National Corner

For the repo man, business zooms

Baltimoresun.com
By Greg Garland | Sun reporter
May 31, 2008

Gas cost, economy mean more people can't meet payments

Eddie Edwards (top) and a colleague from Capital City Auto Auction, in St. Albans, W.Va., secure a repossessed car to a tow truck at Greenwood Recovery in Baltimore. The car will go to auction because its owner defaulted on the loan. (Sun photo by Glenn Fawcett / May 30, 2008)

Burt Greenwood Jr.'s business is booming - not in spite of a dismal economy but because of it. His squadron of tow truck drivers can barely keep up with the orders to repossess cars and trucks of people who have fallen behind in their payments.

"Our intake of new work is increasing like crazy because of the state of affairs economically," said Greenwood, chief executive officer of Greenwood Recovery, who estimates his volume at 40 percent higher than a year ago.

That mirrors what appears to be happening statewide. Motor Vehicle Administration officials say that through April, they issued 4,791 "certificates of repossession" from the agency's Glen Burnie office, which handles the bulk of all such title work. That puts them on pace to top last year's numbers.

The 13,915 vehicles repossessed in 2007 were a 38 percent jump from 2006. However, the number of repossessions in 2005 was slightly greater than last year's total.

Repos by year

The Motor Vehicle Administration office in Glen Burnie issues more than 10,000 certificates a year for repossession of vehicles.
2007: 13,915
2006: 10,061
2005: 14,688
2004: 12,918

Source: MVA

Recently, Greenwood has noticed a different type of vehicle owner showing up to claim personal belongings. "It's reaching deeper into the middle-class sector," he said, referring to the downturn.

He described a well-dressed woman of middle age who came in one morning last week to pick up personal items from a late-model Ford Explorer that had been repossessed. At his busy shop in West Baltimore, one of Maryland's largest and oldest repossession companies, workers bag, tag and stash personal items from vehicles in a locked vault.

"She looked sad. My heart went out to her," Greenwood said.

She told him she was in a mortgage brokerage business that went under, he said, recounting parts of their conversation she had given him permission to share. He said she told him that she could no longer afford a combination of high fuel prices, payments on the Explorer and a mortgage on a home in a nice area of Baltimore.

"She knows she is not alone, that a lot of people are in the same situation," said Greenwood, whose company also had an increase in repossession orders for boats, recreational vehicles, motorcycles, construction equipment and other merchandise purchased on credit.

On a recent visit, a reporter saw four vehicles hauled into Greenwood's shop during the space of an hour.

One was a late-model pickup truck, polished and gleaming with shiny rims. It had been picked up in Pasadena, a driver said. The owner's cell phone charger still dangled from the cigarette lighter inside the cab.

Nationally, analysts say, delinquencies and defaults on loans are up sharply, as financially strapped consumers struggle to keep up with rising fuel and food prices. The American Bankers Association, which tracks consumer loans, says car loans make up about half of banks' total consumer loans.

Delinquencies were up in all categories of fixed-end consumer loans - car, home equity, personal, recreational vehicle and marine loans - during the fourth quarter of 2007, the most recent period for which ABA has figures.

"It's the first time in 15 years we've seen that," said Carol Kaplan, an ABA spokeswoman. She said a loan is considered delinquent if it is more than 30 days past due.

Lenders don't like to have to repossess vehicles because they lose money on them, according to Kaplan and others in the auto finance business.

"No lender wants to take a repossession," said Rick Apicella of Benchmark International, which does consulting work for the automotive finance industry.

He said lenders lose more than $8,000 on average on each vehicle they repossess. Such vehicles are usually taken to auction. But prices for used cars are down and that adds to the losses for lenders, he said.

Tom Webb, chief economist for Mannheim, the nation's largest vehicle auctioneer, said 1.5 million vehicles were repossessed nationally last year - up 10 percent from the year before. About 80 percent were sold at auction, he said, and the others went to used car lots or were sold over the Internet or through other methods.

Apicella said the growing volume of delinquent loans prompted many lenders to change their collection practices to be more lenient with borrowers as a way keep them in their vehicles. "They say, 'Maybe we can allow you to skip a payment and extend the term of the loan,'" he said. But lenders eventually have little choice.

A car loan normally has to be delinquent at least 60 days before a lender will initiate repossession, although Maryland law allows a lien holder to take back a vehicle if a borrower is so much as a day late on a payment.

A Web site for ADP Recovery Inc., a repo company in Rosedale, features a banner saying, "Support Your Local Repo Man - Miss Two Payments." It also advises lenders that "we work around the clock, so if you have a case that needs special attention, just say the word and we will make it happen."

Workers at ADP's lot referred questions to a manager, who was not available.

In the lobby of the corrugated metal building that serves as ADP's office sat a child's car seat with a tag identifying the owner. Outside, dozens of vehicles were parked in a large lot surrounded by chain link fence topped with razor wire. One was a panel van with lettering on the side advertising a man's gutter and window replacement business. The phone number had been disconnected.

State law allows a repo agent to go on private property to retrieve a vehicle but requires that repossessions be carried out by "peaceful means," meaning force or threats of force can't be used. The repo agent can't break into a garage, cut the lock from a fence or move a vehicle that is blocking the one he wants to get.

And the lender generally can collect towing and storage fees only if it has given the owner 10 days' advance, written notice that a vehicle is due to be repossessed.

Once the vehicle is picked up, the owner has 15 days to catch up on his or her payments and pay for storage and towing, or it can be sold at a wholesale auction. The owner has the right to bid on it there. If it sells for less than what is owed, the borrower is liable for the difference.

While companies such as Greenwood and ADP are properly licensed as collection agents, some used car dealers do repossessions with little state oversight.

Shannon Davidson complained to the attorney general's consumer protection division after two repo agents dressed in black came to her Baltimore home. They flashed fake badges and commandeered a 1998 Mitsubishi Eclipse that she and her fiance owned. The car was repossessed after the couple got into a dispute with the seller over needed repairs and stopped making monthly payments, she said.

"They were in a Ford Explorer and represented themselves as police officers," Davidson said of the repo agents. "They told us we had to relinquish every set of keys. When my fiance opened the trunk to get our personal belongings out of the truck, one of them snatched the keys from his hand and they started taking off."

State law prohibits such practices by licensed collection agents, and reputable repo companies don't engage in them. Greenwood, for example, said he thoroughly trains his drivers in permissible techniques.

Nonetheless, it's a risky business. Wary owners have been known to sleep in their cars or leave a pit bull inside.

In an attempt to avoid confrontation, repossessions often take place at night, when the owners are likely to be asleep.

"Seventy-five percent of vehicle repossessions are done during the night hours," said David Gryglewicz, president and chief operating officer of PAR North America, a major provider of services to the auto finance industry "However, an element of danger always exists. It doesn't matter if they are repossessing day or night."

Judy Buckley, who manages repossessions for DMAR Inc. in Upper Marlboro, said that she has been "pushed down and threatened" by owners angry about their vehicles being repossessed. She comes into contact with them when they come to the office to claim personal belongings.

The drivers on the street experience even more. Some nights, the owners wake up.

"You have naked people who want to run after you," Buckley said. "I've had my guys offered money to put the cars down. [That's] not worth their paychecks. They're not thieves. They're people like everybody else, trying to make a living, that's all."

Jul 7, 2008

Vehicle repossessions shift into high gear

Chicago Tribune
Published Friday, June 13, 2008

LOS ANGELES - "JJ the Repo Man," as 40-year-old Jon Anderson calls himself, has 100 repossession orders piled on the dashboard of his tow truck.

Many documents bear a simple note: "Can’t pay. Pick up the car." In short, the car owner is surrendering to the troubled economy’s Grim Reaper: the repo man.

"It’s easier for these people to say, ‘Here, take it!’ " said the 6-foot-2-inch, 250-pound Anderson, driving to a lot filled with scores of cars he’s repossessed in recent weeks. "They can’t afford a car payment, insurance and paying high gas prices. I’d say 75 percent of them are losing their houses, everything. It’s just a big mess right now."

Just as home foreclosures have become a national crisis, prompting the U.S. House to pass a $300 billion bailout bill, auto loans have become the other shoe to drop.

With car repossessions up 10 percent to 15 percent so far this year, on top of similar increases last year, auction yards are filled across the country as consumers are forced to choose between their homes and their cars - and often are unable to pay for either, said economists with auction firms and other experts.

"The unusually high amount of repossessions that we got at the beginning of the year seems to be a reflection of the spillover of mortgage resets, subprime and others, that caused some folks to default on their car loans," said Tom Kontos, executive vice president of Adesa, a national car auction operator in Carmel, Ind.

Delinquencies in car-dealer loans reached a historic high in the final quarter last year, 3.13 percent, said the American Bankers Association, which has tracked such data since 1990. Such dealer-arranged loans make up 90 percent of banks’ automobile loans; the group does not track loans extended by auto manufacturers, a spokeswoman said.

"Look at what’s going on. Food prices are up. Job creation has slowed. People are losing their jobs. And gas is up. It’s all these factors combined," said Carol Kaplan, the bankers association’s spokeswoman.

Last year’s 1.51 million repossessions marked one of the biggest increases in a decade, 10 percent, and the growth is projected to continue this year, to 1.6 million, said economist Tom Webb of wholesale car auctioneer Manheim Consulting.

"They weren’t making a lot of bad loans. It’s just that the market has turned," Webb said. "You can almost guarantee that repossessions will be down in 2009 because the tightening of lending standards has been very severe."

GMAC Financial Services, the world’s largest auto financing provider, has beefed up its collection services and increased its phone calls to at-risk consumers, said spokesman Mike Stoller. As a result, its delinquency rate fell in this year’s first quarter to 2.42 percent from 2.52 percent a year ago, he said.

"The credit environment being what it is has created a lot of stress in the marketplace, and we haven’t turned a blind eye to that," said Stoller, whose company is affiliated with GM dealers.

Jul 7, 2008

Bust is boom for some

Bad times mean big business for pawn shops, resale stores, others

Sunday,  June 15, 2008 3:53 AM
By Tracy Turner THE COLUMBUS DISPATCH

RENEE SAUER | Dispatch
Left: Manager John Kinney says Lev's is busier than ever. "We're loaning a lot more money because people are saying that food costs more, and they can't get the work hours to keep up," he said.

Courtney Hergesheimer | Dispatch
An Automobile Recovery Services employee repossesses an Acura in Obetz. One woman told an employee that she no longer could afford to fill up her car's tank. That kind of reasoning is becoming more common, said company manager Tom Callaway.

For Joe "Snatch Man," there is no economic slowdown. He spends his days repossessing the cars and trucks that folks can no longer afford.

"People lose their job, then goes their car or their house," he said, asking not to be identified because of his work. "It's happening more and more, and I don't see things getting any better."

Unless, that is, you're the repo man, or involved with any number of other lines of work that thrive when times go bad.

Bankruptcy lawyers, debt collectors, credit counselors, pawn brokers and resale-shop owners are some other examples of jobs that can put you on the sunny side of a dark economy.

"Certain companies are seeing more activity as times are tough and people downsize," said Ken Mayland, an economist and president of ClearView Economics near Cleveland.

Even so, they really are "just people who are doing their jobs," he said.

Tom Callaway, who manages Automobile Recovery Services in Obetz, where "Snatch Man" works, said business is up 40 percent over this time last year. He has anywhere from 200 to 250 repossessed cars, trucks, motorcycles, boats and recreation vehicles on his lot each month.

"One of my field agents repossessed a car from a woman who said she couldn't afford to fill it up anymore," Callaway said. "Here lately, excuses like that are more common. People are saying, 'I had to pick between my house and car -- and the car lost.'

"People are desperate, and lenders are becoming more aggressive to get their collateral back."

A total of 1.5 million cars, boats, motorcycles and recreation vehicles were repossessed last year, a 10 percent increase over the previous year, according to Manheim Consulting, an Atlanta-based vehicle auctioneer.

Similar trends also mean brisk business for some occupations.

For example, bankruptcy filings increased 18.3 percent through the end of May over the same period last year, according to the U.S. Bankruptcy Court for the Southern District of Ohio.

At Calig and Handelman, business is up 20 percent from the same period last year, mostly because of foreclosures, said Sam Calig, a bankruptcy lawyer.

"People are dealing with mortgage problems, foreclosures and job losses," Calig said. "Mortgage companies are still unwilling to work out deals, gas is continuing go to up and wages aren't keeping pace.

"With the rising costs of food and everything, I just don't see people being able to keep up. We see a lot of people who come in and can't even afford to file the bankruptcy. Most bankruptcy attorneys are handling increased case loads."

Nearly 75 percent of resale-shop owners said sales rose in April, according to a recent survey by the National Association of Resale & Thrift Shops.

The trade group, based near Detroit, said the number of resale shops has increased by about 5 percent per year for the past three years, with 25,000 such stores nationwide.

The survey also found that 80 percent of resale-shop owners said they had an increase in new customers in April compared with April 2007, said Adele R. Meyer, executive director.

"Business has grown twofold, attracting a new demographic of suppliers and customers," she said. "People who may not have gone into a resale store are now seeing them as a way to stay within their budget while seeing high-quality merchandise.

"Others chose to sell their items to turn it into cash."

That cash on the spot is one reason resale chains such as Once Upon A Child, Music Go Round, Play It Again Sports and Plato's Closet are seeing increasing business, said Scott Giesinger, an executive with Winmark Corp., the chains' Minneapolis-based parent company.

"Lots of people who are strapped with higher energy costs are looking for options to save and make money," Giesinger said, noting that the stores have increased customer counts and widened demographic appeal.

The tough economy and the disappearance of payday-lending outlets, which the industry attributes to tough new state legislation, also is benefiting central Ohio's pawn shops.

Lev's Pawn Shop has noticed an uptick in business, much of which is from people looking to pawn items for loans, said John Kinney, who manages the 3446 E. Main St. location.

And it's not just jewelry, televisions, DVDs or CDs that are pawned. Tires, exercise equipment, riding lawn mowers, air conditioners and motorcycles often are used as collateral for the loans.

"We're much busier now than ever," Kinney said. "The biggest thing we've seen is that people are struggling, especially as gas prices continue to go higher. We're loaning a lot more money because people are saying that food costs more, and they can't get the work hours to keep up."

Some used-car lots are seeing an increase in customers because auto loans for new cars are harder to come by, said Cary Corvi, who owns Auto Rite Group on Morse Road. The small used-car lot offers consumers "buy here, pay here" financing options for cars. The interest rates are at higher, subprime levels.

"If you're working and have a phone bill or electric bill in your name, you'll get a car," he said. "We're like the last option. The people who come here can't go to a new-car store and get a conventional loan.

"With gas prices rising the way they are, everyone is hurting."

This pain also is causing a shift in buying patterns for retail companies that normally don't worry that much about swings in the economy.

One survey showed that consumers now say that price above all dictates where they will shop and what they will buy. This means they are leaving specialty stores for department stores, are more accepting of store brands and generally are trading down, according to the AlixPartners Consumer Sentiment Index.

The same thing is happening with food.

People are spending less on take-out or restaurant foods and choosing to cook at home, providing a boost for grocery stores, said Tim Hammonds, president and chief executive of the Food Marketing Institute, a trade group based in Arlington, Va.

"More people are staying closer to home to avoid unnecessary driving, and they're eating out less, which is driving grocery sales," said Tom Jackson, president of the Ohio Grocers Association. "People may choose a lesser-cost product, but it's still being sold."