Protect Yourself: Contract Indemnification Language

Protect Yourself with Proper Indemnification Language in Your Contracts

Agents play a pivotal role in the most dangerous and expensive portion of the repossession space. However, once again, there is a concerning trend emerging in our industry – some lenders are sending contracts to their agent network containing indemnification language that does not adequately protect the agents against the actions of the lenders. This practice is not only ethically questionable, but also puts agents in a vulnerable position such that many would lose everything even when problems occur through no fault of their own.

For example, an agent recovers a vehicle for a lender, only to find out later that the lender lost the lien prior to sending the assignment to the agent and had no legal authority to order the repossession. In such cases, these one-sided contracts offer little protection for the agent, and may leave them to deal with legal and financial repercussions on their own.

Agents have always been the lifeblood of the repossession industry and many have voiced their frustrations to the American Recovery Association (ARA), believing that these contracts are not only unfair, but also undermine their trust in their lender partners. They find themselves in a precarious situation, torn between their clients and the lenders, with little or no legal recourse when issues arise.

One agent shared an experience, stating, “We work hard to recover collateral with certified agents for reputable lenders, but when lenders provide us with contracts that shift all responsibility to us, it feels like a betrayal of trust. We need fair and balanced agreements that protect us and our clients.”

Agents, acting on behalf of lenders, play a critical part in the repossession ecosystem. However, some lenders are undermining the agent’s role by sending contracts that include one-sided indemnification clauses which leave their agent partners legally and financially exposed regardless of the lenders actions, inactions or decisions.

Indemnification clauses in contracts serve an essential purpose. The equitably allocate responsibilities and liabilities among all parties involved, ensuring that each party is held accountable for their actions. In lender-agent relationships, these clauses should provide a fair distribution of responsibility, protecting both parties. Some lenders have attempted to address these concerns by providing shared responsibility or more balanced indemnification language upon request. While this is a step in the right direction, it raises questions about why these fair terms aren’t included in the standard contracts in the first place.

The practice of sending one-sided contracts to agents is unacceptable for several reasons. First and foremost, it can be seen as taking advantage of agents who may not have the legal expertise or negotiating power to ensure fair terms. Secondly, it further erodes trust within an industry which has very little trust to begin with, further damaging the lender-agent relationships which are crucial for this sector to function properly.

These are pressing concerns for the agent network, and immediate action is needed. Lenders should take it upon themselves to not only revise their contract templates, but any forwarder who sends contracts to the agent network must ensure that they include balanced indemnification clauses. This would not only demonstrate a commitment to fairness but also help restore a level of trust between lenders, forwarders, and the agent networks.

The issue of one-sided indemnification clauses in lender-forwarder-agent contracts has been a pressing concern for the agent community for years, The very agents who play such a critical role in securing vehicles for lenders, deserve contracts that provide fair protection and allocate responsibilities appropriately. The practice of sending contracts that place the entire burden on agents is detrimental to the industry’s integrity and effectiveness. Agents encountering unfair contracts should not hesitate to seek assistance from ARA. This issue will be addressed collectively, with agents, lenders, and forwarders working together to ensure that contracts are fair and equitable, reflecting the values of transparency and trust that should underpin the recovery sector.

Mike Peplinski, vice president of Harding Brooks stated, “We have made some great strides with many lenders and forwarders revising their contracts, making them equal & fair for all parties. Unfortunately, when changes are made within contracts, your signed contract does not get automatically updated. In many cases, the lenders and forwarders are not sending their revised contract to be signed and therefore the unequal contracts remain in play. Furthermore, some clients only agree to equal indemnification on a case-by-case basis when the repossessor requests for it to be added.”

In closing, we encourage agency owners to take a proactive role in protecting their businesses. Have contracts reviewed by a reputable attorney before signing to ensure the proper indemnification language is included. As always, if you have questions please be sure to reach out to ARA Home Office at homeoffice@americanrecoveryassn.org .

Sincerely,