Trouble for the Economy
By JEFFREY MCCRACKEN and GREGORY ZUCKERMAN
December 6, 2007; Page A1

First came housing loans and the subprime-mortgage crisis.

Now, signs of stress are creeping into another key consumer area: auto loans.

Delinquencies in the auto-loan market are ticking up to their highest level in several years. Lenders are tightening terms in some cases, and interest rates have risen from the rock-bottom levels of a few years ago. About $575 billion in loans for new and used cars are made annually, according to the National Automotive Finance Association.

About 4.5% of auto loans made in 2006 to top-rated borrowers were at least 30 days delinquent as of the end of September, up from 2.9% the previous month, according to a Lehman Brothers survey of companies servicing these loans. That is the biggest one-month jump in at least eight years. Lehman says 12% of subprime borrowers, who have poorer credit records, were delinquent on their 2006 auto loans as of September. That is the highest level since 2002 and up from 11.1% the previous month.

"The numbers will get worse for auto loans," says Dan Castro of GSC Group, a New York firm that runs debt-related investment funds. "We're starting to see signs of rising losses, and delinquencies are creeping up."

Few in the auto-loan industry see the strain as the kind of disaster-in-the-making that home mortgages have become. Still, there is a connection between the two categories, since the squeeze on some home borrowers may make it harder to carry car loans. The trouble signs in auto loans suggest that the credit woes could be spreading to the broader economy, a development that has been worrying investors and policy makers in Washington.

Other corners of the credit market are also sending troublesome signals. Shares of First Marblehead Corp., which packages student loans into securities, dropped to a two-year low yesterday after an analyst cut his rating on the stock and Moody's Investors Service threatened to downgrade some of its securities, also because of delinquency concerns.

Car loans differ from home loans in one crucial way. During 2004-06, many home loans were made to speculators on the assumption that the underlying asset -- the home -- was sure to keep rising in value. Many people, inspired by fervor in the market, took out home loans that in retrospect they had little hope of paying back.

By contrast, everyone understands that the car behind a car loan is an asset destined to lose value. The typical delinquent borrower in a car loan isn't a speculator but someone who became unable to make what previously seemed like a manageable payment. That is why car delinquencies are closely linked to the health of the economy.

"Auto-loan defaults tend to be event-driven, like a job loss or an unexpected health-care bill or a divorce," says Dan Berce, chief executive of AmeriCredit Corp., one of the country's largest subprime auto lenders. "We watch quite closely economic indicators like unemployment rate, weekly job claims or hours worked."

In the second quarter, borrowers were at least 30 days behind on 2.77% of all auto loans made by nonbank lenders, the main players in the market, according to the American Bankers Association. That was the highest delinquency rate since 1991.

Many auto loans undergo the same Wall Street financial engineering as the mortgage loans that stand at the center of the credit crisis, making this a potential issue for investors. Auto loans often are bundled together into securities, sliced and diced into pieces with varying levels of risk and return, and sold to investors around the world.

In 2006, $89 billion of auto loans were packaged into asset-backed securities and sold to investors, according to Standard & Poor's, making it the biggest asset class for such securities next to mortgages and credit cards. That tally doesn't include certain other types of securities backed by car loans. The market is now slowing. Deutsche Bank estimates such bundling was down to $69 billion during the first 11 months of this year, a 19% drop from the same period last year.

Borrower problems also could deal a blow to the already-struggling auto industry. Auto sales held up during the 2001 recession in part because lenders were able to offer easy borrowing terms. If lenders tighten terms in response to the delinquencies, it would make it harder for some people to buy cars.

U.S. auto sales are down about 2.5% this year, and the auto industry is bracing for sales to decline further in 2008. Interest rates on auto loans have increased to nearly 8% from about 6.5% in late 2004, according to J.D. Power & Associates.

The auto-loan-delinquency problem is somewhat less severe for two lenders associated with the top two U.S. car makers -- Ford Motor Co.'s Ford Credit, and GMAC Financial Services, which is 49%-owned by General Motors Corp. That is because Ford Credit and GMAC don't handle many subprime loans.

GMAC Treasurer David Walker said auto-loan delinquencies in the third quarter were the highest in at least three years, partly because of economic factors, but he said credit losses are still well within historical levels. Separately, GMAC is struggling with the fallout of the subprime-mortgage crisis because one of its units was a big home lender.

AmeriCredit, of Fort Worth, Texas, is also experiencing stress. The company makes about 500,000 new- and used-auto loans a year, valued at about $9 billion, some of which get sold to investors.

In the quarter ending Sept. 30, AmeriCredit reported net income of $61.8 million, down from $74.2 million for the period a year ago. It also lowered fiscal-2008 profit projections, blaming poorer-performing 2006 auto loans. AmeriCredit shares traded at $10.32 in 4 p.m. New York Stock Exchange composite trading yesterday, down 18 cents from the day before and 59% lower for the year to date.

There are reasons to believe the problems in auto loans won't reach crisis levels. Auto lenders and credit counselors say many consumers see their cars as a necessity and would sooner hand back the keys to a home and look for a rental than default on a car loan.

Auto lenders and dealers note that the monthly payment on a car is smaller than a mortgage payment. Most auto loans carry fixed interest rates, unlike subprime mortgages, which often reset to a higher rate after an introductory "teaser" period of two or three years.

Still, auto loans, like home loans, saw credit standards loosen in 2005 and 2006. CarMax Inc., of Richmond, Va., the largest used-car retailer in the country, said at the end of 2005 it lowered lending standards. For example, it allowed consumers to put down less money to buy more expensive vehicles. Car Max made about 140,000 car loans last year.

"We had been too strict and wanted to make more loans and maximize profitability. We expected our delinquencies and losses would go up, but they are up higher than we thought," said Katharine Kenny, head of investor relations at CarMax.

Some subprime auto lenders, such as Capital One Financial Corp., say they are seeing higher risks in parts of the country where home prices are falling the hardest, such as California and Florida. Lenders say rising delinquencies are also tied to higher fuel prices and slowing job growth.

Mr. Berce said rising delinquency rates prompted AmeriCredit to tighten its lending standards early this year and it will reassess the matter next month. It is now demanding that borrowers put down more cash against the value of the cars they are buying, especially among consumers with lower credit scores. Mr. Berce said this tightening of standards could reduce lending volume by about 10%.

--John D. Stoll contributed to this article.

Write to Jeffrey McCracken at jeff.mccracken@wsj.com and Gregory Zuckerman at gregory.zuckerman@wsj.com

Skip Tracing Leads and Information

2007-12-01T10:32:00.000-08:00

There are so many ways to develop leads on finding people these days that it literally requires staffing an in-house data analyst. If used properly, the leads and information available can be a tremendous help in managing your business needs, especially when it comes to Risk Analysis.

The other day we got in a new deal on a guy who lived in Riverside, CA. When we pulled a public record report on him it showed he had a pending legal case. My Tracer went to a web site called Black Book on line, and through a link from that site, she found out he was in court all week, standing trial for the offense that was reported on his public record database document. We signed the deal out to a repo company and by the time that guy needed to go to lunch when the judge called for a break in the case, he also needed a ride because we had taken his from a surrounding parking lot near the court house. The Black Book on line site was free, and that example is one of the reasons why I've been so intrigued at getting back into the skip tracing business.

Skiptracing in today's world in comparison to how it used to be in the 80's when I first started is like the difference between Night and Day. In terms of available leads, it's almost as if we were blindfolded with our hands tied behind our backs when we had to find new leads in comparison to the data available today via the internet.

In the old days we relied on huge, outdated Criss Cross books, old microfische property records, Dozens of yellow page directories you had your friends and relatives collect from wherever they were going on vacation, and a number of other stale sources of information. The credit application, if properly filled out with some good, legible references, was worth it's weight in gold.

Skip tracing has always been all about finding people who know the person you are looking for. These people are "leads", and the more leads you have, the better shot you have at finding the person you are looking for.

In today's world, there are more leads than most skip tracers know what to do with in most cases. It's almost data overload when you pull some of the available reports, which is why you need a data analyst.

On the down side, the debtors and skips also are working with more knowledge, more information at their fingertips. They are smarter, craftier, so in a way it has balanced itself out. We worked a guy earlier this year who used his real name to go in and buy a million dollars worth of collateral over a two week period, which he did with his 770 FICO score and because he showed a long term, high paying job and he was a homeowner. On the surface, it looked like identity theft. Once you dug down a level, you could see the house had been flipped between he and his relatives multiple times over the past several years, depending on who needed it for their scam. The job appeared legit, but it was a business in foreclosure by the property landlord and the Franchise Tax Board. The business address also contained 26 different shell companies using 53 different spellings he had used for one scam or another, and all of these things didn't leap out to the people approving his loans based on his 770 Gold Balls FICO score.

So, as you can see, there are many sources of leads and information, but what really matters is how you use these tools to improve your specific business needs.

Sub-Prime Mortgage problem sounds a lot like prior Sub-Prime Auto Finance problems from the 90s.

2007-11-23T09:37:00.000-08:00

“WHAT WERE THEY SMOKING?”

My buddy is a real estate investor. When I asked him the other day “how’s business”, I was very interested in his take on the situation. Like everyone else, I’ve heard all the bad news about the Sub-Prime mortgage industry. Freddie Mac down two billion for the quarter. Moody’s estimates 1.7 million homes will be lost to foreclosure in 07-08, double the prior two year total, and a conservative number to many. Citigroup CEO resigns after a ten billion dollar write down, Merrill Lynch loses eight billion, and it’s CEO.

What I didn’t know was exactly how this happened, or more importantly, when it would hit rock bottom. I figured my buddy could clue me in, and in doing so, I believe he hit the nail on the head. Several times during his analysis he used the term “Reset Rate”. I knew a reset was the point when a loan resets to a different interest rate, usually a higher one. What I didn’t know was that there was a mechanism in place to track this number. I guess I shouldn’t have been surprised, because I’ve learned during the start-up phase of Find John Doe that almost everything can be tracked.

His business, like mine, is directly tied to the Sub-Prime mortgage fall-out. When he told me the high water mark for resets will happen this March, when One Hundred and Ten Billion Dollars in mortgage paper will reset, he caught my attention. When he told me the high months in 2007 were September and December at fifty eight billion each, and when he further explained that the first six months of 2008 will reset at an amount that’s almost equal to what will have reset in all of 2007, I got my answer. We’re in big trouble, again.

I say again because while we were talking, I started to realize that this was sounding way too familiar. I’ve been in the auto finance industry since 1982, and in 1999, I was a small player in the clean up of the Sub-Prime auto financing carnage. Not many people outside our industry even knew of our woe’s back then, mainly because our troubles happened at the same time Internet 1.0 started to implode, and mostly because we’re talking about car loans, not home loans.

I’ll never forget when a client of mine explained Sub-Prime auto financing to me back in the mid 90s. At first, it didn’t sound much different than what some of the mouse-house finance companies you see in rural strip malls were already doing, charging highway robbery interest rates to try and cover their butts in case a large percentage of the deadbeats they put on the road couldn’t make their payments. My client further explained that due to the popularity of credit scoring and better credit reporting methods, there were more people that needed second-chance financing than all the mouse-houses could handle. Then he mentioned a word I’d never really heard associated with auto financing; Wall Street.

Back in those days, my wife and I owned a medium sized repossession business that paid the bills and kept us busy running a business that really needs a screenplay written about its idiosyncrasies to fully explain what goes on behind the scenes in one of America’s more interesting industries, but I digress.

When my client explained how Wall Street investors were looking to purchase large, securitized pools of auto loans, I asked him a simple question; who is going to find the people who skip, and who is going to repossess their cars? He smiled knowingly, and within a couple years my wife and I grew our business into the largest repossession company in the country. What happened was actually pretty straight forward. I quickly realized that these Wall Street investors needed to hire a servicing company to work all these loans they’d purchased, so I started looking around to see who these servicer’s were. Suprisingly, there weren’t many. When we located the one’s who were getting into this during the infancy of Sub-Prime servicing, we soon realized that the one’s servicing the loans were struggling with a process that many lenders have struggled with for years; skip-tracing and repossession.

I’d been hired by Chrysler Credit back in 1982 as a field rep, which was a corporate way of saying repo man. After five years at Chrysler and a year at Mitsubishi’s start up financial arm, I branched out into the private sector to manage two small Los Angeles repossession companies. My wife and I then started a skip tracing company in 1989, and after a few cocktails we named it after a film we’d just seen; Skipbusters. When the Sub-Prime wave began to hit around 1995, Skipbusters started to get really busy, especially after the delays in collection activity that should have taken place on these loans, but didn’t, because each loan had now changed hands from originator, to Wall Street investor, to servicer, in a relatively short period of time. Within a year we had contracted with a nationwide network of what we considered to be the ‘best of the best’ repossession companies in the country, and we were locating and they were popping hundreds of cars every day.

It was during this time that one of the largest servicers came to us with a problem. They were having trouble finding the best repossession companies to do their work on their “normal” repossession assignments. Anyone who has ever been associated with repossession knows the word “normal” is not in our vocabulary. Anyway, they wanted to know if we would manage their repossession process for them. We did some research and quickly determined that no one in the country was doing this type of work. Manheim Auctions had tried it a few years back, and when I called and discussed their experiences with the person who managed this process for them, they suggested I don’t attempt it as it “blew up in our faces”.

We then polled the repossession companies we were sending work to through Skipbusters, and everyone said they were up for more volume, so we formed a company called American Recovery Service. We started by managing the repossession process for many Wall Street investors, and then we branched into doing work for mainstream companies like VW credit, General Electric Capital, and other more traditional lenders. Within two years, our business doubled and then tripled, and we were handling a then industry record fifty thousand assignments for repossession a year. In March of 1999, after too many eighteen hour days and with two kids who didn’t know their parents well enough, we sold our companies to a large auto transport and towing company that expressed a desire to get into the repossession industry. We were the sixty-sixth and last acquisition this company did, but unfortunately, most of the promises they made were never kept.

In hindsight, the promises weren’t kept for three reasons. First off, our main customers, the Wall Street investors, were starting to really take some huge losses. Many were going out of business, and that started to affect our business right after we sold the company. Secondly, the Internet bubble was starting to burst, and that was carrying over into many industries, including ours. The third reason is one that I now see as the biggest reason back then, and the biggest reason now, given the current trouble the Sub-Prime mortgage industry faces. It’s a reason that is as old as time; Greed. When I started to see the house of cards the company who bought mine was built around, I resigned and left the auto finance industry after a twenty-year career.

As I now look back on those times, I can see how greed played an important role in the creation of the Sub-Prime auto industry mess. When my buddy was explaining the current woe’s of the Sub-Prime mortgage industry, I quickly connected the dots and realized that greed must have played a role in how we got into the current situation we are in. It was then I recalled seeing the cover of this week’s Fortune magazine sitting on my nightstand, an issue I’d yet to read. I remembered the cover saying “WHAT WERE THEY SMOKING?” and it showed the faces of four recent CEO’s who resigned their positions amidst the looming crisis. When I got home after talking to my buddy, I read the accompanying article. It went on to detail the billions in losses and write downs major corporations are now having to record when they try and assess the value of these high risk mortgage loans they still carry on their books, “and no one seems to have any idea what they’re worth”, the article goes on to say.

So, when my buddy told me “We’re waiting for the reset to hit the high water mark, and then we’ll see what the fall-out is”, I now realized exactly what he was on to. The problem is caused when the reset amount is more than the person can afford to pay, and it’s compounded when there is no equity in their home because the bottom has fallen out of the housing market. The equity they thought they would have in place to allow them to refinance their loan is not there, i.e. no one will make a $300K loan on a home now worth only $270K, especially when it appears $270K may be $250K in a few months.

The Sub-Prime mortgage problem was caused by a number of factors. For starters, lenders gave brokers too much flexibility in lending qualifications, making it difficult for the lenders to properly assess the risk of each loan. Not that anyone cared, because they all were riding the wave and making money hand over fist, but it was the first breakdown of the most common of all lending practices; qualification. The next factor was the poor structuring of loan products by investment banks. The popular adjustable rate loans in 2005 and 2006 looked great to the rookie investor jumping on the house flipping bandwagon, or even more sadly, to the first time homeowner who was sold a bill of goods they ultimately never could pay. These loans, which are now the one’s that are resetting at record rates and causing the largest impact in the current blood-bath, did not offer lenders or their customers many options when we saw a 200 basis point rise in mortgage interest rates and the sharp decline of new home sales and dropping sales prices. “If the home goes up just half the amount it’s gone up in the past two years, you’ll have more than enough equity to refinance it at a reasonable rate before your balloon is due”. Those are some famous last words many people heard as they signed up for a loan that would eventually become a foreclosure.

So when will it hit rock bottom? My buddy said they’re expecting the fall-out from the first four months of ’08 to hit hard in Q2 and Q3, “because it takes a while after the reset for the foreclosure process to run it’s course”, he said. I agreed, and then I started to wonder how this will carry over into other industries, especially the one I have now jumped back into after a six year absence, auto finance.

When you take a closer look at the number of these loans due to reset in 2008, and the scary similarities to the Sub-Prime Auto Loan problems we witnessed first hand back in 1999, I believe you will agree that the problem looks like it will get worse before it gets better, and statistics are starting to show this problem is starting to carry over into other financial sectors.

An article in the Columbus Dispatch titled “Car sales are the latest Sub Prime casualty” recently stated, ”Payments on 2.73 percent of auto loans made through car dealerships were at least 30 days past due in the first quarter of 2007, a 10-year high, the American Bankers Association said.
Called indirect loans, this type of financing accounted for about 75 percent of all car loans in 2006, said research firm J.D. Power and Associates.”

Tom Krisher wrote, in an article from this past Monday titled “Analysts worry that mortgage troubles could spread to auto loans ”Lehman Brothers analyst Brian Johnson said his analysis of auto loan-backed securities sold by Ford Motor Credit Co. and GMAC Financial Services showed some higher delinquency rates for October and September compared with recent years.”

Experience also tells me that the finance companies that go into 2008 prepared to handle the worst will come out of this much better than those who go in with blinders on, unprepared.

My suggestion to the finance companies is to find a way to recognize a problem before the problem finds you. Identify your high-risk accounts, especially those directly affected by the Sub-Prime mortgage fallout. Update your vendor lists, make sure you have the help in place to handle the storm when it hits, i.e. solid repossession companies and reputable skip tracing companies who have been tested through a champion v challenger program in the larger metropolitan and higher volume areas. Make sure you have a plan in place to see the signs of trouble, and work your early stage accounts harder than ever when those signs show a problem starting to happen. With the tools we now have available at our disposal, this process has never been more efficient, but if you don’t free up and devote your management and IT resources toward looking into the future, you may find yourself wishing you had done that a year from now.

http://www.msnbc.msn.com/id/21887610/

http://www.investorsinsight.com/thoughts_va.aspx?EditionID=564

http://jec.senate.gov/Releases/10.04.07SubprimeLeadershipEvent.html

http://money.cnn.com/magazines/fortune/fortune_archive/2007/11/26/101232838/index.htm?postversion=2007111212

http://www.columbusdispatch.com/live/content/local_news/stories/2007/09/02/carloans.ART_ART_09-02-07_A1_0D7PLPO.html?sid=101

http://en.wikipedia.org/wiki/Balloon_payment_mortgage

http://www.businessweek.com/autos/content/may2007/bw20070502_662106.htm?chan=autos_autos+index+page_top+stories