Archive for July, 2012

I know there is sometimes a lot of negative talk among repossession agents and repossession company owners when the subject of working for Buy Here Pay Here car lots comes up. Personally, when I owned my company, I never actively pursued used car lots for business. I say that I did not go after their work, but I did do work for two BHPH lots. Both of these used car lots were owned by friends of mine, and not only did we do their repossession work, but we also did their auction transports and towing. They both paid very well and were not resistant to paying for extras such as investigative fees, mileage, cutting keys, delivery and even a close fee. Both accounts had a pretty good handle on the whereabouts of their debtors. Both of them could have done their own repos, but chose to farm them out to me because they did not have the time, nor did they have the desire to deal with angry debtors. I had many other BHPH lots approach me to do their repo work, but I was too busy to accommodate them, and I also only took the other two car lot accounts on because I knew the owners. I knew they did not do any underhanded deals, and they knew what I expected.

After I sold my company, retired and then started, I really never thought much about car lots and their repossession work, other than what I read on the forum when our members discussed the subject. The last few months, in my talks with auto repossession company owners, the subject seems to always come up. I am finding, because of the current soft auto repossession market with lenders, that more and more companies are doing a heavy volume of repo orders with BHPH dealers. Lenders are not writing paper like they used to, but the reports I am getting are that the used car lots are rolling the paper out.

When the conversation comes up, I fully expect to hear that these accounts are dead-end repo orders, dangerous, and pay $150.00 a car. However, I was surprised to hear that although there are some dead accounts, the used car lots are often paying better than some lenders. I am also told that they are willing to pay for extras without putting up a fight. One repo company owner told me, “It’s because they have a smaller volume of accounts than a lender will have, and it is very important for them to get their collateral back. They take their accounts more seriously than a lender that has 10,000 cars out there”.

I was also told that there are so many used car lots out there with repo work, that a repo business owner can often pick and choose whom to work for. The good-paying accounts with decent paper are the accounts they keep, and the car lots that haggle on price and have terrible paper are the ones they dump.

In a conversation I had this week, a company owner said that he loves the diversity in his accounts and BHPH’s add to that diverseness. He has some large and small finance companies, some local banks and credit unions, some title loan accounts and a slew of BHPH clients. He says that the client diversity protects his business because “all of his eggs are not in one basket”. He can afford to drop a client, or even be dropped by one, without being thrown into a financial skid that would result in a huge revenue loss, if he were dependent upon one main client.

Another thumbs up that the BHPH car lots are getting is that there is no waiting to get paid. Oftentimes, the car lots are paying in full when the unit is dropped off and sometimes even paying the repo fee in cash! “This helps keep the cash flow rolling into the business until the slow-paying finance companies decide to cut a check”, according to one repo business owner.

I am linking this article to a thread in the forum, rather than having comments here, to see what input you all have on Buy Here Pay Here accounts. Please click here to discuss.

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The Slow Death Of the Repossession Industry

I learned an intelligent phrase years ago -“If it ain’t broke, don’t fix it”, and I am quite sure that everyone reading this has also heard it before. This article is a call to the auto finance industry to release the stranglehold it has on the auto repossession businesses they have contracts with, to recover their past-due collateral.

Let’s take a look at a couple of decades ago to see where the repo industry was and where it is today. Back in the 80’s and 90’s, auto repossession companies pretty much kept recovery rates somewhere in the 80% range. I know for a fact that collection managers would have put the axe to our necks and found a different adjuster if our rates were not in that range. There was less violence in the auto repossession industry back then, and also much fewer debtors suing clients and repossession company owners. Email was just emerging and proprietary systems were unheard of, yet communication flowed pretty well, despite the absence of those ways of communication.

Fast forward to the present. Today, recovery rates are reported to me in the 50% to 60% range, and sometimes as low as 40%. Almost daily, there are multiple news articles about repossession agents being shot, stabbed, beaten, run over and subjected to other forms of violence. Debtors are being arrested and agents are getting locked up, as well. Lawsuits resulting from repossessions being executed are at an all-time high. Despite today’s technology of mobile phones, laptops, email, text messaging, instant messaging, and a slew of auto repossession portals to flow repo orders through, communication between clients and adjusters is in a sad state.

The repossession companies and the auto finance companies, forwarders, banks and credit unions need to examine how and why the industry has changed so drastically for the worst, in the past 3 decades.

We can blame it on Operation Repo all we want. We can claim that debtors are more seasoned at being on the run. We can blame the repossession agents and accuse them of being unprofessional. We can point all sorts of fingers, but I say it all boils down to greed. It is the sheer fact that clients want a professional, honest, hard-working repossession company that has a nice office, staff that always answer the phone, secure storage lots, and brand new equipment – but they are too greedy to pay for it. Clients want a 9-course, southern, provincial French meal, but want to pay for a four-cheeseburger White Castle meal with a small fry and a small drink.

Back in the late 80’s and early 90’s, involuntary repossession fees were over $325, plus key, bag and tag, delivery to auction fees and, oftentimes, mileage and investigative fees. Clients generally paid a close fee as well, and many times paid the full repo fee when the repo agent’s efforts resulted in the account being brought current. There were no programmable keys back then, insurance was a whole lot cheaper, gas was dirt cheap, and wreckers (if used at all) were not that expensive. Repossession companies were paid a fair fee for what they did, and this enabled them to focus on doing the job well. They did not have to cut corners to save money. They did not work for free, and they had awesome pick-up rates. There was less violence and fewer lawsuits because they did not have to take chances to get the car just so they could get paid.

In today’s repossession industry, everyone seems to want to pay only if the collateral gets picked up. This causes repo agents to do things they would not ordinarily do just to survive financially. I find it funny how silent it gets when I ask a collector if they would work only if they were paid on the accounts that were brought current by their efforts. I see them grimace when I follow up with the fact that they are an employee and not a business owner, and yet their income is guaranteed, minus the expenses that come with owning a business. They get paid just to show up to work and put in 8 hours, while repossession company owners are working 24/7 and getting paid pittance fees that guarantee them a trip to bankruptcy court. Paying less and less obviously does not get you better service or results, yet clients continue to trim down what they pay.

What would result in paying adjustors a fair fee for a professional service?¬† Let’s ask ourselves some questions.

  • Wouldn’t it make them better vendors?
  • Wouldn’t it cause them to work hard and be loyal to their clients?
  • Wouldn’t it raise the bar of professionalism in the recovery industry?
  • Wouldn’t it lessen violence and lawsuits?
  • Wouldn’t it cause pick-up rates to be better?
  • Wouldn’t it make these company owners better citizens to America and contributors to it’s economy?
  • Wouldn’t it make for better business for America and it’s economy?

The industry was never broke. So why on earth did you set out to fix it? Your actions have just about destroyed this industry and the professionalism it once had. Each day, I speak to one or more veterans of the repossession industry that are calling it quits. The reason is always because it is not profitable for them anymore.

This article and petition are a call to the auto finance industry to get back to compensating their adjusters fairly. if you continue down this path, the only adjusters left won’t even qualify to make the cut to be on Operation Repo. Then we can say – R.I.P to the repossession industry.

Repossession company owners¬† – please feel free to put your company name and owner’s name in the comments below. There is nothing wrong with asking to be fairly compensated for a professional service.