Managing Collection Repossessions
Nobody likes repossessions, not the borrower, the bank or credit union. However, in the collections and recovery business it is a necessary part of the process and having the correct software helps manage the whole progression fairly and compliantly.
The financial institutions repossession policy aims to recover monies or possessions (collateral) in the event of default. The recovery process involves repossession, valuation of security and realization of security through appropriate means. Typically, the security is sold with the excess proceeds after the debt is paid off being returned to the borrower, or the creditor continues to collect on a deficiency balance. The repossession process, managed through a flexible debt management system, should aim at the recovery of money owed the creditor, not just to deprive the borrower of the property.
All the members of the staff representing the bank or credit union involving repossession ought to follow the same guidelines. Typically, they include:
- Contacting the customer at the place of his/her choice. Usually that is at a residence first, then at the place of business/occupation.
- Identifying person(s) authorized to represent the financial institution for follow up.
- Respecting the borrower’s privacy.
- Ensuring all written and verbal communication is straightforward, easy to comprehend and civil.
- Documenting the efforts made for the recovery of funds or possessions and the copies of communication sent to customers.
- Adhering to regulatory guidelines regarding fair practices and the outsourcing of financial services.
The Repossession Process
All recovery of dues and repossessions should follow the same established procedure and only set in motion after all attempts by the financial institution to discuss with the borrower alternative methods and resources available failed.
In the United States, state laws direct repossession procedures. All 50 states and the District of Columbia enacted Article 9 of the Uniform Commercial Code, which generally allows security interest holders to repossess goods if a debtor is in default, meaning that the debtor failed to fulfill his or her obligations under the contract. The most frequent types of default resulting in repossession are failing to make required payments, and maintaining sufficient insurance coverage.
Many states enacted supplemental laws that apply specifically to the repossession of purchased and leased automobiles. These intend to afford additional consumer protections. Typical requirements include mandating auto lenders to provide consumers with opportunities to either reinstate or redeem purchase or lease contracts after repossessing vehicles.
A reinstatement entails a consumer paying all past due amounts plus the creditor’s repossession expenses, and then reacquiring the automobile as if the repossession had not occurred. Redemption entails the consumer paying off the entire contract balance and then gaining ownership of the vehicle free and clear of any contract obligations.
Many consumers mistakenly believe that they are legally entitled to a grace period that prevents creditors from repossessing goods until the payments are a certain number of days overdue.
Help with All
The IBS Collections and Asset Recovery Manager is an integrated, in-house software platform with one database for managing delinquency loan collections through charge-off recoveries and special assets, as well as repossessions.
The collections and asset recovery manager handles consumer loans, mortgages, commercial loans, cards, savings, and credit lines. Its pre-configured workflow, and collection and recovery tracking, is customizable for tracking all stages and debt issues including past due and delinquencies, charged-off debts, bankruptcies, foreclosures, repossessions and other real estate owned (OREO) assets.
The system provides extremely robust and flexible capabilities to meet bank and credit union needs while integrated into the leading core processing platforms. It can also integrate with mortgage and card portfolio processing systems, letter printing fulfillment vendors, recovery agencies, insurance companies, auto dialer platforms, and many other services where integration with CARM is required.
CARM can also improve compliance enforcement with custom-configured workflows, automated and manual follow-up ticklers, improved documentation, outbound debtor messaging, rule-based and single-click letters, and single-click standard or custom messages.