Perhaps the most delicate aspect of remarketers’ services is dealing with repo agents.
“In many cases, credit unions call repo agents sight unseen, which means they have to trust the person they’re calling to handle often distant matters,” says Meadows. “Still, they have a big say in how they want repossessions handled and what their expectations are.”
Being scrupulous about how they handle repossessions can help credit unions avoid litigation, he says. “While credit unions have the legal right to get their assets back, courts have a tendency to view them as Goliaths and the borrowers as Davids.”
That makes thorough recordkeeping essential. One way of doing that is with Auto IMS’ “repo agent report card” which tracks how many days it takes an agent to do a repossession, how many repos he or she has done, what each agent’s guidelines are, and each agent’s bonding, licensing, and insurance data.
Jackson describes MVTRAC as “a risk management system for credit unions because we vet all of our agents. We visit each repo facility in person and check out its security, hiring practices, and reputation.”
Remarketers also know a lot of little things. “We look at vehicles ourselves and recommend whether to repair them,” says Plascencia. “For example, a cracked windshield isn’t the deterrent to a good sales price that you might think, so we don’t advise replacing it.”
She says that while there are some regional variations in which models are repossessed, auctions are determined more by type than make. “For example, at the end of summer you’ll see motorcycles and motor homes come on market as people start shedding vehicles they won’t use for several months.”
Remarketers sometimes advise credit unions to move cars to places where they’re more likely to sell.
“It might make sense to move a convertible from the snowy Northeast in winter to a part of the country that’s sunnier,” says Meadows. “But generally, we advise selling them close to where they were recovered. There are well over 500 auto auctions nationwide, all technologically advanced, and it’s easy for us to help credit unions to track them.”
Doing it right
Plascencia says two common mistakes credit unions make are not benchmarking performance and selling repos at small and captive venues, which affects their bottom-line returns.
“A credit union may see that a Buick retails for $15,000 and try to sell it for that price at auction,” she explains. “But it’s a wholesale market out there, and it will more likely bring in $6,000. Also, some repo companies are owned by auctioneers. Obviously they’ll skew their operations to derive the maximum benefit for themselves.”
Plascencia advises credit unions to:
- Ask about the company’s out-of-state capabilities;
- Know that intent-to-repossess letters are crucial and must follow certain legal forms;
- Ask whether a vehicle is worth repossessing;
- Realize that vehicle evaluation data should conform to industry standards; and
- Know their repo agent: Is this person licensed, bonded, and insured?
After repossessions peaked in 2010, says Plascencia, several factors are helping the subsequent decline:
- Financial institutions have tightened their lending guidelines;
- Lower production volume by Japanese auto makers and the corresponding decrease in defaults;
- Dealers are keeping their trade-ins; and
- Credit unions are giving financially strapped members more slack.
“Most credit unions are considered boutique financers relative to the top five auto loan originators,” says Jackson, “so they must be extremely customer-friendly. Repossessions must be done as tactfully as possible. There’s always the possibility for a new lending situation to develop if the credit union has handled previous difficulties with their members well.”