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.
Saturday, May 22, 2010
Saturday, March 6, 2010
Social Networking and the Workplace
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
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
Monday, November 30, 2009
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.
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.
Wednesday, October 28, 2009
The biggest change in the Auto Finance Industry has been...
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
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
Tuesday, September 29, 2009
Repossession assignments and fine wine; a case study
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
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
Monday, August 24, 2009
It ain't over..
I just got back from a family vacation in Mexico. Through the years, we've been to all the major resort cities, and Ixtapa and Puerto Vallarta have been our favorite to date. We last visited Cancun when we were first married, and during that stop we took a cab to Playa Del Carmen to catch a boat to Cozumel. This trip had us staying at a friends place in Playa, with a couple nights on the back end of the trip at a resort in Cancun.
When we last visited Playa, the year was 1989. I recall it being a lot like Ixtapa's port city, Zihuatenejo. Old Mexico.
We arrived in Playa at night and immediately noticed the remarkable changes in the town. It had a vibe on the main street, 5th Avenue, that reminded me of a street in the Latin Quarter in Paris; lots of people on vacation partying together at all the upscale and neighborhood restaurants, clubs ad bars. Most had outdoor tables and the people watching was as good as it gets.
While down there we stayed at a place called Porto Playa, a condo/hotel. It was built by a guy named Jack Perlman and even though the place was a few years old, it was like a brand new development that someone had plucked out of an upscale US beach town and transplanted in Playa Del Carmen. Jack is a former executive with the NY Yankees and he retired from the hustle and bustle of the states to develop property in Playa.
Like us, Jack stumbled on this town back in the late 80s. He saw the potential, so he rode out the real estate boom in Manhattan and he found some partners and they started buying property in Playa. He's built three or four projects and each one is magnificent. I have to believe he's also been one ofthe catalysts in helping urbanize Playa. While its always had white sand and beautiful warm turquoise water, what it lacked was nightlife, and a place Americans, Europeans and Canadians could invest in and feel comfortable. I know a couple people in our town who have invested in his projects in Playa, and they couldnt be happier.
When we last visited Playa, the year was 1989. I recall it being a lot like Ixtapa's port city, Zihuatenejo. Old Mexico.
We arrived in Playa at night and immediately noticed the remarkable changes in the town. It had a vibe on the main street, 5th Avenue, that reminded me of a street in the Latin Quarter in Paris; lots of people on vacation partying together at all the upscale and neighborhood restaurants, clubs ad bars. Most had outdoor tables and the people watching was as good as it gets.
While down there we stayed at a place called Porto Playa, a condo/hotel. It was built by a guy named Jack Perlman and even though the place was a few years old, it was like a brand new development that someone had plucked out of an upscale US beach town and transplanted in Playa Del Carmen. Jack is a former executive with the NY Yankees and he retired from the hustle and bustle of the states to develop property in Playa.
Like us, Jack stumbled on this town back in the late 80s. He saw the potential, so he rode out the real estate boom in Manhattan and he found some partners and they started buying property in Playa. He's built three or four projects and each one is magnificent. I have to believe he's also been one ofthe catalysts in helping urbanize Playa. While its always had white sand and beautiful warm turquoise water, what it lacked was nightlife, and a place Americans, Europeans and Canadians could invest in and feel comfortable. I know a couple people in our town who have invested in his projects in Playa, and they couldnt be happier.
Tuesday, June 23, 2009
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.
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