Flat Rate VS Contingent Repossessions

That's the current debate in the repossession service industry. Lenders want the repossession service industry to work on a contingent basis, but the lenders don't like to pay contingent fees.

First, lets get our terminology straight. A flat rate repossession is a repossession where the lender pays the repossessor whether or not the repossessor recovers the car. Usually the repossessor paid a higher rate if the collateral is repossessed, but the repossessor still receives payment even if they do not repossess the car.

A contingent repossession is a repossession where the lender pays the repossessor only if the repossessor recovers the collateral. The contingent fee charged is usually between 10% to 40% of the collateral's value.

Some lenders foolishly balk at contingent repossession rates, however, isn't it better for the lender to pay $5,000 to get back a 2007 Mercedes, than to charge off the account and never liquidate the collateral?

Obviously the best course of action for any lender is to hire one or two flat rate repossessors to repossess the collateral. If the flat rate repossessors are unable to repossess the collateral, it is definitely worth the effort for the lender to assign the repossession to a contingent repossession service. If they do not recover the collateral there is no fee. If they do repossess the collateral, it is like new found money to the lender.

It is funny how a lender will think nothing of hiring a collection agency and give them 33% to 50% of every dollar they collect, but the same lenders refuse to open their eyes to what a contingent repossession service could do for their monthly charge off balance.

What's your opinion?

Reader Comments:

Franklin says: I work for a contingent repossession service, and I think that many lenders understand and utilize our contingent repossession service. They don't like our rates, but they love the fact that we repossess collateral that no one else is able to.

BankerBob says: I sometimes wonder if the flat rate repossessors even bother to run the addresses we provide them. We recently had a case where a flat rate repossessor claimed the car never showed. The contingent repossessor repossessed the car on the day it was assigned to them with two flat tires at the given address. The debtor gave up the keys and said the car had been parked there for the last 3 months, just waiting for the repossessor to show up. The lesson here is, You get what you pay for.

JayCarter says: Though I work for a contingent repossession service, I think that lenders need flat rate repossessors to repossess the easy cars, and contingent repossessors to repossess the cars that the flat rate repossession services can't find.