PAR North America recently held an event to honor 15 of the best repossession operations in the country and generated funds to help agents who sustain negative consequences that sometimes come with the job.
The business unit of KAR Auction Services handed out accolades for Agent of the Year, Resolution and Compliance Champion and various regional awards. The awards ceremony included an auction benefiting the Recovery Agents Fund (RABF).
PAR North America — a leading U.S. provider of vehicle transition services with coast-to-coast solutions for recovery management, skip tracing, remarketing and title services — honored Final Notice Recovery of Maryland as Agent of the Year for its high vehicle recovery rates and consistent dedication to providing excellent customer service.
Zane Investigations of Nevada was honored as the 2018 Resolution and Compliance Champion for its commitment to resolving customer issues promptly resulting in fewer customer complaints while meeting all compliance requirements and reporting on a weekly basis.
PAR North America and its recovery agent partners raised $40,000 for the fund. RABF provides financial help to families impacted by the dangers of the repossession industry and the unfortunate circumstances that may prevent those in the industry from being able to plan for unexpected events that can arise and devastate a family.
Other honorees included:
Regional Choice Awards
— Coastline Recovery Services of California
— Alpha Recovery of Arizona
— West Texas Auto Recovery of Texas
— Seize of Illinois
— Specialized Towing of Florida
— Associates Asset Recovery of North Carolina
— International Recovery Systems of Pennsylvania
Impound Agent of the Year
— H & S Recovery of Georgia
Resolution Champion
— Allstar Recovery of Mississippi
LPR Agent of the Year
— Hide and Seek Recovery of Texas
Rookie of the Year
— Skagit Towing and Recovery of Washington
Sidekick Salute
— AGR Recovery Specialists of Florida
— Relentless Recovery of Ohio
Over the past year, the handling of personal property and redemption fees has become one of the hottest compliance topics in the industry. It is on the radar screen of virtually every auto finance company in the country, as well as the regulators. Most of this interest is sparked by Consumer Financial Protection Bureau concerns over disparate treatment of customers and inconsistencies in what customers are charged.
This issue has resulted in significant changes by most lenders as to how these fees are handled. Most lenders have shifted their approach to one of the emerging five models:
• Fees charged are up to agent and collected by agent
• Fees charged are up to agent and billed to lender
• Lender sets allowable charges and are collected by agent
• Lender sets allowable charges and are billed to lender
• All in one pricing
The remainder of this article will examine the key issues surrounding each model and aim to give you additional data points to gain a better understanding of the individual approaches. Let’s look at the five models in a little more detail:
Fees Set by Agent/Collected by Agent
Most major lenders have moved away from this approach primarily because lenders have little control or visibility on what is actually being charged. Consumers face the same dilemma and can be taken advantage of by agents. It’s no surprise that the lending community is migrating away from this model.
Fees Set by Agent/Billed to Lender
Although some states do regulate and specify repossession related fees, this approach still leaves the lender exposed to wide variations in fees charged. This structure does provide more visibility but there are inconsistencies on what is charged to different customers and by different agents.
Lender Sets Allowable Charges/Collected by Agent
When it comes to personal property and redemption fees, this is one of the better models as it reduces disparate treatment and ensures reasonableness. The lender sets allowable charges which establishes a guideline for the agent. While a more favorable approach, the lender continues to lack visibility since there’s no guarantee that an agent will comply.
Lender Sets Allowable Charges / Billed to Lender
When lenders set allowable charges and it’s also billed to the lender, there is both visibility and accountability. More and more lenders are migrating to this approach.
All in One Pricing
All in One pricing is a single flat fee set by the lender that covers the cost of the repossession, any personal property or redemption-related fees, and other ancillary services that might occur. This model is extremely straight forward and very easy for lenders to administer. It’s a one size fits all approach; however, therein lies the challenge. Only a percentage of repossessions involve personal property, redemption and storage. This makes it difficult to come up with an appropriate price that would make sense for every repossession.
Our Recommendation
Each model does offer some advantages and disadvantages. However, based on an assessment of interests of the various stakeholders as well as both the administrative and regulatory issues, ALS Resolvion has been recommending the following framework to our clients:
• Allowable fees established by the lender and billed to the lender
• Personal Property Fee: Maximum of $50 unless state law provides specific guidelines in which case state law would apply.
• Vehicle Redemption: Storage of $20 per day for the first five days of storage and$35 per day thereafter. Redemption/Administrative fees – Maximum of $75. Total Maximum redemption related fees (admin fees + storage) equals $150.
We feel that this framework strikes the right balance between a fee schedule that is reasonable for the agent, the need to be fair to the consumer and the need for a process that the lender can defend from a compliance standpoint.
Mike Levison is the chief executive officer of ALS Resolvion. More details about the company can be found at www.alsresolvion.com.
Another way for repossession agencies to find the personnel they need recently launched.
The American Recovery Association (ARA), in partnership with TalentValue, recently rolled out an improved ARA Job Board at repojobs.us. It’s part of the association’s ongoing member recruitment strategy with TalentValue.
Through the job board, ARA members can post current job openings. The association intends for this new job board to connect ARA to fresh talent within the repossession industry, while also providing an indispensable resource for job hunters within the community.
The site makes job application quick and easy for candidates, and it streamlines the reviewal process for employers.
“The launch of the ARA Job Board will form an important critical link to helping ARA members find great people,” said Doug Duncan, president of TalentValue. “As this job board grows, it will have greater and greater impact on the industry as a whole, because the health of ARA’s member companies will become stronger and more profitable.”
Job seekers can narrow their search criteria, including:
1. Job title
2. Company name
3. Keyword
4. City, state and ZIP code
Agency members can get started with the recruiting process by following these steps:
1. Register your own career web page.
2. Post your own positions.
3. Use OnePost search engine optimized job postings.
4. Use TalentValue's Applicant Tracking System to vet your candidates.
5. Use the JobFit Assessment to avoid hiring mistakes.
6. Further vet your candidates with ARA's Compliance Background Checking Services.
7. Reach out to a TalentValue Recruiting Expert to get started.
It all can be starting by going to repojobs.us.
For more information about ARA, its partnerships, and its member benefits, visit repo.org.
The next step in the collaboration involving the American Recovery Association and the National Automotive Finance Association unfolded on Wednesday.
Continuing their repossession efficiency project, ARA unveiled its newly improved Certified Collateral Recovery Specialist (CCRS) program.
The resulting baseline standards agreed upon by ARA and NAF Association encompass the key areas of vendor compliance, including owner/business regulatory reviews, training, policies and procedures and vendor site visits.
“The newly renovated CCRS program makes the compliance and education platforms much more efficient, which is something we’ve worked to achieve for a long time,” ARA president Dave Kennedy said. “In addition to reducing costs, I believe our CCRS program is the most well-constructed program in the industry.”
Kennedy insisted that ARA’s CCRS certification is the most comprehensive compliance exam in the industry, and it’s only awarded to those who score in the 80th percentile and above on each exam.
“We’re proud that our program was written by education professionals with the advice of attorneys, not by attorneys for attorneys,” said Les McCook, executive director of ARA.
Used nationwide by finance companies to the benefit of their organization and vendor network, ARA pointed out that its CCRS is least expensive program of its kind in the industry, and it’s the only all-inclusive system available to date.
In addition to rivaling any other training platform, association leadership highlighted the added benefits of ARA’s system include client customization, fingertip information resources and outside independent audits.
“For those paying these costs for their entire network, this is a major savings when compared to comprehensive operational costs,” ARA said.
ARA’s CCRS program is currently accepted by several finance companies in the country. Not only is it recognized by the Louisiana state government, but ARA indicated it will soon be also recognized in several states.
“ARA is working diligently toward full national adoption,” the association said.
For more information about ARA, its partnerships and its member benefits, visit repo.org.
Over the years, repossession and skip-tracing services have come to be viewed somewhat as commodities by many in the lending community. As such, outside of compliance, the primary focus around the management of these services has been cost. After all, since these services are available through multiple providers, why pay more than what the low-cost provider is willing to accept?
This downward pressure on costs has resulted in the service providers having to reduce resource allocation, in several key areas, in order to maintain an acceptable margin on the business. In many cases, this strategy ends up costing the lender more in the form of higher charge offs, higher priced deep skip services, etc.
However, some lenders have realized that even small differences in recovery rates can translate into big gains in net dollars recovered even if the cost of the repossession was slightly higher.
When recovery fees are driven down to rock bottom levels, the service provider (whether a direct agent or a forwarder/skip company) is typically forced to undertake one or more of the followings:
• Reduce the labor allocation devoted to the portfolio
• Reduce payment to the agent/driver
• Reduce the amount and quality of the data purchased from third party providers
Let’s look at each of these issues in a little more detail.
Labor allocation
In the case of forwarders or skip service providers, typically administrators or skip tracers are assigned to work a specific group of cases. The labor pool allocated to these functions is a significant part of the provider’s overall cost structure. When a lender pushes for rock bottom fees, inevitably queue sizes get increased in order to reduce labor cost. The more cases an investigator has to work, the less time that can be spent on each and recovery rates usually suffer.
Repossession agent fees
When margins are very tight due to low fees, the forwarder/skip provider is also limited as to how much can be offered to the recovery agency. In our case, those fees range from $275 on the low end to $375 on the high end. You can bet there is a big difference in the amount of effort the agent puts into the $375 cases than the $275 cases.
The repo agency faces the same dilemma since they also work primarily on a contingent model. On low fee cases, they will inevitably have to reduce the number of times an address is run, reduce the fee to the driver — or both.
This is a real issue in today’s world where the agent ranks have thinned over the past few years due to rising costs and compliance requirements. Fewer agents, combined with rising delinquency rates, means that agents are in a good position to pick and choose where they put their resources and you can be sure that they do just that. Wouldn’t you?
Reduced data purchases
When it comes to locating missing cars (outside of LPR technology) it is all about finding good addresses and contact numbers. Fortunately, there are many data sources out there that provide information. The cost can be anywhere from free to several dollars per report. As you might expect, the more expensive reports often (not always) contain the better/more current information. However, the service provider must be very careful on how and when the best data sources are used.
For instance, a $6 report on a portfolio that generates a 20 percent recovery rate will add $30 in cost per recovery just for that report. Combine that with a low fee schedule and it makes it very difficult to utilize that data source.
All of these “adjustments” that are required to deal with low margin business absolutely make a difference in recovery rates, charge offs, auction values, etc..
Financial impact
Let’s take a look at a couple of different analysis of the trade-off between higher recovery costs and higher recovery rates.
The analysis below illustrates the additional “lift” in recovery rates that is required to offset a $50 difference in recovery costs.
As you can see, based on these assumptions, the service provider would only have to generate less than one additional recovery for every 100 assignments to offset the cost of paying $50 more on all recoveries. This does not even take into consideration the value of avoiding the charge off.
Note: The below analysis is designed to illustrate two issues:
1. The extremely small (1/4 of 1 percent) additional recovery rate that would have to be achieved to offset an additional $50 recovery fee
2. The additional value ALSR believes it will generate based on the higher recovery rate we believe we can achieve
| |
$375 Recovery Fee |
$425 Recovery Fee |
$425 w/ Improvement |
| Involuntary Repo Fee |
$375 |
$425 |
$425 |
| Unit Value |
$10,000 |
$10,000 |
$10,000 |
| Annual Assignments |
1200 |
1200 |
1200 |
| Precentage Recovered |
45% |
45.25% |
48% |
| Number Recovered |
540 |
543 |
576 |
| Total Recovery Expense |
$202,500 |
$230,775 |
$244,800 |
| |
|
|
|
| Total Value of Recovered Units |
$5,400,000 |
$5,430,000 |
$5,760,000 |
| Less Recovery Expense |
-$202,500 |
-$230,775 |
-$244,800 |
| Net Recovery Value |
$5,197,500 |
$5,199,225 |
$5,515,200 |
| Additional Recovery Value |
|
$1,725 |
$317,700 |
Of course, the net benefit between higher costs and higher recovery rates is significantly impacted by auction values. Some portfolios deal in collateral that often has little more than scrap value when recovered and some have average values in excess of $25,000. The table below illustrates the financial gain, under different auction value scenarios, if recovery rate increases just 5 percent.
Here are three assumptions:
• 250 first placement cases per month
• 35 percent versus 45 percent recovery rate
• $50 increase in recovery fee
Average Auction Value
| |
$5,000 |
$7,500 |
$10,000 |
$15,000 |
| Additional Annual Recovery Value |
$690K |
$1.065MM |
$1.5MM |
$2.2MM |
If you would like to see a more detailed analysis based on the specifics of your portfolio, just let us know and we will prepare.
Summary
Cost is an important variable in the repossession management process, but pushing costs too low can produce a diminishing return.
Mike Levison is the chief executive officer of ALS Resolvion. More details about the company can be found at www.alsresolvion.com.
Nationwide recovery management and skip tracing firm Millennium Capital and Recovery Corp. made a total of eight personnel moves this week as five executives ascended into new positions, and three managers joined the company.
According to a news release, the promotion of several key company leaders included:
— Jeffrey Marsh has been promoted to chief managing officer and executive vice president.
— Scott Wilson has been promoted to chief operating officer and senior vice president.
— Geoff Pope has been promoted to chief compliance and technology officer.
— Michael Upperman has been promoted to managing director of operations.
— Rick O’Connell has been promoted to managing director of operations.
In addition, several new senior managers have joined Millennium in key leadership positions, including:
— Diana Moeglin as vice president of business services
— Rhonda Nixon as managing director of operations
— Jason Nemec as director of operational excellence
Millennium explained the expanded breadth and depth of its senior management team are part of the next steps in its pursuit of excellence for auto finance companies in all key partnership areas, including performance, service excellence and compliance.
“Welcome to the new Millennium,” president Jayne Bronchetti said.
“This new leadership team at Millennium is at the forefront of transforming the recovery management industry through Millennium’s propriety approach leveraging business intelligence, and intelligent automation to maximize recovery performance, reduce losses, and streamline the recovery process for brand name consumer lenders,” Bronchetti added.
In his new role, the company indicated that Marsh, who joined Millennium in 2015, will lead the company’s long-term business strategy to add value to its customers and to champion its efforts to transform the industry, while overseeing its leadership team, and continuing to expand its business development and growth.
Marsh was named one of the Trailblazers, Innovators and Disruptors in the auto finance industry by SubPrime Auto Finance News in 2016.
Wilson joined Millennium in 2017 as vice president of operations and has led the development of the company’s internal systems, including both predictive analytics and ongoing automated intelligence initiatives. Wilson oversees the recovery operations and performance metrics at Millennium and is a key force in the pursuit of its intelligent automation initiatives.
The company said Geoff Pope’s leadership in compliance and technology have earned him the promotion to chief compliance and technology officer.
Among other credentials, Pope completed the National Automotive Finance Association’s Consumer Credit Compliance Certification Program and oversees the company’s SOC2 Type2 audit program. Millennium is completing its seventh consecutive SOC2 Type2 audit this next month.
Maximizing recovery and reducing losses for finance companies have been the primary focus for Upperman and O’Connell. And as managing directors of operations, the two directors have been tasked with completely overhauling Millennium’s internal process to reduce losses further for finance companies, capitalize on the available technologies and provide great efficiency in the process.
The company also is pleased to announce the appointment of Moeglin to vice president of business services. Moeglin brings an extensive experience in the transportation and automotive industry to the company. She will oversee the company’s pre- and post-recovery operations.
Nixon has joined Millennium, also as a managing director of operations, with a great deal of financing experience, having been an associate vice president and regional collections manager and other roles with Wells Fargo Dealer Services for the past 12 years.
Nixon also has experience in loan servicing and collections with First Investors Financial Services Corp. and Union Acceptance Corp.
Millennium also created the key position of director of operational excellence, which has been filled by Nemec.
Nemec is a wealth of knowledge in operational excellence from his roles at Huntington Bank, KeyBank, Citi, First Merit and National City Bank. His role is focused on dismantling existing processes and re-engineering them to optimize performance and efficiency for Millennium and its customers.
Millennium is leading a workshop session at Used Car Week 2018 in Scottsdale, Ariz., titled, “How Intelligent Automation is Transforming the Recovery Industry,” featuring industry thought leaders with the latest on technology in the sector.
Millennium is also moderating the much anticipated “Forwarder Panel” discussion at the event as well, with some of the leading national recovery management firms’ and lenders’ perspectives on technology and the evolution of the “forwarding” industry.
More details can be found at www.usedcarweek.biz.
Perhaps the tightening of underwriting is leading to stabilization of delinquencies on the cusp of repossession as well as a bit of an improvement among those contracts that are behind but could possibly be brought back current.
The newest State of the Automotive Finance Market Report from Experian Automotive indicated the percentage of 30-day delinquencies has dropped 3.1 percent to 1.90 percent in the first quarter, while 60-day delinquencies have remained flat at 0.67 percent.
“Traditionally, lenders’ risk tolerance has swung back and forth like a pendulum, and right now we’re seeing a more risk-averse side,” said Melinda Zabritski, Experian's senior director of automotive financial solutions
“But if payments continue to improve, we could see credit standards loosen,” Zabritski continued. “The more insight lenders have into consumer credit behavior, the better decisions they can make.”
Drilling deeper into the Experian data at 60-day delinquencies, what analysts classify as finance companies — providers oftentimes with the most subprime paper in their portfolios — posted a delinquency rate more than double the overall Q1 reading at 1.60 percent. However, that figure is just 5 basis points higher year-over-year.
When looking by state at 60-day delinquency, the Top 10 locations continue to be areas likely familiar to auto finance institutions, forwarding companies, repossession agents and other service providers. Experian reported these Q1 figures:
1. Maryland: 1.33 percent
2. Mississippi: 1.22 percent
3. Louisiana: 1.11 percent
4. South Carolina: 0.95 percent
5. Alabama: 0.90 percent
6. Georgia: 0.89 percent
7. New Mexico: 0.80 percent
8. Texas: 0.78 percent
9. North Carolina: 0.77 percent
10. Nevada: 0.76 percent
Dave Kennedy and Les McCook of the American Recovery Association shared some vivid anecdotes originating from meetings with Jack Tracey and Joel Kennedy of the National Automotive Finance Association along with leadership of close to 30 finance companies with large and small portfolios.
“They saw the hardship that was being placed upon their vendor network. And in being a good business partner and caring about the other side, they are now rethinking their strategy,” said McCook, ARA’s executive director, during the annual Non-Prime Auto Finance Conference hosted by the NAF Association. “What’s important here is this is a beginning,”
That beginning is ARA and the NAF Association using last week’s conference as the springboard to announce the results of their first joint effort to establish a minimum compliance standard for third-party repossession vendors that work directly with an auto finance provider, not through a forwarding model.
Together with a working group of NAF Association bank and finance company members, the leadership of ARA has sought to address the lack of standardization of compliance programs by setting forth the following goals:
1. Create a set of baseline criteria for NAF Association members to use in the oversight, management, and auditing of recovery agents.
2. Produce a standard list of compliance requirements for recovery agents to help them satisfy all of their clients.
3. Streamline the process of third party management for recovery agents specifically, resulting in lower costs for all parties.
Dave Kennedy, who is ARA’s president, shared an analogy with conference attendees in an attempt to summarize the entire situation; one that might have generated extra impact with individuals who have children currently attending a college or university or recently graduated.
“Say you go to college and you get your degree. You go to school at say Temple, and you pass the baseline standards for that degree. But then your employer says, ‘We like you, but we now require that all of our employees to go Harvard, so you’re out of a job.’ That doesn’t make any sense,” Kennedy said.
The initial agreement indicates repossession agencies can complete training curriculum from five different providers, including:
— Recovery Industry Services Company
— Recovery Standard Training
— Vendor Transparency Solutions
— American Recovery Association
— Recovery Specialist Insurance Group
“The key is to bring efficiency. All of these training programs meet the basic criteria. This is going to save hundreds of thousands of dollars for lenders. They’re all great programs. Now if an agent can prove he has one, it’s going to save hundreds of man hours,” Dave Kennedy said.
“It's an excellent initiative and something that’s going to bring a lot of efficiency and comfort to both sides of the table,” Kennedy added.
Joel Kennedy, an NAF Association board member, former finance company executive and now director with Spinnaker Consulting Group, emphasized the concept of bringing efficiency and addressing potential problems that might be keeping finance companies “up at night.”
Kennedy also pointed out how crucial the input was from an array of finance companies, not just large players dictating the situation.
“It’s all about trying to drive better efficiencies and synergies for the process that we have right now,” Kennedy said. “The whole point is each individual finance company has a responsibility from a third-party vendor management standpoint to make sure they’re managing their own vendors as if it was their own company. With repossessors, there is additional risk involved given the customer engagement.
“What we came up with was a baseline set of standards that can be ascribed to by all of the NAF Association members to say, ‘Here is the bare minimum of what we think you need in order to safely management this relationship.’ There really isn’t any kind of guidance from any regulatory body that says chapter and verse how you manage this relationship and risk,” Kennedy continued.
The resulting baseline standards encompass the key areas of vendor compliance, including:
1. Owner / business regulatory reviews
2. Training
3. Policies and procedures
4. Vendor site visits
“We want to create a significant solution for both sides of the auto-lending and recovery industries,” said Tracey, executive director of the NAF Association. “I look forward to our continuing relationship and mutual problem solving.”
Joel Kennedy closed his portion of conference presentation about this development by delving into how ARA and the NAF Association can forge forward on the current developmental path.
“I think this is the kind of thing that not only can provide guidance to our members to streamline and build efficiencies where we can all spend a little less time schlepping and more time analyzing on the high-value, high-risk targets we can get solved,” he said.
“The next steps are to carry this through and see how far we can take this,” he continued. “Can we collaborate on data? Can we collaborate on sending the field guys to chase information? Can we get into more self-reporting for the recovery agents where we can get the data into a repository and all the members can utilize it?”
Tracey later added, “There are some serious dollars to be saved.”
