Lenders Optimistic, Repo Agents Concerned About Future

UNCASVILLE, Conn. — Lenders and repossession agents created an interesting paradox at an annual conference held here this week. 

The conference, sponsored by RSIG, is a gathering of nearly 300 agents and lenders from across the nation. 

Lenders were optimistic about the future of their business, citing higher origination volumes and lower delinquency and default rates. Ally Financial, in one case, noted that repossession rates were at all-time lows. Ally, Chase Auto Finance, and Westlake Financial all reported higher loan-origination volumes. 

Chase and Ally also noted that they have expanded their nonprime operations.

While lenders reported positive indicators about the short- and long-term future of the business, repo agents remain concerned about the state of their industry. Agents face lower fees, increased insurance costs, and fewer repossession orders. Agents aslo lamented that lenders were providing them with less information to use in locating and recovering defaulted collateral. 

Anecdotally, a number of repossession agents expressed that the number of repossessions they are performing has dropped more than 20% during the past 18-to-24 months. 

The paradox between the sentiments of lenders and agents is not altogether unusual. The ups and downs of the repossession industry generally trail the cycle of the auto finance industry. When loan volumes increase, delinquency and default rates tend to increase in the 12 months following the increase. The same is true when loan volumes decline; there is a corresponding decrease in repossessions 12 months down the line. 

So as lenders increase originations, especially nonprime loans, delinquency and default rates are expected to increase. Whether the higher number of repossessions  is enough to offset the lower fees paid by banks to agents will be a key determinant of whether the repo industry rebounds or not. 

In the meantime, lenders and agents are searching for other means of keeping expenses down to offset the declining revenue.  

Agents are hoping that an increased usage of technology tools will help lower costs to offset reduced revenue. RSIG, for example, is rolling out its National Agency Management System (NAMS), a tool that will act as an interface between lenders and repo agents to help improve workflow and communication.