Editorial
There has been a lot of talk about repo fees; some going down, some going up, some contingent, and even some that limit how much and for what. Of course the recovery agent wants more, the lender wants less, and the forwarder just wants a piece of the middle. Would it surprise you to know, that together, the answer to everyone’s wants has been placed right before our very eyes?
Recently, Santander Consumer USA sent an Open Letter to the Recovery and Repossession Industry. The letter went to great lengths in explaining why Santander had made some changes in the way it conducted business with its forwarders and recovery agents. Santander, like the rest of us, is becoming complaint with the Dodd-Frank Act and the CFPB (Consumer Financial Protection Bureau). Almost right dab in the middle of the letter is this sentence: “The CFPB has directed financial institutions to develop and implement a comprehensive program that ensures the service providers’ compliance with Federal consumer financial law.” The Open Letter continues by stating, “Santander Consumer USA was one of the first companies to make changes in the recovery industry to comply with Dodd-Frank legislation. These changes include: *(#2) Standardizing pricing”.
Standardizing Pricing? What’s this? You mean the Federal Government wants to standardize the pricing for repossessions? When the Recovery Associations simply made suggested pricing back in the early 80’s, didn’t the government threaten law suit and call it “Price Fixing”?
Well 30 years later, it would seem the recovery industry had it right all along. The Dodd-Frank Act seeks to set minimum standards and fees for consumer lending to “protect the consumer”. Up to this point, lenders and forwarders have dictated these fees. The lack of a unified voice from the recovery industry has made this permissible.
We have tossed around unity for some time now; we have even made small steps in that direction. Recently American Recovery Association and National Finance Adjusters merged, but still we do not have a unified voice. A voice strong enough to set or suggest standardized pricing; to protect the consumer and to protect the recovery industry. I guess each Association could recommend a standardized price for its members in order to protect the consumer, but wouldn’t it be better if all of our Associations could unify on this one topic? Could this be the turning point we have been looking for? Not just for unity sake, but for each of us to start making a living again.
When viewing standardized recovery fees from the perspective of consumer protection, it would seem to make sense and the right thing to do. Since due to geographical and many other factors that can be a part of any repossession, to set a “cap” on standardized recovery fees would prove a daunting task and certainly result in an unfair compensation to a recovery agent. Take Santander’s nationwide “cap” on redemption fees of $150.00 This “cap” might be considered fair for a recovery agency in small town USA, but in metropolitan areas where real estate taxes and the cost of living are higher, this “cap” proves to be substantial loss to the recovery agent. Maybe in thinking of standardized fees, we look from the opposite direction and set a “minimum” standardized fee.
Since 1938, the Federal Government and the U.S. Supreme Court have held that minimum wage is Constitutional and is needed to protect the worker. A set standardized minimum recovery fee would also be in that same spirit, not violating anti-trust laws, and establishing the ground work for standardized business practices for the recovery industry in order to protect the consumer from unethical treatment by their financial institution and their vendors.
If we were to be able to unify on a minimum standardized fee structure in order to protect the consumer, then the focus would shift from pricing to compliance as the CFPB and Lenders desire.
Imagine a minimum fee structure in place. All of the Associations and their members operating under the same structure for services rendered. From the CFPB point of view, they would embrace the standard as status quo, resulting in an easier stand to consumer complaints and the review process of big lenders, the lenders would embrace it from a liability perspective, and the forwarders would come to it as a financial safety net. Recovery agents could now budget and set their operations individually to become more profitable based on the standard fees. The banks, forwarders, and recovery agents who broke from the standardized fee structure would be out of compliance and would stand out like a shining beacon for the CFPB to look at. The cost of underbidding or under-submitting repossessions would become too costly for those involved. Not to mention, that lenders and forwarders would submit assignments to recovery agents, not based on fees, but by performance and compliance. Once again, the results and professionalism of the individual recovery agents would become the standard by which they were measured.
Additionally, with minimum standardized fess in place, the attention of the lenders, forwarders, and recovery agents could then turn to further compliance issues and ways to conduct our industry. These cost saving measures would become the profit margin we have all been seeking. From lender to forwarder to recovery agent, the cost of doing business would lower immensely. Insurance would drop as a result due to less risk of lawsuits, again creating a higher profit margin for all entities in the industry.
If there ever was a time or an issue that we needed to unify under, this ought to be the one and the time to do it, for all our sakes.
Be well, be safe, and be profitable. See you at NARS
Alex Allen,
General Manager
Anytime Recovery
Lake Worth, Florida,
Contributing Editor, Cucollector
This is a great idea in theory, but who would set the pricing? I certainly don’t want the goverment to set my pricing for me. I especialy dont want forwarders to set the pricing, but Im thinking that if there is a set price then the forwarders may start to fall by the wayside. Since they wont be able to accept work at street level pricing then send of to the recovery agent. I got into this business to establish my company as a professional one and then have the ability to charge a fair price. I am uncomfortable with an outside entitiy setting that price for me. I own a business, I am not part of a union and dont want to be.
Alex – Great writing! I think you’re onto something here.
One of the most difficult challenges on my side of the fence, is that some of our competitors are sending assignments a a dangerously low rate so that they can submit a low rate to the lenders. It’s impossible to debate with any lender, that the fees X, Y or Z Forwarder are too low for the industry and just as difficult to debate on why it’s dangerous.
People from the industry know, if you have an agent willing to take an involuntary for $150.00 (Don’t laugh, there are agents out there doing it) because they’re going to get the volume, they also must recover a volume number of vehicles to stay in business since there are literally no profit margins. All too often, I speak with agency owners that don’t understand where they’re profiting or losing on an assignment; which was remarkably explained in detail by John Ziebro’s article and methodology.
The point of my comment to your article is this; if the industry leaders focused on your “minimum wage” concept, the industry would quickly and more concisely learn what fees are poverty-and-risk, average-and-stable, and above-average-and-niche. Qualifying a pricing range within the industry and illustrating why, shown in a modeling by geographical areas as you pointed out, would bring a far greater clarity to the industry than just a simple call for unity.
The greatest thing about your article Alex? If everyone sets their sights on your concept, they will be forced to work together to gain the matrix necessary to build the modeling.
Working together, will build unity! (And in the end, will help the reputable Forwarders with the lenders, in pricing.)
Great article, great ideas Alex! Keep writing, I think the fact that it’s midday and no one has posted, means you have everyone thinking-and-thinking about it…..
I firmly believe that Alex’s idea is dead on. Regionally based minimum fees could be established at the state association levels if supported by a panel from the major associations. Of course this would require some unity at the agency level. While some might take advantage of the expectation of increased volume, they will still at some point have to step up to the costs of compliance which would eventually drain them. It is time for the industry to start banding together as Proffesionals and stand above the rest. What the CFPB is looking for is structure, consistency, compliance and professionalism . This can be done. More so now than at any other point in the industries history.
Kevin
This is a fascinating idea as long as the INDUSTRY sets the minimum pricing. Jeremy is right on in saying the the Federal Government should have no say in setting prices. They may have rights in matters of interstate commerce per the constitution but they have no right to tell states or individual companies within a state what they can or can not charge for their services.
I could see that this could easily be accomplished by the existing associations coming together through surveys of their members and worked it out among the elected leaders of those associations and finally voted upon by the members. Those agencies that aren’t affiliated with any association, if they wanted a voice in this would need to either start a new association or join an existing one. If the argument came up that these associations don’t speak for them, I don’t see that as a valid argument. It would be the same as if an electrician decided not to become a part of the their association, that would be his choice but he couldn’t then complain about having no voice – if you want a voice, join up.
Surely there is no more powerful voice in this industry than a united one through all the current associations. The industry could set a standard and individual owners could still set their own prices and decide if they want to meet, exceed or go below that standard minimum. But the lenders then would have a safe fee standard to use by which they could reduce their liability by not being accused of paying a substandard fee to therefore less than qualified operators.
Nice idea Alex!
This is a fascinating idea as long as the INDUSTRY sets the minimum pricing. Jeremy is right on in saying the the Federal Government should have no say in setting prices. They may have rights in matters of interstate commerce per the constitution but they have no right to tell states or individual companies within a state what they can or can not charge for their services.
I could see that this could easily be accomplished by the existing associations coming together through surveys of their members and worked it out among the elected leaders of those associations and finally voted upon by the members. Those agencies that aren’t affiliated with any association, if they wanted a voice in this would need to either start a new association or join an existing one. If the argument came up that these associations don’t speak for them, I don’t see that as a valid argument. It would be the same as if an electrician decided not to become a part of the their association, that would be his choice but he couldn’t then complain about having no voice – if you want a voice, join up.
Surely there is no more powerful voice in this industry than a united one through all the current associations. The industry could set a standard and individual owners could still set their own prices and decide if they want to meet, exceed or go below that standard minimum. But the lenders then would have a safe fee standard to use by which they could reduce their liability by not being accused of paying a substandard fee to therefore less than qualified operators.
Nice idea Alex!
Exactly Russ! It is the industries duty and right to set the standards, police yourselves well and it becomes difficult for anyone else to argue. The way I see things, the ball is in all of your courts and you ALL need to get together and seize the opportunity.
Kevin
Has anyone ever noticed that States and Communities can set rates on Non-Consent towing from private property but have never attempted to set rates on repossessions. WHY??
The 1994 Federal Deregulation Act 49USC 14501 strictly prohibits setting rates BY GOVERNMENT on consensual towing. In essence a repossession is being done with the CONSENT OF THE LEGAL OWNER OF THE VEHICLE.
So how does Santander get off on telling us that it is setting rates in response to GOVT PRESSURE. Standardized Pricing is a result of the Securitization of Auto Loans into Asset Backed Securities. The Actuarial Bean Counters who write the Prospectus for investors came up the flat rate pricing scheme to make the Prospectus work mathmatically. Do these Bean Counters have any idea what it costs TO REPOSSESS A VEHICLE OR RUN A RECOVERY BUSINESS–HELL NO–BUT THEN NEITHER DO MOST REPOSSESSORS.
Looks like everyone is going to NARS.
I am taken back by the statements by Scott Jackson as the new MVTrac Marketing Strategy came down to slashing agent compensation by 25% to undercut competitor rates by waiving a contract around to a kool-aide drinking advisory board from a major lender who was suppose to place loads of front end assignments into the database. That never materialized. Instead of continuing the debate and remaining a firm voice for reasonable rates you chose the same path as your competition you above berate. Amazing!
Thank you all for your comments, insights, ideas, and concerns. It is a daunting task for me to put my thoughts and heart in to writing. I have been very nervous about putting myself out there.
I do not have the need to be right. I simply write and hope others will think about it and come back with even more thoughts.
I would like to see our industry unite. I know for us to do that will take everyone to have an open mind and open heart. That we have hung on, for too long, resentments that do not serve us. That the lack of unity has been and will continue to be our biggest problem and downfall until we are willing to come together. I do not know of any other industry that has more than 1 association.
The “Anonymous” poster who wrote about MVTRAC might be better served if they had facts to that particular situation. Contempt prior to investigation will keep anyone in complete ignorance. As a member of the MVTRAC Advisory Board, I voted my conscience based on the information at the time. While it is true that MVTRAC did lower it’s recovery rate by a few dollars. It is also true, as a recovery agent, I do not like being paid less for any of my services. The reason we voted in favor of it was not due to the tasty kool-aide (though it is delicious), we felt it would endure a company that has been and continues to be a friend and ally to the recovery industry its serves. If anyone would like more information on this subject, please ask me at NARS or contact me.
Ok, back to work. Be Safe, Be Profitable, and Be United.
My question is with all this dictating our prices and when to run an account. Along with other direct demands when are we no longer an outside contractor, but in the eyes of workers comp considered an employee. This is probably something that should be asked of a WC agent. We have been told by our WC agents that if you consider someone an outside contractor that you can’t dictate anything to them and that they must be their own boss.