Why Contingency Pricing No Longer Works in the Repossession Industry

Repossession is now the only “contingency” industry where: Risk increased, control decreased, and prices went down.

GUEST EDITORIAL

License Plate Recognition technology has captured easier recoveries, leaving repossession agencies with tougher cases and success rates dropping to 20-30%. Unlike viable contingency models in other industries, repossession offers flat fees, no control over outcomes, and lender power to deny payment at will. This escalating risk with stagnant prices has made traditional contingency pricing unsustainable in repossession.

1. Declining Recovery Rates — Including Direct Assignments

Since the widespread adoption of License Plate Recognition (LPR) technology, recovery rates on direct lender assignments have materially declined. Higher-probability, visible, repeat-location vehicles are increasingly recovered upstream through LPR programs.

Importantly, this shift is not limited to accounts that were historically more readily identifiable. LPR technology has also absorbed a meaningful portion of vehicles that previously required traditional skip tracing, surveillance, or investigative field work to locate—activities that were historically treated as distinct, billable services within the repossession process.

As a result, vehicles that once justified contingency economics through additional investigative effort and compensated field work are now frequently identified and recovered through passive, data-driven LPR capture. The remaining files released for direct field assignment therefore represent a narrower and more challenging subset of cases, while the investigative labor historically associated with those recoveries has been implicitly folded into contingency expectations.

Vehicles remaining for direct assignment are disproportionately:

Investigative
Multi-address
Actively concealed or frequently moved

Post-LPR reality:

Non-LPR related recovery rates now typically fall in the low-20% to low-30% range
30% represents the high end, not the baseline
This decline applies to direct assignments, not just forwarded or secondary placements

As recovery rates fall, per-file costs increase, while recovery fees have remained largely unchanged.

2. Why Contingency Works in Other Industries

In industries where contingency pricing thrives (law, collections, real estate, public insurance adjusting), three conditions exist:

The service provider controls the outcome
Compensation scales with value created
Clients cannot take the benefit and deny payment

In those models, three successes can offset seven failures.

This is why contingency pricing in those industries commands a premium, not a discount.

3. Why Contingency Fails in Repossession

Repossession lacks all three conditions:

Fees are flat and capped
Compensation does not increase with difficulty or effort
Clients retain unilateral control to:
- Take payment
- Enter arrangements
- Place assignments on hold
- Close and later reopen files

Even when repossessor field work directly causes borrower payment, compensation can be eliminated entirely.

As a result, two or three successful recoveries do not offset seven or eight unsuccessful assignments.

4. Investigative Work Is Being Misclassified as Contingent

Historically, activities such as skip tracing, surveillance, address verification, and field investigation—including door knocking—were recognized as discrete services and, in many cases, separately compensated when required.

In today’s environment, those same activities are increasingly treated as implied components of contingency recovery, despite the fact that they remain investigative in nature and do not provide the repossessor with control over outcome.

Field activity such as:

Working multiple addresses
Door knocking
Verifying or disproving client-provided intelligence

is investigative labor, not recovery.

Door knocks frequently trigger borrower contact with the lender, allowing the lender to resolve the account financially while removing the repossessor’s ability to complete recovery.

Because the repossessor does not control the outcome, this work cannot reasonably be priced on contingency.

5. The Economic Reality: Chasing Bad Outcomes with Good Money

Under the current model, repossessors are effectively:

Using earned revenue from successful repossessions (including LPR-assisted recoveries)
To fund uncompensated investigative work
On files with sub-30% success probabilities

In practical terms, Repossessors are taking good money to chase bad possibilities.

This is not traditional risk-sharing. It is closer to gambling, where:

Capital from confirmed wins is consumed by speculative efforts
The odds of success are worse than many actual gambling scenarios
And the player has no control over the payout decision

6. Structural Conclusion

When contingency pricing was introduced into repossession:

Fees declined, rather than increased
Risk and workload expanded
Higher-probability recoveries—and a significant portion of work that historically justified additional investigative compensation—were later absorbed by LPR
Investigative labor became uncompensated

Repossession is now the only “contingency” industry where risk increased, control decreased, and prices went down.

Clarification on Scope and Boundary Conditions of Contingency Work

The structural failure of contingency pricing is compounded when contingency is treated as having unlimited or undefined scope.

Contingency ceases to function when it assumes:

Infinite addresses will be run without limitation
Door knocking is expected as a demand mechanism, even once
Investigative field work continues without a defined endpoint
The client retains the ability to take payment, make arrangements, or place the file on hold at any time
No compensation is owed when work is interrupted or neutralized by client action

A single door knock by a repossession agent arriving in a fully equipped tow truck is not comparable to a mailed notice or a collection call. It is a high-impact enforcement event that frequently triggers immediate borrower response and lender benefit.

When that benefit is captured upstream—without compensation—the work performed is no longer contingent recovery. It is uncompensated demand activity.

Under these conditions, contingency stops being risk-sharing and becomes open-ended labor with asymmetric control.

Without some form of:

Close fee
Call-off fee
Or investigative / demand compensation

…the repossessor absorbs all cost, all risk, and all uncertainty, while the client retains full discretion over outcome and payment.

In that structure, contingency pricing is not viable, because:

The work performed is no longer finite
The outcome is no longer controllable
And compensation is no longer tied to value created

Final Summary

Since the adoption of License Plate Recognition (LPR) technology, recovery rates on non-LPR direct assignments have declined into the low-20% to low-30% range. As higher-probability vehicles are recovered upstream, remaining field assignments now skew heavily toward investigative, multi-address, and actively concealed cases, while recovery fees have remained largely unchanged.

Unlike other contingency-based industries—where the service provider controls the outcome and compensation scales with value created—the repossession industry operates under a model in which outcomes are externally controlled and compensation is fixed. As a result, two or three successful recoveries are often insufficient to offset the cost of seven or eight unsuccessful assignments.

When contingency pricing is further applied to unlimited investigative scope, door knocking that functions as demand activity, and unilateral client call-offs without compensation, it no longer represents shared risk. Under those conditions, contingency pricing becomes an open-ended cost structure disconnected from both outcome control and value creation.

This misalignment produces a structural pricing failure in which field agencies must fund low-probability assignments with revenue earned elsewhere, reducing long-term sustainability without improving client outcomes.

Respectfully submitted,

Shane Freitas
President & Owner
Accurate Adjustments, Inc.

Concerned Repossession Agency Owner
Active in the repossession industry since 1988
Agency owner since 1997

For more than three decades, I have worked alongside lenders, servicers, forwarders, and field agencies through multiple regulatory cycles, technological advancements, and market shifts. I remain appreciative of the trust clients place in repossession agencies and of the partnerships required to deliver consistent, compliant outcomes.

This article is not offered as a critique of clients, LPR service providers, or vendors. It is an analysis of economic and operational conditions that have materially changed over time. The expectations placed on field agencies under legacy contingency structures no longer align with the scope, risk, and investigative labor now required to produce results.

For the long-term stability of the industry, the quality of service provided, and the consistency of outcomes clients expect, alignment between scope, control, and compensation is necessary. This is not a call for increased cost, but for structural coherence that preserves effectiveness, accountability, and sustainability for all parties involved.

This perspective is offered in good faith, with respect for existing partnerships, and with the shared objective of ensuring that repossession services remain reliable, professional, and viable in the years ahead.