Editorial

The biggest mistake you’ll ever make in the repossession process is the one you think isn’t as important as the others.

You’re seated at a long meeting table in an attorney’s office, the stenographer types away her cryptic record as your attorney is seated next to you. The plaintiff’s attorney asks the question. “What diligence did you perform when selecting the repossession agent involved in the incident that occurred?”

If you’ve never sat through a deposition, I assure you, you don’t want to. If you have, you already know you’d prefer not to again. It’s a little like verbal Jiu-Jitsu and a little like the Spanish inquisition. Even when you’re squeaky clean, it is uncomfortable and if you say the wrong thing, it will be used against your company and most likely, you.

With all of that said, why is it then so many collectors and lenders know little or nothing at all about the men and women they hire to repossess their collateral? Is it complacency? Ignorance or are they just a little lazy. Perhaps it just doesn’t fit into the high volume assignment business model that assured them they were held harmless in the event of agent misconduct.

Now, go back to the attorney’s office and answer the plaintiff’s attorneys question with any of those responses. Do you really think that’s going to protect your company? How about you? Does it protect you or insulate you from suddenly being dragged into the fray and named as an additional defendant? What makes you so sure your employer won’t throw you under the bus and act appalled at your incompetence in an act of contrition to play out for the judgment of a court or jury in hope of some leniency?

Don’t be so sure it won’t happen to you.

The New York Times Test

One very good self-test to perform on your self is something I refer to as “The New York Times Test.” It’s not original and has other names but basically, it is a simple question to ask yourself whenever you are about to make a decision that perhaps you’re not sure of or are concerned could show poorly on you or your company. Simply ask yourself, “If I were to do this, how would it look if things were exposed on the cover of The New York Times.

If your answer to this is that you would have a hard time explaining it, would be embarrassed by it or feel it could be ruinous to either yourself, your company, Credit Union or Bank, DON’T DO IT!

The reason I’m bringing this up, is that the level or levels of separation between you and the repossession associates you keep, is thin. Hold harmless agreements and facilitation companies won’t insulate you when the feces hits the rotary oscillator regardless of what they say, but I’ll get back to that later.

What they do reflects upon you and there is no escaping that truth. You may as well hop into the truck with them, because in the eye of public opinion you do it every time you assign a repossession. Whether it’s a single assignment or a batch of hundreds assigned through an interface it all comes out the same. Your reputation is sitting next to that Repo Man or Woman when they roll up to that address you assigned them to. What they do in the field reflects upon the reputation of both you and your employer.

Guard your reputation with your life. It takes years to build a good one and only seconds to destroy it. Without it, you are nothing, irrelevant or vilified.

Who is Your Repossessor?

“It’s 2am as Bubba crawls out of his house into his old sling boom tow truck. He’s got a list of new repossession assignments he just got last night while watching his favorite TV show “Operation Repo.” Your assignment is on that list.

As Bubba approaches your borrowers address he spots your car in the driveway. A light comes on inside the house as he’s backing into it with the tow truck. As Bubba gets out of the truck, the screen door swings open with an upset borrower.”

So what happens next?

You don’t know if you don’t know Bubba. Do you even know if Bubba has a legitimate storage lot or is he just stashing cars in his backyard? Has Bubba had any type of training besides what he’s seen on “unreality” TV? Does Bubba have a criminal record?

These are questions you should be prepared to answer in a deposition. Any appearance of unprofessionalism, incompetence or barbarism will be mirrored upon you. Is it worth the $50 to $100 you saved?

In all of the United States, there are only three states with any meaningful licensing requirements for repossessors. Florida, California and soon, Illinois. While this is a good start, it doesn’t always mean that just because the agent is operating in these states that they are licensed. Unfortunately, the states of California and Florida do a pretty poor job of supervising these activities and see their roles as merely administrative. Getting an unlicensed repossessor or repo company shut down requires the administering agency to actually catch them red handing in a repossession. Good luck with that.

Even if you hire a licensed agency there is always the risk they have unlicensed agents. In Chino Hills, CA a licensed agency had an unlicensed agent repossession a car from a borrower and accidentally crushed her to death leaving the address. While there is really know way to know the agent down to the minutia, knowing the agency employees and owners themselves could help.

As far as the other 47 states go, the laws and regulation vary from no regulations at all to laws that are less rigorous than getting a fishing license. So how do you weed out the knuckle draggers from the professionals?

Associations

While a repossession agencies affiliation to a state or national association is no guarantee that nothing will go wrong in the field, it is a good measurement of their industry participation in training and affords additional bonding above the insurance binder you should already have on any agent before you send them any assignment. Please tell me you have their proof of insurance.

Whether it’s the AFA, ARA, TFA or NFA, they all offer additional bonding to their member companies and have bylaws which their members are required to abide by. The same holds true with the state associations.

While there is no unified trade association or federal licensing requirements, a repossession companies affiliation and participation in an association is a good measurement of their experience and professionalism. This is not to say that all repossession agencies operating outside of the realm of the associations are bad. There honestly are some great ones out there. Many of them just prefer to not pay the fees and since the explosion of the internet, the need for association agency guides, which was a major attractor to joining an association in years gone by, is just not as necessary for exposure.

Saving a Buck

With more than 60% of all repossession assignments in the United States originating from the top ten lenders, it’s no surprise that they would expect some discount for the volume of their assignments. Furthermore, the need for them to streamline their operations and efficiencies makes bulk assignments to facilitators, otherwise known as “forwarders” an ideal method of assigning mass amounts of assignments with minimal vendor management necessary on their end. This factor coupled with volume discounts saves some lenders millions of dollars a year.

But there is a darker side to this arrangement. Depending upon who the forwarder or facilitator is, it is the luck of he draw as to who the recovery agency assigned to their accounts is. As previously mentioned, the majority of states have little or no licensing, background or regulatory requirements and the agents chosen may have only been chosen because they agree to work for as low as $275 per repo. Unheard of prices now and lower than they were 20 years ago.

So how can they afford it? It’s pretty simple, many of these agents have no lots. Many of these agents have no insurance. Many of these agents are only repossessing part time and have little or no experience.

Is this the guy you want out there in a potentially dangerous situation with your member at 3am? I would imagine not unless you want to get brought into the legal fray of an event like the shooting of Alabama borrower 67 year old Jimmy Tanks in 2009 or the hit and run killing of  William Jacobs in Georgia the same year. Both were repossession agents hired a forwarding company.

While the companies hiring these agents assure lenders of insulation for litigation, I assure you every lender was brought into the fray of civil legal proceedings and a heavy emotional and financial toll was paid.

I’m not slamming the entire forwarding and facilitating industry. It’s obvious they are trying to improve both their image and processes. Renovo Services recently completed a SAS 070 certification, which is the first of its kind in the industry to my knowledge and I assure you, it is neither cheap nor quick. There are however, many fly by night forwarding companies with some very shady people operating them that you should steer clear of.

Price should be the last of your concerns. You get what you pay for.

It’s not Always Easy

If you’ve managed to get this far in my rather long winded rambling, remember, accidents do happen in this industry and even to the best of companies. No matter how well you know the agency there are just too many variables in play with each and every account that you can take account for.

For some expert advice on agency selection and or any other training on the repossession process, I would strongly suggest you attend either in person or by webinar presentations by Eric North of North Law. For many years Eric has been the premier legal trainer and consultant for the Credit Union industry. His advice and teachings provide an excellent foundation for maintaining and developing sound collection and repossession policies, procedures and strategies. Also, unlike many other presenters, he won’t put you to sleep!

All you can do is your best to make sure that if you are sitting in a courtroom or deposition and the questions of diligence arises, that you can answer straight faced and head held high that you had checked the agency out thoroughly and objectively with earnest care for the serious and litigious nature of the often necessary duty of repossession.

Hindsight is 20/20. Caution removes the need for hindsight.

Kevin Armstrong

Editor