The other day, I was sent an email from a leader at one of the major trade associations that just about made me laugh, if only for the fact it is so ridiculous, farfetched and outright outrageous. I was shown the Wikipedia definition of Contingent Work. You know, as in contingent assignments?
Contingent work or casual work is an employment relationship which is considered non-permanent. These jobs are typically part time (typically with variable hours), have limited job security, and result in payment on a piece work basis. Contingent work is usually not considered to be a career or part of a career. One of the features of contingent work is that it usually offers little or no opportunity for career development. Contingent workers are also often called freelancers, independent professionals, temporary contract workers, independent contractors, or consultants
Go ahead, look it up! https://en.wikipedia.org/wiki/Contingent_work
Casual? Seriously? Obviously the writers of this definition have never had the joy of running six addresses on an account for a week only to have an account reassigned or closed. Nor have they had the joy of the “casual” experience of a 300 pound man in his underwear shouting obscenities at you in his driveway at three in the morning. Casual? Hardly.
Non-permanent? I suppose so. Clients are fickle and it is piece work but let’s get real; the amount of vetting requirements, requests for GPS locations of agents and all of the other more recent requirements just to have the thrill of working contingent assignments makes you wonder if you are an independent contractor or an employee.
Part Time? Perhaps once upon a time, like in the 70’s, there were some part timers, but the only part timers out there now are a bunch of meth smoking tow jockies with a sling boom, an attitude and a rap sheet three pages long.
Limited job security? Yup! We all know that part is true. It’s not right, but it is true.
A Career? Obviously not. And this brings me to my point. If anyone in the repossession industry considers themselves a professional, why would they work under these conditions or allow themselves to be treated this way?
Contingent Work is different than a Contingent Fee. A Contingent Fee is most commonly seen in personal injury lawsuits and from collection agencies, where a 30-35% recovery of all recoveries is paid to the prevailing attorney or agency. This large payout compensates for the risk associated in the event of loss. No one is receiving 30-35% fees based upon the collateral liquidation recovery. No one. Therefore, this is not really a contingency fee as it is missing the higher reward element. It’s all stick and no carrot.
So, how did this all begin? Believe it or not, it wasn’t always like this.
Contingency first raised its ugly head in the repossession market at a banker/lender trade association meeting around 1985. It was there that the lenders discussed the costs of repossession and explored ways to control that cost. In that meeting, they compared the repossessor with:
Real Estate Agents – The real estate agent much like a repossessor runs around looking at 10 -20 houses with a prospective purchaser and was only compensated if a deal goes through settlement. What the lenders failed to take into consideration was that the real estate agent charged an average of 6% sales commission on homes, 10% on commercial properties. According to the U.S. Census, Bureau, the Median and Average Sales Prices of New Homes Sold in the United States during June. 1985 was $86,300. This equated to an average sales commission of $5,178 (1% or $863 for the real estate broker (similar to our forwarder today) and the agent received 5% or $4315 = $5178.00.
Next, they compared the repossessor with:
Lawyers – (can you imagine that?) We all know many lawyers are willing to work cases on a contingency basis. Even in those cases that they accept contingent, many insist their client be responsible for expenses, win or lose. What’s missing here is the fact that they get to pick and choose the cases they accept. They have the opportunity to evaluate its probability of success, and that success means they are fairly certain (1.) It will settle for a payout large enough to make it worth their while ( 2.) That in all probability they will not have to spend extra time in a trial. (3) They never take contingent criminal cases.
You will notice the lender’s legal guys are never contingent, wonder why that is?
Following this meeting a few lenders began pushing the idea that real estate agents and attorneys worked contingent, so why not repossessors? There were enough unprofessional agents who thought they could still make a living working contingent by charging what were called the “accessories fee.” The accessories included but not limited to:
- Mileage running the account
- Insurance on the account
- Extra man in the truck
- Dolly fees or flatbed/rollback fees
- Get ready – detailing the vehicle for sale
- Title work
- Antifreeze check in the late fall and winter months. Additional charge to add needed antifreeze.
- Sale of vehicle fee (some charged 6%)
- Skip-tracing or investigation fees
- Surveillance fees per hour
- Fronting bail-out money over $300 (some charged 10%)
- Key fees.
Sounds like an auction, doesn’t it?
The next thing they forced on everyone was the elimination of the accessory fees and a standardization of flat rates that paid the same if you were in Podunk, Alabama or Los Angeles. The net affect was those in low cost of operations areas, like Podunk, got a decent raise. While those in the larger cities took a significant hit.
Once upon a time, contingent assignments mitigated the risk by a higher contingency fee to compensate for the lack of a closing fee. This risk reward scenario made sense when the repossession fee was 30-40% higher than the standard rate with a closing fee. I suppose that was a fair deal in the 90’s when repo fees averaged $300-$325. Unfortunately, those fees haven’t budged much, if at all for the industry since then, and as I’ve written about before, with inflationary costs a repossession fee for an agency should be close to $500.
So here are some questions for you;
- Is this a Casual Job to you?
- Is this Non-Permanent for you?
- Are you being paid 30-35% of the collaterals liquidation value post sale?
- Are you only working Part Time?
- Is this not your Career?
If you answered YES to any of these, then contingent work, excuse me, Casual Work is perfect for you!
If you answered NO to any or all of these, then why would you be accepting contingent assignments?
I hate to beat a dead horse and you’re all adults capable of making your own business decisions, but when you accept contingent work, you are also accepting the marginalization of you, your business and the industry.
That is, unless this is all Casual Work to you? If so, Rock On!
Kevin Armstrong, Editor, CUCollector
This editorial has been reviewed, contributed to and approved by;
Allied Finance Adjusters
American Recovery Association
California Association of Licensed Repossessors
Time Finance Adjusters
Recovery Specialist Insurance Group