Compliance Crisis – Key Delays Creating Chaos in Florida

Guest Editorial

Over the past few months, we have been experiencing a frustrating practice that is creating issues with our, and other agencies, abilities to maintain compliance with the laws of the State of Florida. That issue is: delays in key approvals. These delays are leaving us unable to provide required itemization reports to borrowers of their personal property stored in their repossessed vehicles as required by law.

To be straight, we have been experiencing this problem through forwarding companies and not our direct assigned lenders. Whether or not this is a communication breakdown between the lender and the forwarder, I cannot say. But what I can say is that there are state laws that we are required to comply with.

The law requires that we mail the borrower “Within 5 working days after the date of a repossession, the Class “E” or Class “EE” licensee shall give written notification to the debtor of the whereabouts of personal effects or other property inventoried.”

The law further requires that; If personal property is not claimed within 45 days of the notice of intent to dispose, the licensee may dispose of the personal property.

The Problem

While we are frequently experiencing delays exceeding 5 days to get approval to make keys, we are also experiencing situations where the forwarding companies are letting the vehicles sit in storage on our lot waiting for the 45 days to expire and then requesting it be transferred to the auction with property in it.

The compliance issue doesn’t just go away because it’s at the auction. Keys are needed either way.

What we need for compliance starts with the keys! They are needed to:

Remove and inventory the personal property within the compliant timeframe, notification requirements and manner of storage.
Erase borrower personal data from the vehicle’s memory
Safely move the vehicle to the transporter for proper delivery to the auction.

So, what happens when it arrives with no key at the auction? They will… wait for it… make keys! Of course that comes with a 10% markup over the fees charged by the locksmith vendor they use. And once they get those keys they will do the following:

Remove and throw away the personal property in a completely non-compliant manner. No inventory, no storage period as required by law. ($200 fee)
Erase borrower personal data from the vehicle’s memory (@ $40)

Whether the keys get made at the agency lot or the auction, there will be keys needed. There is no getting around it. When approved up front or within three days these same duties will performed in a legally compliant manner. If performed by the auction, not only does it cost more, but compliance is thrown out the window.

At the auction, not only are the expenses for the keys traditionally higher, but the auction charges anywhere from $75 to $200 to clear the car out, and they don’t inventory the property.

This practice is highly illegal and is merely passing the expense on from the cost of the repossession fees charged to a borrower to the auction expenses which are backed out of the vehicle sales price.

Why?

So, why does this problem even exist?

Is it the lenders hoping to get the borrower to reinstate or redeem the vehicles. I can see how adding additional fees to the repossession may may the redemption more difficult for the borrower. But from my experience, if they don’t reinstate in the first three days after repossession, they probably won’t anyhow.

Is it possible:

The forwarding companies are shopping around for cheaper solutions out of fear of having to get approval from their lender clients? Afterall, they are selling their services to the lowest bidder. Who wants to upend that with additional fees post recovery?
Or are they shopping around for a cheaper locksmithing expense?
Or are they simply trying avoid charging their lender clients the expense on the recovery end and pass it on to remarketing expenses that get backed out of the auction’s net sales proceeds?

I do know from my own company’s experience with my direct lender clients, this is not even an issue. It seems to be primarily happening on accounts coming from LPR recoveries managed by forwarding companies.

Whatever the reasoning is, it creates massive gaps in legal compliance to the laws of the state of Florida and other states as well.

Just to be clear, here is the law that regulates personal property management on repossessions in Florida:

The Law

The law in Florida is very similar to that of other states when it comes to the legal requirements to provide an itemized inventory of personal effects to borrowers in a timely manner. In Florida, we have 5 business days to provide this information to the borrower.

The law is specific and without exceptions:

493.6404 Property inventory; vehicle license identification numbers.—

(1) If personal effects or other property not covered by a security agreement are contained in or on a recovered vehicle, mobile home, motorboat, aircraft, personal watercraft, all-terrain vehicle, farm equipment, or industrial equipment at the time it is recovered, a complete and accurate inventory shall be made of such personal effects or property. The date and time the inventory is made shall be indicated, and it shall be signed by the Class “E” or Class “EE” licensee who obtained the personal property. The inventory of the personal property and the records regarding any disposal of personal property shall be maintained for a period of 2 years in the permanent records of the licensed agency and shall be made available, upon demand, to an authorized representative of the department engaged in an official investigation.

(2) Within 5 working days after the date of a repossession, the Class “E” or Class “EE” licensee shall give written notification to the debtor of the whereabouts of personal effects or other property inventoried pursuant to this section. At least 45 days prior to disposing of such personal effects or other property, the Class “E” or Class “EE” licensee shall, by United States Postal Service proof of mailing or certified mail, notify the debtor of the intent to dispose of said property. Should the debtor, or her or his lawful designee, appear to retrieve the personal property, prior to the date on which the Class “E” or Class “EE” licensee is allowed to dispose of the property, the licensee shall surrender the personal property to that individual upon payment of any reasonably incurred expenses for inventory and storage. If personal property is not claimed within 45 days of the notice of intent to dispose, the licensee may dispose of the personal property at her or his discretion, except that illegal items or contraband shall be surrendered to a law enforcement agency, and the licensee shall retain a receipt or other proof of surrender as part of the inventory and disposal records she or he maintains.

For further understanding of this law, Tobey Schultz, Senior Attorney for the Department of Agriculture and Consumer Services, Division of Licensing provides the following;

The provisions of section 493.6404, F.S., requiring that “a complete and accurate inventory” be made of such personal effects or property in a vehicle or other equipment that is repossessed does not allow for any exceptions. Even if a recovery agent encounters difficulty in gaining access to a vehicle either because he does not have a physical key or because the vehicle is equipped with a digital keyless lock, there is nothing in the law that would authorize the agent to relinquish possession of the vehicle to the lienholder without first performing the required inventory.

As you can see, there is no “wiggle room” to this law. We MUST comply, no matter what the circumstances may be.

My Plea for Sanity and Compliance

Like the explosion of all-wheel drive vehicles that require dollies or flatbeds (now over 60%), the numbers of vehicles requiring keys in order for us to process them in a legally compliant manner is only growing. Why keys, like dolly and flatbed fees, aren’t immediately preapproved by now is a mystery to me.

Technology isn’t going away and it will only increase. These features are the new normal. These are no longer the exceptions, they are the rule. Delaying key approvals is only creating compliance issues.

PLEASE! I beg of everyone out there to see the problems that these delays are causing. They aren’t just problems, they are risks. Risks posed to agencies like ours as well as many others out there who are being forced into non-compliance by these delays.

I know from my numerous conversations with my industry colleagues all over the country that this problem is nationwide. Although the laws vary from state to state, 5 days is on the high end of the average. We cannot function like this.

As if it’s not bad enough that most lenders and forwarders prohibit us from charging for personal property removal and storage, must you also require us to be out of legal compliance at the same time?

Please people, considering how many service level agreements (SLA’s) that we must comply with, how about you do the same for us and give us prompt responses to key approvals by the 3^rd day. Is that too much to ask?

Danny Pabon

Vice President

Florida Repossession Agency

Www.FLREPOSSESSIONAGENCY.COM