DALLAS — With an economic rebound still tenuous, recovery efforts by finance companies, credit unions and buy-here, pay-here dealers remain a critical part of doing business nowadays.

As the industry ventures deeper in 2012, SubPrime Auto Finance News reached out to several recovery executives to gather their thoughts on how recoveries are evolving.

To set the stage, skip-tracing expert Alex Price gave a direct assessment of the current climate.

"I've observed more change within the recovery industry in the past 24 months than in my whole career," stressed Price, who has more than 25 years of experience and now is national sales and training manager for MasterFiles. 

"There has been a paradigm shift in the industry's mode of operation," Price continued. "Formerly, the industry could be characterized as a large group of independent operators who may or may not belong to one of several industry associations in the U.S. These associations were a primary source of generating new business to its members.

"Now the industry has a greater appreciation for the value of education, training, certification and they place more relevance on unity," he went on to say. "I believe that the motto for 2012 will be together we stand, divided we fall." 

Repo Remarketing's Jodie Dawson, vice president of recovery services, concurred with Price about how the industry has changed drastically over the years.

"The old 750 credit score is now the 650," Dawson stated. "Lending is beginning to dive deeper again in an effort to put more loans on the books, which should show an increase in repossession recoveries in the next 12 to 18 months."

According to the 2012 Used Car Market Report from Manheim, repossessions peaked in 2009 when nearly 2 million vehicles were repossessed during the height of the recession. Manheim reported the figure dipped to about 1.5 million units in 2010 and more than 1 million a year ago.

However, with credit thawing for consumers in the subprime space, recovery professionals are bracing for a possible upturn.

"Our clients are all talking about being poised for growth as lending standards loosen, anticipating increased origination activity," said Joe Miller, director of customer service of AutoIMS.

"The repossession volumes appear to have hit their bottom and in many cases are coming back up already, albeit slowly," Miller continued. "The downturn has caused a massive shake-up in the number of independent repo agencies and the manner in which they go to market. Many agencies have joined national associations, consortiums and forwarders to stay in the game, and there is a spectrum of business models available to meet lenders' varying needs for recovery services."

Technological Influence on Recoveries

With the advent of the Internet, recovery professionals are using technology more to get back collateral and money after a loan contract goes south.

Beyond people searches that can be done on the Web, license-plate recognition providers continue to ramp up their efforts to push their solutions because of what they believe are their effectiveness and more.

"My company is on its 22nd year now, and there's never been a time when so much change has transpired in such a short amount of time," surmised Scott Jackson, chief executive officer of LPR provider MVTRAC. Facsimile, the Internet, they were big game-changers but nothing like what's happening now.

"When we launched our ALPR platform, we immediately realized it would change the recovery industry so one of our marketing slogans is ‘revolutionizing the industry,' and we truly are doing just that; we're changing the landscape of the industry," Jackson continued.

"The landscape of the industry is changing in large part due to the technology," he emphasized. "If you're a local recovery agent and you don't have an ALPR system, there's a good chance your clients are not sending you the volume they would if you had a system. Some lenders are extremely focused on their technology savvy agents."

Another LPR provider, Digital Recognition Network, is approaching the industry in a similar manner. New CEO Chris Metaxas is especially asking lenders to look at recovery in a different light because of what technology can do.

"DRN is a solution to deliver greater and more productive asset value that hits their balance sheets in a positive way," Metaxas explained. "Our network — the value network we've created and this is really important — allows lenders to take advantage of a network effect of using technology to be able to accelerate their time to the recovery of their asset. It's really big.

"We deliver that benefit which drives a more effective bottom line, which drives lower risk, which drives more profitable organizations," he stressed. "My message is squarely focused on driving profitability for the auto finance customer."

Metaxas acknowledged that lenders haven't necessarily considered their recovery divisions as ones that can assist with profits.

"Auto finance customers tend to look at this function as an expense-line driven function," Metaxas pointed out. "They don't look at it as a return on asset-driven function. My goal is to change that mental state. I'm looking for auto finance executives to have the conversation about using technology and this network we have a disruptive force to change the dynamics of this legacy approach they've used for years in their business."

With technology in the recovery space evolving so quickly, Jackson touched on what he thinks might unfold this year.

Jackson acknowledged, "2011 ended with a high emphasis on compliance so our eye is set closest on compliance for 2012. There's too much at stake for our clients to risk any hiccups at all, much less any major setbacks. 

"We want to ensure recoveries, but not at any liability expenses to our company or our clients," Jackson insisted. "With compliance in mind, we are increasing efficiencies for our staff and for the agents. We're creating new things that will allow the recovery agency owners to spend less and do more and to utilize the technology to the full capacity.

"I'd liken it to a forklift used to pick up hundreds or thousands of pounds more than one person can lift on their own," Jackson explained. "We're creating the forklift of efficiencies and methodology and rolling it out to the industry both in auto finance analytics and recovery industry analytics, methodology and technology."

Beyond LPR, Price reiterated how much technology is used in the skip-tracing step of the recovery process.

"Technology is vital to the operation in terms of both cost and man hours," Price noted. "It's an exciting time with products like MasterFiles where a skip-tracer can gather data in minutes that would formerly take weeks to produce."

Eric Hurst, vice president of credit and collections at Dealer Services Corp., touched on technology, as well and how it can boost the future immediately and long term.

"Social media and automatic tracking and activity notice programs will make it nearly impossible to skip undetected for any significant amount of time," Hurst declared. "If some can bury them self so deep that these formats don't yield a result one is likely not missing anything.

"The landscape is robust. As the general economy continues to improve, legacy loss will bear fruit provided some effort is expended," Hurst added.

Plans for 2012

Several of the executives who shared their perspective with SubPrime Auto Finance News also discussed what they plan to watch out for this year and what they're doing to serve their clients better.

"To prepare, we continue to streamline our recovery efforts by providing efficiencies to our clients and recovery agents while forging process improvement which include managing agent relationships and the needs of the credit unions through timeline benchmarking and communication," Dawson highlighted about Repo Remarketing's strategy.

"We assist the agent and the credit union while working to resolve the balance of pending assignment with low cost strategies and efficiencies," she continued. "We rely on close account monitoring, and technology advancements such as license-plate recognition and skip-tracing methods. We can no longer ‘sling' accounts from one agency to another, abuse our agents, and expect results. We work each account based on its merit and review the intimate details of every assignment to determine the appropriate course of action. Our credit unions are benefiting from the aggregation of inventory and industry standard best practices of the services we provide."

Finally, Price shared a broad assessment about what could be in store for recovery professionals this year.

"I think the economy and the direction it takes this year will be critical," Price emphasized. "With that said, the first several months of 2012 will set the stage for the coming years, with the leaders of this industry taking a stand on uniting the industry and building industry standards in education, training and certification. It will be these men and women who lead the charge, building long-lasting alliances with clients, vendors and technology. They will take the recovery world to the next level and beyond."