The Great Redeemer
By William Meany, Professional Repossessor, April 1999

There is some truth in the phrase 99% of the people are good 99% of the time.  There may be some demonstration in this phrase when it comes to installment credit, and it is the very reason that we all have to pay a premium for credit in our society.  If everyone paid every payment on time we would all be out of business.  We all make mistakes.  Everybody in life deserves a second chance to make good on their commitments. We all see the sad faces of those that have failed to make their payments, some have simply forgotten, some simply cannot pay.  The difference between these people is what counts to a creditor. 

Some debtors have been in the orient for ten weeks on important business, and failed to arrange for their credit commitments in their absence.  Others are criminals who never had any intention of paying their loan in the first place, while the balance of people are suffering from divorce,  loss of employment, or one of life’s other challenges.   Whatever the reason, we have likely heard most of the stories. 

A concerning portion of our business, are the assignments which involve debtors that want to regain possession of their collateral and redeem themselves with the creditor.  Since we are often the only contact that has physically been involved with both the customer and the collateral, our insight can be very valuable to the creditor when they make their determination on how to proceed with the customer.  We need to consider the value of the contact that we make, and how to communicate this to the client. 

It is often the case that ASSETs, such as cars and trucks are redeemed to customers who are unable to afford same, and to the detriment of the creditor.  While repeat repossession assignments are a profitable venture for the recovery agent, we must recognize that this activity is costing our clients substantial amounts of money.  The risk observed associated with permitting redemptions is the very real threat that the debtor will continue to fail to honor their obligations under the contract.  We all have experienced numerous accounts over the years where units have been redeemed where the debtor has not been properly qualified to continue with the agreement.  The result has been profitable for our firms.  We receive additional assignments.  

It is common for an ASSET to be redeemed to a customer, and for the customer, to make an additional payment or two, and to fall into arrears again.  The result is that the debtor, being in a poor financial state, fails to maintain the collateral, resulting in additional damage, not to mention depreciation, which negatively affects the value when it is ultimately liquidated.  Others disappear altogether, and are never located again for repossession.  This problem has been widespread throughout the industry for many years.  We all know that a debtor that redeems by simply paying costs of recovery and bringing the account current, who has not otherwise been qualified, may pose a risk to the creditor.

Case Studies 

Case One:  The repossessor received an assignment to recover a 1997 Jeep Cherokee Limited in October, 1997.  They immediately recovered the vehicle and appraised it at $ 26,500.  The debtor convinced the creditor to cover the costs of seizure and permit them to regain possession of the unit, by simply bringing the account current. 

The debtor attended at the office of the repossessor, kicked up a huge fuss about a gold watch missing from the glovebox, even though they had never entered the vehicle.  The debtor cursed and caused extensive disruption for the repossessor.  The claim for the watch was obviously false.  The debtor threatened to sue the creditor and the repossessor for the watch, in addition to reporting the matter to the local consumer protection authorities.  Instead of spending time justifying the position, the repossessor gave the debtor a small sum of money in exchange for a full and final release of all claims against the creditor and their firm. 

The debtor never made any additional payments on the vehicle and it was assigned to the repossessor for repossession approximately sixty days later.  It has been 15 months that repossessor has had the unit on skip locate, and the vehicle will likely never be seen again. 

Case Two:  In May, 1998 a repossessor recovered a 1995 Chevrolet Cavalier and appraised it at $ 8500.  The creditor permitted the customer to redeem the vehicle by paying the costs and bringing the account current.  In August 1998, the repossessor received a second time repossession assignment for the same car as the debtor had only made one additional payment in June. 

The repossessor recovered the vehicle again in September of 1998.  The vehicle was in much rougher shape than it had been when it was repossessed the first time, it was appraised  at $ 7200.  The creditor permitted the unit to be redeemed a second time despite the pattern created. 

In December of 1998 the repossessor received an assignment to recover the vehicle for the third time.  The debtor had not made any additional payments. After searching for the vehicle for several weeks it was located in January 1999 at a body shop.  The debtor had been in an accident with the vehicle while under the influence of alcohol.  The insurance company refused to honor the claim.  The vehicle had a $ 3300 mechanics lien for storage.  The value of the salvage was approximately $ 800, leaving a negative equity position.  The repossessor abandoned the collateral at the body shop.

Case Three:  In January 1997, a repossessor received an assignment to recover a 1992 Dodge Caravan and appraised the unit at $ 6500.  The creditor permitted the debtor to bring the account current, pay the costs and redeem the unit.  When the debtor attended at the repossessor=s office to redeem the vehicle, he made false claims about how the unit had been damaged during repossession, resulting in the repossessor  having to give substantial discounts in their fees in exchange for a full and final release against the creditor and their firm. 

In March 1997, the repossessor received an additional assignment to recover the unit for a second time as the debtor had not made any additional payments.  The repossessor recovered the unit six months later in August 1997.  The debtor had moved to another city and was living with a relative, without notifying the creditor.  The unit had not been serviced whatsoever, on account of the debtor=s poor financial state.  The tires were badly worn, the engine light was on, there was no oil showing on the dipstick, and the brakes were worn to the metal.   The unit was eventually sold for $ 3100. 

Case Four:  In July 1997 the repossessor received an assignment to recover a 1996 Honda Accord.  The repossessor recovered the vehicle in August 1997, and appraised the unit at $ 17,000.  The debtor convinced the creditor to add the costs of the seizure to the loan balance and brought the account current.  

The repossessor received an additional assignment to recover the vehicle for a second time in December 1997.  Despite substantial efforts on the part of the repossessor they were unable to locate the vehicle at the customer address for almost a year.  In November 1998, the repossessor received a fax from the creditor advising that there was a mechanics lien on the vehicle for $ 13,000 in repairs and storage. 

The debtor had got into an accident with the vehicle which resulted in approximately $ 8,000 in repairs.  The debtor authorized the body shop to make the repairs, the body shop completed the repairs, and the debtor, who had failed to make the monthly insurance payments resulting in the cancellation of the policy, and who was obviously unable to afford the costs of repairs on his own, abandoned the vehicle without notifying the creditor of the accident, which resulted in the accrual of an additional $ 5,000 in storage (11months) owing to the body shop. 

The repossessor eventually recovered the vehicle from the body shop by paying out a negotiated reduced amount of $ 11,000.  The vehicle, which was now one year older, and was poorly repaired (not to insurance company standards), fetched only $ 12,800, with a net recovery to the creditor of just over $ 1,000 after costs.