It’s true, oversight of Repo Agents and Forwarders can be fun for everyone. Auditing is a critical component of oversight; however, oversight is much broader. Oversight includes collaboration between all parties, including the Creditor, Repo Agent/Forwarder, and Auditor. Collaboration gives the Creditor an opportunity to understand how contractual requirements are interpreted, the Repo Agent/Forwarder the opportunity to provide an overview of the industry and how they monitor to ensure compliance, and the Auditor time to discuss findings (and ensure the findings are valid). Even if you do not believe your financial institution is subject to CFPB supervisory authority, it is simply good business sense to develop an oversight program.
Not Legal Advice: The information provided is for general information purposes only and should not replace legal advice from your Attorney. Always consult with your Attorney before implementing any oversight program.
OVERSIGHT VERSUS VENDOR MANAGEMENT FOR REPOSSESSION
Oversight and Vendor Management are not the same.
- Oversight includes auditing, compliance, etc.
- Vendor Management includes, contract negotiation, vendor relationships, repossession recoveries, etc.
There may be a conflict of interest if the Vendor Management team is solely responsible for oversight. It may be challenging for Vendor Management (responsible for recoveries) to identify a concern if the Repo Agent/Network has high recovery results.
INTERNAL PROCEDURES
Creditors need to understand their internal procedures before developing an oversight program. Documents and procedures that need to be reviewed include, but are not limited to:
- Read your contract with the Customer/Member (does your contract identify when collateral can be repossessed).
- Understand state regulations for letters that need to be sent prior to assigning the account for repossession.
- Identify procedures in place to minimize possible wrongful repos, such as shutting of all payment methods after the collateral has been assigned, SCRA and bankruptcy scrubs completed, hold and close procedures (systemic, manual), how accounts are placed, etc.
- Review the Lien perfection process. What is the process if the lien is not perfected?
- Read the Repo Agents/Forwarders’ contract and all addendums. Even if you think you have a standard contract, read all of them anyway. In many cases, there are some differences in the “standard” contracts.
- Determine any Handshake agreements (manager verbally gave permission to do something not outlined in the contract),
REPO AGENT/FORWARDER AUDIT
Here are a few of the areas that you may want to include in a repossession audit:
- State Regulations (Agent licenses, personal property letters, etc.)
- Creditor’s Contractual Requirements with Repo Agents/Forwarder (including recent changes)
- Repo Forwarder-tests completed to ensure compliance with state regulations and contractual requirements.
State Requirements
Repossession laws vary by state. The Auditor needs to become aware of the state regulations, such as:
- Repossession Agent license requirements
- Police notification
- Personal Property (inventory, how long retained, fees, personal property letters required by Agent, etc.
- Privacy laws that require Agents to remove personal information collected or stored in a vehicle after repossession
Creditor Contractual Requirements
Clarity of Creditor contractual requirements is sometimes challenging for Repo Agents/Forwarders, especially when you have a client-specific requirement that may not be an industry standard. An example of this is when the CFPB identified concerns over the personal property fee process. Many creditors developed procedures for personal property fees, and no two seemed to be the same. Repo Agents/Forwarders had challenges implementing the differing requirements. That is not to say that you should not have client-specific requirements…it means that you need to test for compliance.
A few of the general contractual requirements that typically are included in the Creditor Contractual Requirements follow:
- Insurance coverage
- When phone calls may be made to the Customer/Vendor
- Complaints/Claims
- Fees
- State law adherence
- Safeguard of PII information
- Signed Agent/Forwarder contract
Repo Forwarders Tests Completed for Compliance of Agents
Repo Forwarders should have contractual agreements with all Repo Agents and ensure compliance of all federal, state, and local regulations, as well as creditor-specific requirements.
- Ask for evidence of the tests completed for contractual requirements. This includes Agent licenses, proof personal property letter sent in states that require, insurance, etc.).
- Ask for evidence of tests completed for client specific requirements. Because it is in the Agent’s contract, or the Agent signed that they would comply is not evidence of compliance.
It’s Not Over Yet – There’s More
After the audit has been completed, it is recommended that you allow the Repo Agent/Forwarder to respond to all the findings. If the Repo Agent/Forwarder identifies that the finding is valid, then the Repo Agent/Forwarder needs to develop a remediation plan that includes when remediation will be completed. There may an occasion when the Auditor did not interpret the procedures correctly, or the Repo Agent/Forwarder did not understand the question. In those cases, it is recommended that the Creditor, Repo Agent/Forwarder, and Auditor have a telephone call to discuss, and determine appropriate action. There are six areas that lend themselves to an increase in compliance concerns:
- Changes in staffing at the Creditor and/or Repo Agent/Forwarder.
- Repo Agent/Forwarder not understanding the contractual requirements.
- Repo Agent/Forwarder not monitoring compliance which resulted in out of compliance.
- Handshake agreements.
- Creditor does not provide data fields necessary to complete the contractual requirements.
- Creditor-specific requirements.
Summary
In wrapping up, overseeing repossession agents and forwarders is more than just a chore—it’s an opportunity for us all to come together and make things better. Audits are crucial, no doubt, but they’re just a piece of the puzzle. What really counts is how we work as a team—creditors, agents, and auditors—to ensure everything runs smoothly. Whether or not we’re under the CFPB’s watchful eye, having a solid oversight program is just plain smart. But let’s not mix up oversight with vendor management; they’re different animals. Before we dive in, we’ve got to know our internal procedures inside and out and stay on top of those state regulations. And when it’s audit time, we need to cover all the bases—from state requirements to creditor contracts and repo forwarder compliance tests. But it doesn’t stop there. After the audit, let’s keep the dialogue going. Collaborative discussions can help address any compliance concerns and ensure everyone is on the same page. So, let’s approach oversight with diligence, collaboration, and a shared commitment to excellence in the repossession industry.
Want to hear more? Consider our Third Party Vendor Auditing Workshop
Learn more about auditing Third Party Vendors at this workshop, developed and taught by Bev Evancic and Ken Evancic.
For additional questions of the instructors: Contact Ken Evancic or Bev Evancic
Bev Evancic, Senior Vice President, Resource Management Services, Inc. has been auditing repossession vendors for more than 25 years for large financial and automotive institutions. She shares tips and techniques honed from years of experience auditing repossession and collection agency vendors – providing an amazing class experience!
