This article was submitted to RepoMag.com in 2002
There is an ominous cloud spreading over our industry that threatens to decimate our freedoms as individual, independent businessmen and businesswomen. A conspiracy, if you will, by two formidable groups, with lots of money. They have attempted it before, and although unsuccessful, they devastated many of our brother and sister professionals.
Now, more powerful than before, they have formulated specific plans to “take over the asset recovery industry”. They make no bones about it. The two groups I speak of are the “super forwarders” and the auctions that offer collateral recovery services as a part of their operations. In this article I would like to concentrate on the auctions.
These auctions attempt to sell lenders on the concept of “one stop shopping”. They tell the lender that for a fee of $350, they will repossess the collateral, anywhere, cut keys, provide free storage, and deliver the collateral to their auction, also at no charge. Sounds great, doesn’t it. Or so some lenders might think.
After the auction has sold the lender (our client), on this great deal, they call us, the professional asset recovery specialist. They tell us that, hey, we’ve got a great deal for you. We’re going to let you work our repossession assignments, because your client (who was paying you $300, to $350 per assignment), is now our client. The auction tells you, we are going to let you now repossess those vehicles on a strictly contingent basis. If you repossess the vehicle, we are going to pay you $200. For that $200, you must furnish keys, for free, you must provide storage, for free, and you must deliver the vehicle to our auction, for free. What a deal! And by the way, says the auction, we pay no close out fees. However, if we give you several bad addresses and you want to find the vehicle so you can get paid, we will allow you to skip trace the assignment, for free.
Add this $150 profit the auction just made from your hard work to their additional profits from charging the lender for transportation, (that you did for free), clean up of the collateral, “dents and scratches” repair, auction fees, etc. Their total “take” from us and the lender can easily reach several hundred dollars.
Believe it or not, these people are meeting with some success. They have only one problem, US! Why? Because they do not possess the professional expertise or the equipment to service repossessions properly and safely. BUT WE DO!!!
The real tragedy of this “scam” by the auctions is that they don’t really care who they use to do their work. They are looking for cheap labor. They are not interested in experience, professionalism, proper insurance coverage’s, etc. They are gambling that there are some recovery agents and “scavengers” out there who are willing to “prostitute” themselves for a couple of bucks. Those who fall for this “con job” do not realize that they are feeding the very demon that is bent upon destroying them, and taking away their livelihood and freedoms as self employed, independent professionals.
Those asset recovery specialists who run professional agencies realize the high costs and expense of success. As an example, lets take a look at the approximate costs for one year. And to make it simple, lets assume that agency employs just one field recovery agent, one truck, (at an initial cost of approximately $45,000 to $55,000), and one secretary:
(not including owner)
(.57 per mile, 70,000 miles)
General Liability, Garage Liability, Garage Keepers Liability, On Hook, Workers Comp, Office and Contents, Personal Property
(no major service, just oil and filter every 3,000 miles)
(with no major problems)
This does not include any salary to the agency owner, mortgage payments on office, truck payments and storage facilities, computers, telephones, office supplies, etc., etc., etc.!
Another interesting fact is that each individual asset recovery agency carries at least $1 million in insurance protection for the lender. The $1 million or so that the auction carries is usually aggregate coverage, which means that there is only $1 million available to cover every claim of every recovery agent they use. This aspect should be especially important to the lender since the courts are ruling that they are liable for the acts of the recovery agents who repossess their collateral!
Simple mathematics and business 101 makes it very obvious that even if you survive in such a climate as we have discussed here, eventually, when these auctions have a sufficient number of clients and business, they are going to cut your pay again. And during the time you are working for less than what it costs to survive, how do you know they are not already training their own people who will put you completely out of business? They attempted that the first time they tried to take over our industry. Yes, they opened their own repossession companies. It didn’t work that time. Let me tell you why.
We are competent, experienced professionals within our industry, THEY ARE NOT. We know how to do our job, THEY DO NOT. We work horrendous hours, subjecting ourselves to sometimes dangerous, sometimes deadly situations in order to service our clients. THEY WILL NOT. We do this because we love what we do (right?) and we do this so that we can feed and clothe our families and give them a decent place to live. THEY (auctions) COULD CARE LESS!
If we as an industry are not prepared to come together and rise to this challenge, we, as independent businessmen and businesswomen in the asset recovery industry will cease to exist. Surely we will become “lackeys” and “yes” men to these auctions.
But, if we have the resolve, if we believe in our futures and in our families and our faith, if we are willing to come together as one voice, WE CAN WIN AGAIN.
In considering this willingness to come together as an industry and to determine our futures, let me share something with you entitled, “The Sense Of A Goose” When you see geese flying along in “V” formation, you might consider what science has discovered as to why they fly that way. As each bird flaps its wings, it creates an uplift for the bird immediately following. By flying in “V” formation, the whole flock adds at least 71 percent greater flying range than if each bird flew on its own.
People who share a common direction and sense of community can get to where they are going more quickly and easily because they are traveling on the thrust of one another.
When a goose falls out of formation, it suddenly feels the drag of resistance of trying to go it alone — and quickly gets back into formation to take advantage of the lifting power of the bird in front.
If we have as much sense as a goose, we will stay in formation with those people who are headed the same way we are.
When the head goose gets tired, it rotates back in the wing and another goose flies point.
It is sensible to take turns doing demanding jobs, whether with people or with geese flying south.
Geese honk from behind to encourage those up front to keep up their speed.
What message do we give when we “honk” from behind?
Finally — and this is important – when a goose gets sick or wounded by gunshot and falls out of formation, two other geese fall out with that goose and follow it down to lend help and protection. They stay with the fallen goose until it is able to fly again or until it dies, and only then do they launch out on their own, or with another formation to catch up with their group.
Would that we in the asset recovery industry use the sense of a goose in confronting those who threaten the very existence of our industry and our individual businesses?
We must, with one voice, communicate to the lending community that our concerns should also be their concerns if we are to work together for the common goal of reducing the potential for liability, litigation and insurance claims. We must, with one voice, communicate that the inherent danger to us and to them is greatly increased by these dangerous business practices perpetrated by the auctions.