“Hook ‘em and Book ‘em!”
By Alec Trueblood, Trueblood Law Firm, Consumer Attorneys serving Texas, Washington, and California
The repossession industry has changed models. Traditionally, lenders and banks would hire their local repossession agents directly. Today, many national lenders use national “repossession forwarders,” and no longer even have any contact with the local repossession agency. The repo forwarder locates the vehicle, and hires the local repossession agency itself to go take the vehicle. This new way of doing business is driving responsible repossession agents out of the business, and is creating physical danger to both consumers and repo agents.
The repossession forwarders often do not bother to get licensed in the states they operate in. State licensing laws typically define a repossession agency as any entity that engages in business or accepts employment to locate or recover collateral, for money. The repossession forwarders must be licensed, but they are not. Thus an entire industry that should be regulated by the various states, is instead running rampant in a kind of repossession Wild West. Consumers, and even local repossession agents, have brought lawsuits for these violations.
The economic incentives created by repossession forwarding actually increase the physical dangers of repossession. Repossession forwarders are starting to control the market and dictate terms to local repossession agents. They insist on contingent fees, where the repo agent only gets paid if the car is recovered. The local agent is incentivized to take undue risks and breach the peace. For example, if a car is in an underground apartment garage, the agent should stay his hand and wait until it is on a public street. Instead, the repo agent may simply enter illegally and take it, since he’s not being paid anything to wait for a safer moment. Similarly, agents who encounter objections from the owner of the vehicle may ignore those objections and just snatch the vehicle anyway, also a clearly illegal breach of the peace. The risk of confrontation or violence is measurably higher. No car, no money!
The repo forwarders also may pay cheaper fees than the traditional fees. The repo man has to increase volume and inevitably, overlook safety, or as a repo man recently testified at one of my depositions: “Hook ‘em and book ‘em!” The forwarders may also demand free locksmith work or other services – which used to involve a fee. Repo forwarders have also reduced “close fees.” On some occasions the repo man must make contact with the debtor because the vehicle is in a garage or behind a locked fence. The debtor, faced with repossession,may call the lender and make a promise to pay, which used to earn the agent a compensatory “close fee.” But repo forwarders may pay as little as $25.00 for close fees – not enough to compensate for the time and expense of working an assignment. Low close fees and low contingent fees cause the field agent to become aggressive in attempting to secure the collateral, knowing they will not be paid if they walk away from a dangerous situation.
The repossession forwarding model may even increase long-term costs for lenders. Recovery companies being paid reduced rates may not diligently work the assignment, and look for only the low-hanging fruit. For example,if the car is located in a remote area, they may wait until they have another assignment there before they repossess. They may give bogus updates just to appease the lender or forwarder. The lender loses money from a depreciating car. The extra money the lender would have paid for a professional recovery is less than the value the collateral lost during the delay in repossession.
What would you do if you were a responsible repossession agency owner, properly licensed with years of experience, and suddenly had to accept the repo forwarder’s low-fee contracts? You would either increase the risks you take during repossessions, endangering everybody, or you would get out of the business. Who is left? More irresponsible tow operators that do not care that they are working for unlicensed repossession forwarders, and who are only looking to “hook ‘em and book ‘em.”