The State of the Repossession Industry -2011 -

The State of the Repossession industry: 2011



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.

Why Forwarding?

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.

Direct Repossession vs Forwarding - Price vs Cost

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.