Guest Editorial
As you have been reading lately, there are many changes happening in our industry. This is the year of change! It is incumbent for all associations to step up and support their members in every possible way. There are various new vendor contracts being circulated for our members to consider. The time has come to create industry unity to change the unfair nature of many of these contracts.
It is not the place of a trade association to state which contracts to sign or not sign. However, it is our belief that we should make you aware of the concerns that have been expressed by fellow members and your peers in the recovery industry. In the past, we gathered and distributed important industry data that would enable all to make better decisions. However, despite evidence that fees should not be driven down any further, the message seemed to fall on deaf ears. Perhaps we need to change our strategy and decide as an industry, it is time to say “NO”.
I have talked with many business owners in the past who felt the need to hang on to working volume contracts at low rates only to see those agencies disappear. We need to take a hard look at our real costs financially, mentally and time-wise in doing business with some of these clients. I spoke with the owner of a large company yesterday who stated, “The time has come for me to say NO”. He is facing losing ten percent of his business on the first of these NO’s but he understands he cannot afford to continue working accounts for clients that are not profitable. He said he is committed to follow through and not accept any more of these one-sided contracts.
One lender has announced that fees are going to be the same but their contract extends the agents service area out an additional ten miles (a twenty mile round trip) but they don’t pay enough additional mileage to even cover costs. They also added that weekends don’t count toward their free storage, only business days! The next lender puts out a call for higher insurance requirements that will only apply to them. They announced an increase in the recovery fee to offset the costs but in another section, they reduced their close/resolution fee.
Not only do they take away the increase they just gave but they have taken away 50% of your close fee income on 60% of your accounts. Some contracts require you do everything exactly their way and on time or they won’t bother to pay your repo fee. One client puts a limit of $150.00 to cover all fees (storage, redemption, personal property inventory and storage) when the debtor redeems, regardless how long it takes.
Although we have seen greatly increased costs for trucks, fuel, labor, insurance and everything else, recovery rates are lower now than they were many years ago. The squeezing down of recovery fees is only a small part of the overall picture. When some of the downward pressure started, it was still possible to realize revenue from the ancillary fees associated with our work. Now we have seen that go away. Free storage that started at ten days is now fifteen, twenty and even thirty days. We have free key work, transportation to the auction, reduced or no redemption or personal property fees, no close fees and no resolution fee if brought up to date. Where do you make it up?
We have tried very hard over the last few years to create a strategy of working with the lending community to better understand their needs and for them to understand ours. We need to continue to cultivate the idea of mutual respect and an understanding that both sides need to be successful in their halves of the equation for this to work. I honestly believe the vendor managers who have taken time to listen, as well as share, have realized value from their efforts. What I am hearing from some of them is, yes, they understand the value and costs but the orders coming from above are to not budge on fees. Although knowing this will create attrition, their superiors don’t care. How does this make any sense to the executive officers when we as agents have the most exposure to cause their brand assassination should something go wrong? Yet, we are continually asked to take on more for even less.
A major topic for the past year in our industry has been compliance. Obviously you and your clients know that being compliant is going to come at a cost. I don’t think any of us yet fully comprehend what the total costs will be. I have heard openly that some clients know and expect there will be an increased cost to their vendors for this compliance. What I haven’t heard are any answers about how much of this cost they are willing to share.
I can promise the senior levels of these companies are very concerned about compliance and have placed considerable value on being compliant. I know every one of them have assessed the potential losses to their brand’s value should something go wrong in their collection or recovery departments. Now the question is, what are they willing to spend to mitigate their potential loss?
We have worked very hard as an industry to bring respectability and integrity to the business. I know there are many clients that see and appreciate that. The problem is, not enough of them do. Many are so removed from the “process” they don’t realize and aren’t concerned what problems agents face, how our work is done in the field and what our costs of doing business are.
The CFPB may bring solutions to some of these issues soon, but how long can we hold on waiting for that to happen? Even then, it will still take smart business people making sound business decisions and saying NO to bad contracts for it to change. One important item in the third party servicing review process is financial stability. Where will they find compliant and fiscally stable agencies if they continue to push for lower fees and not accept that they need strong partners in the recovery process.
This is why ARA started ARMS and ARMS has now united with Relliance to build an industry-owned forwarding company that will pay fair and reasonable fees to the agencies. If the majority of the network of agents were to say “No” to an unfair contract, we are confident the client or forwarder would rescind that contract and rethink it before sending it out again. A few agencies don’t speak loud enough but the entire network could send shock waves through those companies that insist on improper contracts.
Until a majority of our industry says NO, clients and forwarders will continue to drive down the price just because they can.
NOW IS THE TIME TO SAY “NO” AND STOP THIS.
Les McCook, Executive Director
American Recovery Association, Inc.
5525 N. MacArthur Boulevard, Suite 135
Irving, TX 75038
If every agency say no an stop doing repo nation wide for one week i garantee you they (banks) will stop these hard ball tactics. And consider our concerns….
One client has stated they need a flat rate nationwide for the benefit of the consumer to appease the CFPB. I wonder if they are going to have one flat interest rate nationwide regardless of geographical area or credit history? I think not. The thought that one (low) flat fee suffices nationwide is absurd as the costs of doing business vary drastically dependent upon the market one conducts business in.
Good Afternoon,
We recently sent out our Primeritus contract last week and we only received a few responses/ contacts back. Please if you haven’t already look over the contacts and forward them back to by Friday, March 22. Like always, please feel free to contact at the #’s below. Thank you J
If for some reason you did not receive the email with all the paperwork, please let me know asap.
Kristin Waldron
Vendor Relations
VR Queue #: 615-762-2514
Direct #: 615-762-2343
Fax: 615-332-6005
Email: KWaldron@accis-solutions.com
They need a flat rate to make sure they pad their loans and cover their bottom line. Stupid low rates= CFPB claims PERIOD!
Kristin,
Have you read that contract? Are you really surprised about the lack of response? I have heard from eight or nine people and everyone of them have said they will not sign it.
Amen!!!
Great editorial and advice. It is easy to accept recovery assignments but profitable? Not Always. After reading some of the latest contracts — here is something we like to respond with:
Our firm, ——— (company) has received your proposed contract and fee schedule. Unfortunately, our business model and structure will not allow us to be profitable at the proposed service rates. In addition, we cannot in good faith sign the contract as written. To be quite honest, we do not share some of the proprietary company information you have requested with anyone other than the originating lien-holder. We feel that our organization is not a good fit with your firm, pricing model and contractual terms at this time. Thank you again for your consideration.
Everytime I read one of these missives on “Just Say No” I am reminded of the men and women in our industry now either struggling to just keep their doors open or have already shut their doors and are no longer in business because they had the integrity to say :NO: Who put them out of business? The “REPO RANGERS” operating out of an old truck with no insurance or bonds or association memberships. I would say “NOT”. The people who have created this situation are the legitimate operators who were so greedy they signed the “Contracts”. These people signed every contract that came down the road without any hesitation…to “grow” their companies. They courted the forwarders and big financial institutions until the honeymoon was over and the stark realization that these large entities now “owned them”. The lending institutions and forwarders could dictate and demand anything they desired and the :Contract Signers” had to obey their masters or they would lose the business. These “Contract Signers” became parasites hosting on mass business assignors and as the remora fish also dies when the host shark dies it is now these parasite “Contract Signors” who are fighting so hard to keep the business of the large forwarders and lenders who treat them and pay them like bonded servants. I am proud to say that I and a small band of my associate in the recovery business will never have to say “NO” because we never said “YES”.
Outstanding information and advice Les. I hope all will heed your column and John Ziebro’s open letter as a clarion call to stand firm and work together to reverse this continuing trend of clients wanting us to do more and more for less and less. We have been examining each clients stats and telling those that are simply no longer profitable that we can’t afford to do any more of their work. Surprisingly, some who appreciate our efforts and results have agreed to a fee increase.