Be careful what you wish for

Rebuttal; Contingency does work

It’s NOT the contingency model, it is the business operators that are making it unprofitable.

GUEST EDITORIAL – Op-Ed

Contingency does work if you know how to manage a business with this model. My entire life in the industry was spent leveraging the contingent model for my unique niche and success. The problem is that most companies do not know how to manage such a business. I’ve seen it every time I’ve consulted with companies that are struggling and with a few tweaks and a few weeks the businesses are on their way to profitability again.

Sadly, at an average of 6-months the companies I’ve successfully consulted into profitability (and there are many) are back to their old methods and the downward trend begins. 6-months is the average.

It’s NOT the contingency model, it is the business operators that are making it unprofitable.

So, what is the industry to do? Complain about contingency for one; which has been going on for 30 years. What else? Change laws and create associations that then promote closing fees?

Although this sounds like a great idea it’s very short-sighted. Most don’t realize how dispensable the entire industry really is much less how fast it can all go away.

Second to this are the many complications such as ‘recovery-budgets’ and ‘remarketing-budgets’ and many other facets of running a large financing company with publicly accessible budgets and required reporting.

While recently at NARS, I was talking with a group and found that a large lender found a very high resolution rate when they had their legal department send out letter. The resolution rate was so high in fact that they’ve wondered why they even have repossessions at all.

The thinking now is to have the accounts assigned to their attorneys before it ever gets to a repossession agent and by the time it gets to an agent there will be little left to assign.

I’ve been screaming this almost from rooftops for years and many just can’t believe it, just as I was screaming from every podium that invited me to speak that LPR cameras could unite the industry and out the Forwarding and Skiptracing models out of business. Yet here today, DRN and MVTRAC alone could be assigned 100% of all repossession assignments and the agents would be considerably more profitable while the Forwarding and Skiptracing companies are struggling, consolidating, borrowing and taking on private equity partners, for market share and to remain relevant.

Doesn’t history of our own mistakes ever ring loud enough to make a difference?

Even if everyone agreed to a plan the industry owners move much too slowly to adapt timely enough for the plan to be executed effectively enough to prevail. With this said, the focus is on the wrong ball. The bouncing ball to pay attention to is not the contingency model as has been the case but rather, how to make it work successfully and to teach the success to all agents and the lenders.

Push the lenders into a corner and you’ll only shoot yourself in the foot. The entire recovery industry in total fees is what? Less than $3bb for all repossessions combined? Although it’s difficult to nail down, a large lender, one large lender could pay all the repossession fees of all other lenders and still remain profitable with a big smile.

While doing some digging for some context in writing this, I came across a piece written by Tomas Laurinavicius.

“A century ago, Albert Einstein taught us: everything is relative. The way you see the world depends on your point of view and context. What is hot for you might be mild for me, what is a success for me might be a failure to you. There’s no black and white, there’s only the perspective you choose to look at things. Everything can change in a snap when you provide context.”

Click here to read it: https://tomaslau.com/blog/everything-is-relative

Whereas the Recovery Industry believes it’s very important to the lenders and the amount of money recovered by the process is significant, the lending industry views it has a necessary but not necessary evil.

Imagine a day where you have no assignments because lenders have decided it’s just not worth-it to do business with the recovery industry and they use legal letters from their attorneys as their main recovery process.

Keep pushing and the Repossession Industry will be extinct and will never come back and everyone in it will be scratching their heads, devastated from the extinction and the grief of having to find a way to survive doing something else.

I once “played chicken” with relatively the same subject matter and lost. The timing of my loss was at least planned-for and didn’t hurt me and my company as much as it hurt them.

Keep pushing and it will happen.

Keep pushing and it will only hurt the entire recovery industry alone and the lenders will actually be relieved.