Forwarders withholding fuel surcharges?

ARS appears to be withholding B of A fuel surcharge fees, and they’re not alone.

EDITORIAL

According to sources, last week, several agency owners received a phone call from a representative at Bank of America inquiring on the recovery fees being paid to the agencies by national repossession forwarder ARS. Their alleged finding? ARS was not paying the agencies all of the fuel surcharges despite Bank of America’s instructions to pay them fuel surcharges on 100% of their recoveries. And they’re allegedly not alone.

Surcharges

As fuel prices climbed earlier in the year, many agency owners, as well as several state associations, made it abundantly clear; without a steep increase in repossession fees or a fuel surcharge, they would be unable to continue to accept assignments from the nation’s largest lenders as assigned through their chosen forwarding companies.

In response, most lenders rose to the occasion by establishing fuel surcharges ranging anywhere from $20 to $60. This demonstration of listening to their agency network was applauded by most and it has for the most, averted any major disruption in their recovery ratios. But what no one seems to have counted on was the middle man.

Despite these lenders stepping up for the mutual benefit of the repossession industry, it appears as though some forwarding companies have decided this is something that they can manipulate to their own benefits. Perhaps the best example of this is Exeter Finance.

Exeter

Like most large lenders, Exeter Finance spreads their repossession assignment volume out through many forwarding companies. And like most lenders, they pay a fuel surcharge; $60 as I am told. According to reliable sources, Exeter has tied no strings to this fee and, like Bank of America mentioned above, it is supposed to be paid on 100% of recoveries.

Unfortunately, this appears to have been twisted and tweaked to the forwarder’s benefits. According to several sources;

Through MVTrac Tier 1 and 2 Exeter recoveries pay $60. But if you receive an Exeter assignment through Secure Collateral Management (SCM) that tier 1 assignment fuel surcharge is $57 and a tier 2 is $60. Clearly, they’re pocketing $3 of the fee on tier 1. A dollar here, two dollars there, it adds up in volume.

PAR is doing the same, but only allowing $56 on tier 1 and $60 on tier 2. ARS, according to all reports, isn’t paying anyone all of the lender charged surcharges.

I doubt that the majority of agencies even know what the lenders fee allowances are, and that is a large part of the problem.

Transparency

We all know that this is nothing new. With rare exceptions and limitations, agencies have been unable to charge storage fees for the vehicles. At the same time, many agency owners have seen forwarders charge the lenders storage. Storage that every agency owner insures and pays for out of their 2010 repo fees contingent.

One of the biggest reasons repossession agencies are getting screwed over on all of these issues is a lack of transparency between the lenders and the agencies. Transparency that the unnamed and aforementioned representative from Bank of America was kind enough to provide. If the lenders would be kind enough to either share directly or force the forwarders to be 100% transparent in their fee agreements, it would improve relations for everyone.

No question, the forwarders would balk at this suggestion. But if any of them wanted to really endear themselves with the agency owners and the industry and this improve their agent pool and its performance, this would go a long way in establishing trust. And lets face it, trust is something that the agency/forwarder relationship sorely lacks.

Communication

Historically, repossession agency owners held their fee schedules as close to their chests as a winning poker hand. This is the result of a long-standing tradition of agencies being afraid the competition will underbid them. But in a forwarder dominated world, this risk is minimal at best. Perhaps the remedy, or some level of a solution could be achieved through the sharing of an aggregated pool of known lender allowed fees.

Of course, this would require a lot of agency owners to share what they know and have a central point to report it to for everyone to reference. I was thinking about running another of my “State of the Repossession Industry Polls” soon, but maybe this is a better idea.

It’s bad enough that forwarders like Primeritus owe millions in repossession fees across the country. But watching the forwarders skim fee income away from the agencies for their own profits is pretty sickening and sad.

Sick that they are getting away with it, and sad that the repossession industry and the lenders let them.

Kevin