ELIZABETH, N.J. — A simple Google search can result in hundreds of stories of repossessions gone wrong — from repossessors impersonating police to repossessors getting shot and killed.

On Dec. 9, 2009, a badge-wearing repo man was arrested and charged with impersonating a police officer after dragging and injuring a woman whose vehicle he was attempting to repossess in Chicago. After further investigation, the repoman was found to have been on probation for forgery.

On July 7, 2007, the Dallas County Sheriff's Department pulled over a vehicle that was equipped to look like a police cruiser, but the vehicle belonged to a Dallas repossession company. Upon his arrest, the driver had a BB gun fashioned to look like a police gun and a fake dashboard camera mounted with Velcro.

In a public statement, a department deputy said investigators also found handcuffs, a walkie-talkie and a scanner set to monitor county law-enforcement channels, and repossession assignments were also found in the vehicle. It was also determined the driver was a registered sex offender.

On Jan. 29, the owner of an Alabama repo company was arrested after he pulled over a vehicle he was looking to repossess and identified himself as a city police officer in Mobile, Ala. The repo man pulled the vehicle owner out of her vehicle by her feet and dragged her onto the ground. The vehicle was the center of a bankruptcy case. The repo man had a criminal history and was previously convicted in 2004 on a second-degree charge of receiving stolen property.

Just recently on May 21, a Bloomfield, N.M. repo man reportedly shot a customer six times after the debtor had threatened to get his gun from out of the vehicle that was being repossessed. Two weeks later the agent shot himself and his partner after a delinquent customer came after them with a stick. It is obvious that these agencies did not have enforced policies that restricted the carrying of a firearm during a repossession.

There is no doubt that for a lender, the management of risk does not start upon assigning a vehicle for repossession but rather, in the lender's choice of whom they will use to represent them in the process. This is one of the most difficult decisions for a lender taking into consideration that 38 states in our country are completely unregulated.

Anyone — and I do mean anyone — can enter this industry barely uncontested. During the past 10 years, the violence in our business has dramatically escalated to the point that many insurers have opted to discontinue writing the asset recovery industry.

Those that have chosen to remain have had no choice but to offer coverage at escalated rates. Police academies throughout the country are now requiring new recruits to become more familiar with the self-help repossession process due to the increase in these violent cases.

The age of reality TV programs such as Operation Repo, have not only given our industry a black eye but have somewhat wrongfully educated the general public as to how professional agency owners conduct business. Customers today are generally more aggressive toward recovery agents and are more educated regarding the laws governing our industry.

There are law firms throughout the country that have self-help repossession on their radar, just waiting to attack at the first sign of a questionable recovery. A simple search on YouTube will lead you to attorneys that have posted videos seeking the business of anyone whose vehicle has been repossessed. Twenty years ago, a defaulted customer would ask the advice of a family member or close friend. Today they post a question on the Web and access the advice of the entire world.

The majority of wrongful repossession and related lawsuits are quickly settled out of court to avoid negative PR, and many never make the news. However, over the years, many high-profile cases have been settled in the favor of the debtor, and the awards have been alarming to the financial community.

I have been involved in the asset recovery industry for over 25 years — 20 of those years have been as an agency owner servicing accounts throughout New Jersey, New York and southeast Florida. Over the past five years I have served as a consultant for several of our clients and other agency owners, nationwide, regarding the topic of risk management and how it applies to our industry.

I have also served as an expert witness on industry related civil proceedings. For the past seven years I have sat on the board of directors of Time Finance Adjusters where much research on this very topic has been conducted.

After countless hours of speaking to insurance professionals, attorneys and the leaders of some trade associations within our industry, I have come to realize that there is, in fact, an issue that needs addressing when it comes to the hiring and contracting practices in the asset recovery industry.

Do you really know who is representing your financial institution?

I have had the opportunity to review the contracts of dozens of lenders who have had recovery agencies sing contracts holding them harmless and rest assured believing that liability is solely held by the agent. What they have failed to realize is that a court can find a lender negligent in their hiring and contracting practices despite what the hold harmless agreement asserts.

As a result, a lender's risk management structure needs to have a fail-proof system in place to assure that they are making educated and informed decisions pertaining to the contracting of new vendors, and maintain that forwarding and skip tracing companies follow the same screening guidelines for maximum effectiveness.

Below I have outlined what has been established to be the top seven steps to be considered when contracting with a new or existing vendor. The list is much longer but has been limited to seven steps for the sake of this topic.

1. Criminal Background Checks on all Agency Owners.

Over the years our industry has become saturated with inexperienced agency owners, many of whom are convicted felons. Imagine hiring a contractor who is a convicted felon or a child molester and something going terribly wrong. A jury would not be very sympathetic when they found that despite the sensitive nature of our industry, the contracting financial institution failed to properly screen the vendor.

A good attorney would have a field day with this type of case. Due to the nature of our business, this is by far the most alarming deficiency in the contracting phase.

2. You may be surprised what you find.

The proper way to investigate the validity of insurance coverages is not to simply look at a certificate that lists a policy number, coverage amounts, effective date and expiration dates. The most effective way is to require that all insurance certificates not only list the physical addresses of all storage facilities, but also list each and every truck insured under the policy.

You will be surprised at how many agencies will sell you on the fact that they have a fleet of 10 trucks that cover a large area, only to find that their mathematics were conveniently way off.

You should not be surprised when an agency tells you that they have five storage facilities strategically located to run your assignments in record time only to find that the one storage lot that they have holds a total of 10 vehicles. Try running a Google Earth search on some of your vendors storage facilities. You may find that the pictures of the storage lot that they have previously submitted do not match the picture of the residential property coming up on Google Earth.

Yes, this industry is full of surprises; one need not look very far. However despite the fabrication of storage locations and the embellishment of their operating fleet, the most important factor that a lender should verify is the existence of a vendor's direct primary policy and that it clearly specifies "wrongful repossession."

If you want to take it a step further, require the agency owner to provide a three-year loss-run from the insurance company for your review. This will list any and all claims within the last three years and allow you to make a more educated decision based on the claims experience. The higher the level of transparency that is required of a vendor seeking your business, the better scope you will have of their real qualifications and expected future performance.

3. How long has the vendor been in business?

Require Certificates of Incorporation and verify the validity of these documents. Many states currently have websites where these filings can be confirmed.

4. How financially sound are your vendors?

Aside from obtaining corporate financials from your vendor, in most cases, a simple Internet search would disclose if the corporation or the agency owner has filed for bankruptcy.

5. How is your customer's personal information safeguarded?

Professional agency owners should have written policy and procedures for the safe handling of documentation containing sensitive information.

Their policy and procedures manual should outline the paper trail from the time that an account is assigned to the time that the account is resolved or closed, including the storage system for paper documents and who has authorized access. The manual should also outline how long the agency holds the records for and the means of disposal (preferably through the use of a professionally certified document destruction company).

6. Why a trade association affiliation?

Membership in a trade association that provides members with a bond will generally take an interest in the education of its members in an attempt to of manage their own risk. 

Over the past several decades, Time Finance Adjusters, American Recovery Association and National Finance Adjusters have not only provided their members with bonds but have also provided continued education through industry conventions and certifications programs.

7. What are your vendors hiring practices and do they require certification of their employees?

A professional agency should have a written hiring policy that should be made available upon request. Taking into consideration how unregulated this industry is, industry certification of all field agents and office staff should be a mandatory requirement.

Due to the nature of work and the high degree of risk involved, it becomes essential that all employees involved in the asset recovery procedure receive specialized training from certified and accredited training schools.

Certificates for each employee assigned to work your accounts should be submitted for review. Currently there are several nationally recognized industry certification programs which include CARS (certified asset recovery specialist) and FRS (field recovery specialist) both administered by Matrix Educational Systems.

Recovery Specialist Insurance Group provides state certification courses. There are still other programs available. These certifications should also be verified by contacting the provider of the course.

In ending, I will say that the industry that I entered 25 years ago has changed drastically. Our primary focus has changed over the years, from repossessing vehicles to making sure that risk management is at the forefront of each and every asset recovery professional. I believe that we are at a time where there is no option but to have lenders require transparency of those representing them.

Managing risk is not an option, but rather an obligation that we all have to our companies, our industry and to society in general.

There is no doubt that the practices described herein will remove those that do not belong in the industry and finally create a level playing field for the industry. As a result, liability in our industry will decrease and recovery rates will begin to rebound.

Max Pineiro is the president and chief executive officer of Elite Collateral Recovery and Elite Search Team, a New Jersey-based licensed private detective agency. Pineiro also is an executive board member of Time Finance Adjusters, a risk management consultant and instructor for the Field Recovery Specialist certification program. He can be reached at (800) 625-7376 or max@ecrteam.com.