Repossessing A "Spot Delivery" Deal

We occasionally get a panic call from a local new-car dealer, asking if we help them with a emergency repossession account.

It usually goes like this...customer came rolling in the dealership in their rusted out Lebaron, and after dancing with the salesman,  drives off in a new Chrysler 300, thinking they have a deal.  


However the dealership can’t get the deal run through any financing entity.....customer fibbed about actually having a job, let's say. And in the meantime, the dealership might have complicated the situation by selling (or junking) the customers LeBaron.  Ouch!


The dealership calls the customer and asks...and then demands.... he/she bring the car back, because the financing fell through.  Of course, Mr New Car Owner says “no”....a deal is a deal.  Plus they've been showing off the new ride to the neighborhood. 


So the dealership is calling us, the recovery agent, to insert ourselves in this super tense situation (often with verbal threats having been thrown around from either side), to repossess the new car "sold".....and now "unsold" on this “spot delivery”.

Well, the Federal Trade Commission is holding a series of round tables to surface information about abusive lending and collection practices, and on Nov 17th, they were advised by a leading consumer-advocate attorney that this is a practice that needed to be shut down.

Time to Crack Down on Conditional Car Loans, FTC Is Told
"Yo-yo" loans are prevalent enough to warrant new consumer protection rules
ConsumerAffairs.com


It's time for the Federal Trade Commission (FTC) to crack down on abuses of conditional car loans, consumer advocates testified at a recent Washington hearing.

"In no other area of our commerce can someone sign on the dotted line, deliver the product, and then cancel the transaction and insist on the product being returned because the final credit transaction did not produce the hoped-for income," said Ian Lyngklip, a Southfield, Mich., attorney.

"It's like I walked into a supermarket, purchased an apple, walked outside and took a bite only to have a clerk run into the parking lot and insist the apple be returned," Lyngklip said.

The practice of issuing conditional loans, known as spot delivery or yo-yo loans in the car industry, is prevalent enough and harmful enough to warrant FTC protective regulations and enforcement action, Lyngklip said.

"It is unconscionable that a dealer would sell a car and then, because the final credit terms are unfavorable, send the repo man out to repossess the car and refuse to give back the down payment or reimburse for payments made," added Lyngklip.

A spot delivery, or yo-yo sale, happens when the car dealer sells the consumer a vehicle and completes all the steps necessary to sell the car including executing a contract of sale, signing title, taking a down payment and turning over the keys.

After the transaction is finished, the dealer calls the consumer back claiming the deal has fallen through. In some instances the dealer uses fraudulent means or forcible repossession to take the car back.

The FTC Roundtable was entitled "The Road Ahead: Selling, Financing & Leasing Motor Vehicles." Lyngklip was one of five experts participating in a panel which discussed "Which Practices, If Any, Cause Significant Harm to Consumers, And What Are Potential Solutions."




We don't like losing business, but on this one, we have to agree. The customer is told its a "done deal" when they roll out.  We know the dealership is anxious to get the customer behind the wheel, have him start smelling the new leather and start jamming to the Bose sound system....but it seems like a dicey proposition for all involved...including the repossessor, when a deal is forcefully "unwound" on a consumer. 


Just sayin'. 

Portrait of a Good Repo Client

I've focused a bit on what's gone wrong with how some auto lenders are treating the repossession industry. But its not universally true....there are some good clients out there.


What does a good client look like? At least from the perspective of a repossession agency? 


A good repo client gives you information.  Lots of it.  
How many cars are sitting at the "address provided"? Only a fraction of what there used to be. So it's often what's being untold that is resulting in missed repo opportunities. The creditor might know why the debtor is in our area ("he's looking for work...he's a plumber"....or "he's down here with girlfriend"...or "he's really into bowling...").  There a million little factoids that might be useful for an intelligent investigator to use in his hometown to find more information about the debtor. Cars are often repossessed from locations we surface, and it takes data (even seemingly unrelated data) to do that.  Even knowing the vehicle's color or tag is huge. It's in your best interest to tell the repo agency everything you know about the debtor. 


A good repo client treats our staff well. 
Man, I know it would be frustrating being a collector for an auto lender. Customers lying to you all day, upper management pressing for better numbers, a minefield of legal issues to navigate with every collection call.  It would be tough.  But we appreciate it when a collector sets all that aside and relates to our staff as being "on the same side", because we really are. People in the repo business really do go to the wall for a client they appreciate.  That means more cars recovered, and less loans pushed into charge-off.  Think of the repossessors as your football team, and you, Mr. Client, as the coach. It takes positive motivation and team spirit to get your agents ready to hit the streets.


A good repo client pays a fair fee. 
I am repeating myself from previous posts.  But...paying a reasonable repo fee means that the agency really will give each repo deal their best efforts. Its that simple. 
Trust me......you don't want to be the client whose accounts get worked "only when we're in the area". Priority accounts receive better attention, and clients that pay fairly get prioritized. 
Also paying a close fees justifies the agency's investment in Accurint reports, or running Carfax's, or even paying to get a tag number to input into their own ALPR systems...on a no-repo-no-fee basis, agencies will quit spending on those accounts knowing that's only more money out the window.  You will get more cars from agencies that you pay a close fee, and more of the same if you allow your agent to charge a skip fee on a legitimate find. 


A good repo client says "thanks".

I know its not your own personal car that we've recovered. But when you sense we've gone the extra mile, and kept hammering away on an account by checking the address a million times, or recovered the car from some other address we surfaced, please feel free to say "thank you".  Good will and appreciation pays dividends in any relationship, even business relationships. 


Its not all about the money, although that's a part of it.  And I'm not saying a good relationship with your repossessor will make or break your organization. But it will make a difference...a huge difference.....in your organization's bottom line.  But even more importantly, this has to do with cooperation and respect....which are good ways to interact with people no matter what activity you're engaged in.

Mayhem Is Everywhere!

Most TV commercials suck, really. But you got to admit that the latest rounds of Allstate Insurance commercials are incredibly funny. Click on this one to see if you agree: 

   They make a great point...."mayhem is everywhere!" Mr Mayhem proclaims in one commercial.  And in this clip he snarls: "If you named your own price for auto insurance, you could be paying for this yourself!"  You gotta laugh at how smug and irritating this guy is. 

But its a perfect case in point for the repossession business. Can you think of any line of work that has such a potential for mayhem? I can't.  

Mix big heavy cars with bigger and heavier tow trucks. Toss in a few angry customers and financially-desperate repossessors. Throw in some alcohol and a few handguns (somethings with the customer or, worse yet, with the repo agent!)  Stir together under a lot of pressure, generally in the middle of the night. That's a recipe for mayhem. 

When price becomes the sole criteria (or even the MAIN criteria) for a service like ours, and you ignore every other factor, you do encourage mayhem. 

This could simply sound like a plea for higher repo fees. It's not.  

We all nod in agreement when someone says "you get what you pay for!" So its true in the repo business, too:  to get good, intelligent people  to do this job using good equipment, with lots of training and lots of insurance, it takes more money than what some of the too-big-to-fail banks want to pay. And the result has been "accidents" like this in which consumers or repossessors have shot each other, run over each other, rammed each other, or committed various other acts of "mayhem".  

Several lawsuits from all of this are winding their way through the court systems right now. In 2011, lenders will pay out tens of millions of dollars for death or injury claims over repossessions, the majority of which involved repossessions handled on a no-recovery-no-fee basis. The two go hand in hand, and its getting scary.  

And in most cases, unnecessary.