Guest Editorial
I read where a forwarder was offering a fee for a “RESOLUTION” where a recovery specialist makes contact with a consumer and through that effort the client reaches an amicable agreement with the consumer. This fee, I would assume, would be less than a full recovery fee and under the circumstances I wonder “WHY”?
Why would a “RESOLUTION not be worth the same as a “REPOSSESSION”?
Is it not in the financial institutions best interest to salvage the debt and not suffer the inevitable loss which comes with repossessing mortgaged collateral? Is it not in the consumer’s best interest to be able to keep possession of their vehicle and maintain a credit rating which does not reflect “REPOSSESSION”? If then a “RESOLUTION” is a win-win situation why should the agent who made it happen be paid less for their efforts.
It is my opinion that “RESOLUTION…SAME AS REPOSSESSION” should be the desired end result for all concerned parties.
I would like to explain this statement by first stating that when a request is made by a lender for the repossession of mortgaged collateral and an assignment is placed with a professional recovery specialist, one of three things is going to take place.
One, the mortgaged collateral is located and recovered, this is “REPOSSESSION”.
Two, the mortgaged property either cannot be located or due to extenuating circumstances cannot be recovered without a possible “breach of peace” and the client or recovery specialist decides to cease further attempts to recover the mortgaged property by self help. This is normally referred to as a “CLOSE”.
Three, the recovery specialist is unable, for various reasons, to effect peaceable self help repossession and contact with the consumer is warranted. This may be a case where the collateral is secured inside a garage, never present at the consumer’s verified address or it may be a case of where the consumer insists on speaking with the lender prior to surrendering the collateral. At this point the lender has control of the outcome of situation and may decide to allow the consumer to “pay current” and keep the collateral. The recovery agent has no control over what the lender decides. In most cases a knowledgeable lender, knowledgeable of the conditions of the contractual obligations of the consumer, will insist the consumer pay the past due amount plus the recovery specialist’s charges. If the consumer complies in order to retain possession of the collateral there has been no cost whatsoever to the lender and their account has now been brought current. In many cases the lender will add the recovery specialist’s cost to the balance of the consumers account and again there has been no actual cost to the lender. This action is commonly recognized in the lending industry as a “RESOLUTION”.
A “RESOLUTION” is usually the most desirable of the three results if the consumers past pay record so warrant this action. It should be clearly understood that it is the lenders decision for the consumer to be allowed to “pay current” and retain possession of the collateral or demand that the consumer release the collateral to the recovery specialist.
The question then becomes, why, in this win-win situation would not the recovery specialist be entitled to a full recovery fee? The recovery specialist has certainly earned his fee by making a direct face to face contact with the consumer, which in itself may be a very dangerous situation, made demand for the surrender of the mortgaged collateral and placed the lender in direct contact with the consumer. It is evident that the actions of the recovery specialist have been the catalyst which has brought the lenders account current, at no cost to the lender, and put the account back in an acceptable status.
This is the meaning of “Resolution…Same as Repossession” and why the fee, in my opinion. Should be the same for either result,
Ron L. Brown, MCE, IFCCE, CARS, CCCO
Ron L. Brown is the President and Chief Executive Officer of CSI Group in Oklahoma City, Oklahoma, one of the oldest and largest Asset Investigation and Recovery Agencies in the Central Plains area.
Ron, a state licensed Private Investigator and member of the National Association of Fraud Investigators, has over 35 years experience in the field of locating and recovering lost and missing people and assets and has assisted many law enforcement agencies including the U.S. Marshall’s Service, U.S. Customs, Federal Bureau of Investigation and the Texas Rangers.
The subject of numerous published articles related to his unique methods of locating people and assets he is internationally recognized as one of the leaders in the Tracing and Recovery Industry. Receiving the prestigious “Instructor of the Year” award from ACA International in 2002, 2004 and 2009, he now spends much of his time traveling as an instructor for ACA International, the Council on Law Enforcement Education and Training and co-presenting the critically acclaimed “MANHUNT” and “CYBERTRACKER” Seminars.
Ron is recognized as one of the key instructors of the Fair Debt Collection Practices Act, Graham-Leach-Bliley Act and the Fair Credit Reporting Act and has written many published articles on these ever-changing federal laws. He is industry recognized as an expert witness and has written opinions and given testimony regarding areas of “Breach of Peace” related to the asset recovery industry.
Having authored numerous articles and books on the subject of tracing and the utilization of neuro-linguistics in the psychology of motivation in the tracing and collection process, his latest endeavor has been to co-author the best seller, “MANHUNT: The Book”.
Currently active in all divisions of CSI Group he continues to personally handle investigations ranging from international and national recovery assignments to internal fraud and embezzlement and is well known in Debt Collection, Law Enforcement and Asset Recovery circles.
Ron may be contacted at Rbrown2150@aol.com and you are invited to visit him at the “MANHUNT” website, www.manhunt-seminars.com , the National Association of Fraud Investigators website, www.nafraud.com or at the “CSI”, website, www.csi-arm.com
Brilliant article Ron. I couldn’t agree more. Imagine how that could change the face of the recovery industry. If this was the case, you might even have agents out there pushing for Resolution over Repossession in many cases. There have been many times when I felt compelled to help a debtor and have even given up the recovery because I saw that I could help the debtor instead.
Clients could indicate whether they wanted a” Repossession Only” or “Repossession or Resolution.’ Like you said it would be a win-win.
Ditto- Great article, good timing!
Ron is absolutely on point.
It is crazy that many of the creditors “incentives” to the repossession industry yield results that are actually in their best interests. I sat in on a meeting recently with a great client to the industry (in most respects), who stated that their goal was to “keep the customer in the car”. I get that…..it makes sense. But when you offer a tiny close fee (or a fee at all) versus a normal repo fee, there’s little or no ncentive for the repossessor to do that. They will lie in wait for the car, pushing the account further and further towards charge off…or giving customer opportunity to skip…or a million other scenarios which actually will keep the customer in the car, but not resolve the account!
Someone in the industry is pulling together data which will demonstrate the real-world effect of this…that clients that assign with low or no close fees recover a smaller percentage of their cars than clients that pay a close or resolution fee.
I have heard that clients won’t pay close fees because “we pay for results”. Translation: we pay for metal. But that takes this whole process of well-handled account resolution off the table.
Ron – I think you are on to something here. As we move forward in the attempts to offer a standardized recovery industry to protect the consumer, this ought to be included. What better way could the consumer be protected in a financial dispute than to be offered a resolution option during the repossession process. Financial institutions who followed your suggestion here could honestly say to the CFPB that they had the consumer in mind by making such an offer.
One of the outcomes of increased scrutiny by the CFPB will be fewer repossessions. I can see lenders developing an increased laundry list of “to do’s” before ordering an actual repossession. Now would be the time to push this concept to the lenders. The problem as usual is “OURSELVES”, we are use to giving away this valuable service.
Great article Ron. I hope many clients will read this, smack themselves on the forehead and think, ” Damn, that makes sense”!
Ron,
Great article , and could not agree more. The clients that recognize this wisdom will keep the buyers in the cars and keep paying down that loan balance. This positive resolution gives that lender an opportunity for cross-selling other profitable services to that buyer in the future due to the enhanced relationship that now exists between the lender and the buyer.Good business sense!!
That’s right Ron! In every instance the debtor pays all the recovery fees associated with their account where it’s in the language of the contract. So yes, I believe lenders should pay full repo fees on a assignment that results in a debtor paying current.
Every $ the client gets paid on the resolution is 1 less $ the client won’t have to try collecting on the deficiency. A good man in the field that communicates the right things to the customer is worth a bundle to the client. And in many cases leads to a contract that is paid in full. I was in lending for 17 years and got more praise from home office for the $$ I collected than for the charge off. A well educated field man should get paid for his knowledge and expertise.
If someone calls me an buys insurance, and I nothing other than work really hard all my life, but not on this particular account, I get paid just as if I made a lot of phone calls, went to see them, persistently called them every year, Quoted their insurance 3 times.. I GET PAID for RESULTS not effort.
I have to say if the contact by the repossessors results in a payment, it saves the lender lots of money, AND LOTS OF RISK.
Think about it, if someone doesn’t pay their insurance premium to me, I call them and remind them, WHO benefits we both do. THE WHOLE PURPOSE IS TO KEEP THEM A CLIENT. If a repossession company gets a debtor to pay ALBEIT just by their presence WHO wins and WHO loses. The debtor and the lender win and the repossession company loses.
The resolution fee should be at least $200, especially if the close fee is under $100. Anyone working for a close fee under $100 (depending on the geographic territory covered) is working CONTINGENT, even with a close fee.
Ron, I just posted your letter on another discussion in this group. I have had great success doing just as the letter states. Thanks