#228 - Special Episode - TIADA Repoing The Right Way

You are listening to the Independent Dealer Podcast Texas Edition with hosts Luke Godwin and Jeff Watson, a podcast by Dealers for Dealers.

Hello and welcome to this special edition of the Independent Dealer Podcast. This is the Texas edition.

Luke.

Things are a little different, but we're really excited. This is a great opportunity. We have to, to do a podcast for Tiada.

It is. And we have two really awesome guests that are veterans to Tiada and they're here to educate us on the repo environment and how to repo a car properly in Texas. So a little different for us, but something that, that Texas dealers will get such great knowledge out of. And if you're not doing it the right way, by the end of this podcast, you will be doing it the right way.

Yeah, absolutely. Michael and Mike, please introduce yourself to the podcast community. Let's start. Michael T. Tell us a little bit about, just real quickly, your background, where you're from, what are you involved with. For anyone who doesn't know you.

Michael Thomason, president and partner, the Controlling partner of MCMC in Fort Worth, Texas. Been in the business for 40 years. Started off getting parts at wrecking yards and running for lunches and things like that. And I, I think I just outlived everybody else.

That sounds like, that sounds like most people in the car business. We kind of start out doing all those things.

Michael.

That's, that's right. Yeah, but so it's a fat, obviously it's a family run business. We this, I'm a second generation car dealer. We have third generation people now coming onto the, the management team. So we're going to try and move this thing into third and fourth generation for us.

That's great. And MCMC is one of the biggest and best buy here. Pay your operations in the country, Michael. So we're really happy to have you here.

Well, thanks. I appreciate those words.

And also we have Mike Dunnigan who is counsel for Tiada and been working with the IDA for about 40 years. If you will go ahead and introduce yourself.

Mike Dunnigan. I have been counsel to Tiada for 45 years now, but who's counting? I started out right out of law school working actually in the Tiada office as counsel. I couldn't get a job anywhere else and I took to it and grew my practice and then became. Well, I went into private practice with my partner Chris Jamison under the firm name Jamison and Dunnigan. I'm of counsel now to that firm, but still counsel to Tied. I am still writing articles and speaking, putting out seminars, that sort of thing.

So are you the end all, be all when it comes to how Texas dealers should run their business? Correct. When it comes to the legal side.

I hate the word guru, so I would say be all and end all probably fits in that category. I can help, but.

Mike is the E.F. hutton of Tiada Car Dealers.

There's probably, there's probably a lot of dealers out there, young dealers that don't know what that means. Michael T. But I do. I remember those commercials.

So he speaks, we listen.

Yeah.

And I think everybody should because repos can be done the wrong way and it can get you in a lot of trouble.

Right? Yeah. Certainly low hanging fruit for us. Yeah, for sure.

So the last two years have been interesting across the country and no different in Texas. It's been the lowest, you know, time, probably repossession wise, of any time in history that we could recall. What Michael, I'm going to throw this to you to start with. What's been going on in the last two years for your company when it comes to repossessions, how are you handling it? Before the pandemic, during the pandemic and as we try to creep out what's going on there?

Well, our overall goal always has been to collect the money, not the car. So we've just pre pandemic, we just worked with the people as much as we could work with them. I know there's a lot of questions to go into that kind of stuff later on in the podcast, but we just try to work with the people if they're working with us and we're going to work with them, make payment arrangements, doing deferrals, things like that. During the pandemic, there was a lot of money that flowed into the economy that really helped not only our customers out, but it helped the dealers out. A lot of dealers had some of their best years during that pandemic, which is kind of counterintuitive to how things you thought things might go. But we've done well. Repossessions and collections were good. If you were a good, solid dealer, you're probably still in business and doing well.

You know, that makes me think MIKE D. So he said something there, that they've always tried to collect the money, not the car. Now, I would say that that's most buy here, pay here's philosophy. I mean, if you're running your operation good, that's the way you want to run it. How does that conflict with the light of the new CFPB director, Mr. Chopra, coming out and saying, hey, buy here Pay here, we're watching you. If you're going to go out there and just repossess these cars because asset values are up, that's a big no. No. Who, I don't know anyone out there who's just repoing cars because all of a sudden their asset values went up.

But that's been a myth over my career is the thought that the rubber band dealers, they called them, that the car dealers were actually making money by repumping and that just wasn't the business model. It didn't work. But somehow that myth has perpetuated itself and I think obviously it's still around. If someone thinks that a buy here, pay here dealer wants to go out and unlawfully repossess a car just to create inventory, they're confused. Dealers don't do that. First of all, as Michael T. Said, you work with people, you try to collect the money. Usually my experience has been you're going to suffer some type of loss on a repo. It's not going to be a profit making venture or part of the business. So I think there's just this misunderstanding out there. Obviously nobody, no dealer wants to get sued and the easiest way to get sued is to repossess a car when there's no default. But they don't, they're not going to do that. So I think it's just kind of a perpetuation of the myth that's been out there for a long time.

Yeah, unfortunately it's bad for our industry because I can't tell you how many times friends have said to me, well, you're just, you're going to repossess that car, make so much money. And I go, you don't understand anything about what we do.

So you know, anyway, that economics are way off on that. If you people have done lots and lots of analysis on repo and cars and if it's profitable, it is not profitable to repossess cars. I thought the, I'll make a comment about his, the CFPB directors. I thought the, the using the word stolen in his quote there, oh my gosh, was so off putting and really takes all the burden off of the customer and the, in the clients out there. I mean, I understand what they're saying. Yes, all repossessions need to be legal, but that means it's not, you're not stealing. I mean that's a lien mortgage, piece of property. So there's, you can't steal it.

So for everybody out there that may have not seen this quote, but the Quote is this. No American ever wants to wake up to see their car stolen. Auto loan servicers need to ensure that every repossession is lawful. I mean, I'm with you, Michael. When I saw it, I was a stolen. What are we talking about here?

It's part of the myth that Mike, Mike Dunnigan is talking about there. That myth, that perpetuating of that myth of we're just stealing cars, selling and stealing them.

But in light of this, in light of this regulatory, maybe, I don't know what you want to call it, maybe that attitude towards buy here pay here dealers. Mike, will you give us a little bit of insight and give us some. Under what situations can we repossess a car? So maybe dealers don't know or maybe they think there's some sort of gray area. And obviously we hear all these urban myths. Well, I'm not 90 days late. You can't pick up my car. You know, when can a buy here pay here dealer repo a car?

The requirement at law is that the contract be in default. And it's all based on the contract. The motor vehicle retail installment contract for a buy here pay your dealer alone for a bank or an institution. But the terms generally follow the statutory scheme and it's fairly limited, but there has to be a default. Now, default can be many different things, but without default, there can be no lawful repossession. And so, you know, we get down to definition of default. And a lot of that is just in the contract. If you read the contract, it pretty much spells out what are the terms and conditions of default. Typically, the lack of payment is the most common. But you also get into questions of failure to maintain insurance of the collateral that may be required by the contract. We see cases where vehicles are impounded or a third party is claiming ownership or a superior lien over the buyer pay here dealers lien, that can lead to a default because the collateral is in jeopardy. So there's a number of things that can amount to default, but that default has to be clear. And obviously the good dealer is going to make sure, double check the files before they put out the repo order to make sure that we are in default. The question of is there a time period that you have to wait? In Texas, there is none. Some states do have a mandatory hold period waiting period. Texas does not. I've always maintained that you just have to act reasonably. I don't suggest you go out at 12:01 after midnight of the day, the payment's due and pick up the car. But you wait a reasonable time, you work with the customer whenever possible, as Michael T. Suggested, and only as a last resort, typically is the dealer going to go ahead and pull the trigger on the repossession. But in Texas there is no mandatory time period. And so I use just the guidance of what is reasonable.

That makes sense because reasonable dealers shouldn't do unreasonable things to get themselves in trouble. And in most dealers out there, if you haven't sat down and read your retail installment contract, you need to do that because it will have a default section and in that default section it will tell you what is a default and what is not a default. And I guess there is a little bit of gray area sometimes when you say the car is in jeopardy and maybe somebody else says it's not. But, but in general, I think that's pretty, pretty typical. Michael T. What GPS wise GPSs have made our life a little easier in the buy here, pay here industry. How do y' all use GPSs? What do you use them for? Or, you know, they, I'm sure they're on every car. Can you walk us through the right way to use a gps?

Well, I'll walk you through how we use the gps. I don't know that I can say what's right for everybody and in every state. All states treat GPSs and starter interrupts differently. We only use GPS for locate reasons. We don't, we don't have a starter interrupt or anything that goes along with that. So we're just using it for a locate reason. We got into it when GPS units finally came down in cost enough that it seemed to make sense to put them on every car because that's a big financial commitment to do that. What we found was with the locate devices, we get about 90% of our cars within two days, where it used to be, about 50 days to get that car. And if the GPS, if we, if a car doesn't have an active GPS on it, it's about a 50 day repo with, with the GPS, it's a day or two.

That's a, that's an amazing statistic. I haven't ever looked at that, but it seems like every time I, I see a repossession on our board, it hasn't been picked up and out for repo. I go, what's up with the gps? And they all go, well, it's not working. And I'm like, ah. And it's, it's, it seems like it's always the one that we can't find.

Right?

Yeah.

So Michael T. Let me ask you that. Are you not finding the cars that don't have GPS's or is it like, well, I find all of them. I'm not losing cars, I'm just finding them 48 days sooner.

Exactly. We eventually locate the car. In most cases we don't have many just lost cars. Average maybe one a month for the year. But a lot of times even after that's gone so long, you know, you charge that car off, it's not an active car, a note on your account list any longer, but you may get that car three months later. So it eventually comes back. Most of them come back home.

But guess what? That 48 days or longer, that's a lot of money. Stuff can happen to that car. It might come home, but it's no prodigal son. It's. It's something you don't really want back home when you do end up finding.

And a lot of cases, yeah, in a lot of cases you may find that car, oh, we're in Texas. This car is in North Dakota. It's not worth going after. It's just a done deal. We're not looking for it anymore.

So we've been in pound three months and it's.

Mike, sorry, Mike Dunnigan. Is legally GPSs, can that get dealers in trouble? You know, how does Texas look at that?

The main requirement is that the office consumer credit commissioner, which issues finance licenses to buy your pay here, dealers and other types of institutions has taken the position that you have to have a written authorization as part of your claim closing documents that to install a GPS without number one, informing the buyer, but number two, actually getting their permission is considered by OCCC to be a violation. There's also an issue that fortunately has not reared its head here, but there is a criminal statute that says it's an offense to put a tracking device on someone else's vehicle. And then we get into a question. Does your lien qualify you as an owner? So far no one's made any issue of it. But certainly getting the permission slip, which most of the GPS vendors actually have a form and they're in the dealer software packages, that is specific authorization. And so that would overcome it. Some dealers, a few dealers still feel that if they tell their customer that is almost like tipping them off to have it removed or disabled. And so there are a few dealers who don't. But the fact of the matter is they become so universal now, I think everybody just pretty much assumes it's going to be on there. So my feeling is Go ahead and get the written authorization, get it clear with the state, with the police, with anybody else who might raise an objection.

And do you have an issue with starter interrupt with the GPS or what do you think about that when it comes to Texas O, Triple C?

I don't know that it's necessarily Texas or occc, but I will say that I am less comfortable with the starter interrupts because there are situations that have happened, that have been documented, that have gotten into the national press where a car was disabled and it somehow was involved in an accident and it was blamed on the fact it was disabled, or that someone is picking up medicine for their sick child and their car is disabled. And there are just some things that happened. The other aspect where I've seen some actual fines issued were in the bankruptcy context. The disabling of a vehicle is a. Is tantamount to a repossession. It's constructive repossession, which is a violation of the bankruptcy stay. And there was a dealer in Arkansas who got a substantial fine because he kept. He said he wasn't doing it on purpose, it was just defective equipment or something. But anyway, the vehicle kept being disabled during the course of the bankruptcy, and the bankruptcy judge was not at all sympathetic to the dealer.

Oh, I bet not. I wouldn't want to been in that. In that situation with. I mean, repos are at a, you know, a really low target compared to where we've been over the years. Have you trained your staff any differently, Michael T. Compared, you know, from now until, you know, two and a half years ago, or have you put in new training for. For how to. To collect the right way and not repossess quickly? I mean, where are we now?

We're kind of back to pre pandemic, just unofficial rules. You know, the. The world is kind of, for us in Texas. It's just kind of. We're back to normal, what we would call normal. So, no, our philosophy, our training, that none of that changed during the pandemic. It hasn't changed now. We still have the same message and the same culture in our office.

Really.

It's just all around about we have three rules. But I can't tell you all the quote on the rules. We collect the money. We collect the money. We collect the money. That's the first three rules.

That's a great way to lean.

That's a clean way of saying that.

And to that point, Michael and Mike can speak to this. You joke around about there just being three rules, but I guarantee that your policy and procedure manual is probably more than three rules. And how important is that, Mike, for us to have our default and our collection policies written out? No matter how big of our dealership, if we are doing a buy here, pay here, if we're collecting payments, we need to have our collection policies in writing.

That's become important. I think recently there's been more scrutiny on procedures, certainly with the CFPB getting involved. In fact, early on, I was not aware of anyone had a written procedure and a lot of it was just kind of gut reaction. Is this a good person that's going to take care of it or do I need to go ahead and pull the trigger on the repossession? And those kinds of decisions were made. But I think we're getting into a world where you do need to have a written policy. You need to have a fairly specific policy. And you know, there's going to be some variations in particular circumstances, some deviations maybe from that policy. But it's something I think that you need to have. If a question comes up and you get into court and you're asked about your policy, it's certainly, I think, worthwhile to be able to produce the fact that you do have, that you do have written policy and you do have training for your employees as to what the policy is and how it's put into effect.

I think that leads us kind of into our next question. Talking about, you know, defaults and late payments. When we talk about working with customers, a lot of us, you know, take promise to pay dates and things like this, and we note their account. We don't get them to sign anything because typically it's done by phone or what have you. What is a good policy to have on promise to pays and broken promises to pays and how is it best to collect it? I'll send this to Michael T. To start with. How does MCMC use promise to pays and the defaults on those promises pays as to how you repossess the car?

Well, I mean, again, you're talking to the customers a lot. You're, you're, you're getting those promises to pay. You may get two or three promises. You know, let's, let's, let's get. You're behind a payment, let's collect a payment in a quarter every time for four months. So there's, there's a lot of ways that we'll work with them. I don't know if you're talking about actual work or if you're talking about how do we use that, how do we do that in our process and policies, rules. It's really about how we work with the customer. Is the customer making contact with us? Are they avoiding us? Are they attempting to pay something toward their account? I mean, those are all parts of that go in with those promises to pay. If they're kind of a difficult customer, it's a little harder. Maybe they get put into a different category of how, how intensive do we need to be working with you?

Yeah, and I think that's all about communication, right?

Yeah, Communicating.

Yeah.

Mike, a couple of. Mike. Mike, a couple legal questions. So say we went through that communication process and we made the hard decision. We repoed the car. Say we pick it up on a Friday, and inevitably on Monday or Tuesday, we're going to get a bankruptcy filing notice. Mr. Customer went into Mr. Bankruptcy Attorney and filed a bankruptcy on a Monday after we repossessed the car. Do I have to give that car back to them or is it now mine because I got it on Friday?

Yeah, and that's a fairly common situation we see these days. And in fact, I suspect that that customer has already visited with that bankruptcy attorney and maybe having their car picked up actually triggered them taking the down payment money in to get the case actually going. We see that because we tracked where there were visits, actually sometimes before the car is purchased, but certainly before the car is repossessed. The answer to the question, though, is by and large, you're probably going to have to give the car back. Most of the courts, bankruptcy courts, certainly the ones in Texas, even though they're federal courts, the ones located in Texas, have taken the position that once that bankruptcy is filed because the vehicle was repossessed doesn't change the ownership or take it out of the bankrupt's estate. It's part of the estate until notice has been given, the time period has passed, and then the car has been disposed of, then that would cut off the fact that it would be part of the bankruptcy estate. But the example you give, pick it up Friday, they file Monday, you're not going to have had time to legally dispose of it. So the bankruptcy court is typically going to pull it back. In the cases we handle with our clients, our buy here, pay here dealer clients, and some banks and credit unions, in those situations, we usually do tell them to require proof of insurance, especially if the insurance has lapsed and there is no insurance. And then quite often those people run out and get insurance just for the purpose of getting the vehicle back. Sometimes some of our attorneys may negotiate with the debtor's attorney to try to get some conditions in place as part of returning the vehicle. But by and large it's going to probably have to be given back. And the converse of that is the failure to do so is going to subject that lienholder to contempt of court charges and other kinds of fines from the bankruptcy court?

Yes, I've been privy to many of those. Can we start getting referral fees from the attorney, the bankruptcy attorney, after we repossess them? Because I'm like you, I think they've already been there but hadn't given the money to the attorney yet. Soon as you repossess the car, they go down there and have the money to give to the attorney. So frustrating what happens all the time. So in Texas, it seems that there is a self help repossession that customers, I guess two types. One the customer brings the car back. We all have that happen from time to time. Michael, is this something y' all encourage somebody instead of having to actually physically go out and repossess the car, Is there a way that you've that y' all figured out over the years to encourage customers to bring the cars back so that you don't have the fees and maybe the people, you know, have a chance later on to come back and buy another car from you again?

Yeah, I mean it's very, it's, it doesn't happen real often that they'll bring the car back. It's, it's part, that's part of, goes back to part of that communication. If the cars, a lot of times if they do call and say, hey, I don't want this car anymore. When you go get it, you need a flatbed because it's, you know, it's crunched. I mean as long as the car's running, they want to keep that car. So how do we keep them paying? We've all, we've gone through lots of different things. We've offered to not turn it in as bad credit if they bring it back. If we've offered them money to bring us the keys. We've all, you know, we've all really just boils down to. It's just always been if the car's running, they kind of want to keep driving it until, you know, they're forced not to any longer.

Sure. That's, that's been my experience over the years as well. Mike Dunnigan is there. Can you kind of walk through the difference in a strict foreclosure and a non strict foreclosure as it pertains to Texas and occc.

Sure. For a buy here pay here dealer or any lender in the subprime market, typically there's two ways to handle the disposition post repossession. One is strict foreclosure, one is private sale. Strict foreclosure has sort of become, I think, the preferred method of most buyer pay here dealers for the reason that the property, the collateral reverts back to the ownership of the lienholder. And right now with the need for inventory, then that certainly is preferred. But even before COVID and before the shortage of cars out there, I think more and more buyer pay here dealers were going strict foreclosure. Strict foreclosure, you send a notice to the customer proposing to accept the collateral in full satisfaction, which means you forgive any indebtedness. For many buy here pay here dealers, it's the best of both worlds. Because the fact of the matter is in the subprime world you're not going to be collecting very many deficiencies anyway because a lot of these folks are judgment proof and you're just spending money, wasting money, going after them in court. So you're not really giving up that much by forgiving the indebtedness. After 20 days from the time you send the letter, if you don't get a written objection, then the property reverts back and you can put it out on the lot and you don't have to account for what you do because it's yours at that point. It also cuts off a bankruptcy filing at that point because it's now yours. And so there are benefits, I think for a lot of buy here pay here dealers to doing strip foreclosure. The one thing that you got to keep in mind though is you cannot report a deficiency to the credit bureau because you've forgiven it. There is no deficiency. Private sale, on the other hand, is the more traditional way of disposing of repossessed units. And it's been used by banks and institutions mostly because they want to preserve any deficiency. With the private sale you send the notice and usually it's about a 10 day holding period. And then you can sell it at an auto auction, wholesale auto auction, you can sell it wholesale or you can sell it retail from your lot. But the difference being it's not yours, it doesn't revert back to you. You're sort of acting as a trustee to maximize the return. The proceeds from the resale to apply to the indebtedness to reduce that indebtedness. After you do the resale, then you just do the math. Is there a surplus? If there. If that is, if you sell the car for more than what was owed, you need to write a check to your customer because that's their equity. On the other hand, if there is a shortage, then that is a deficiency that you can attempt to collect, you can report to the credit bureau. But the main difference, strict foreclosure. The vehicle comes back into the ownership of the lienholder, whereas in a private sale, you do have to sell it and apply in a commercially reasonable manner and apply the pre proceeds and account for the proceeds versus the balance.

Yeah, I think that's a very good explanation because a lot of people out there probably don't understand the difference. Sometimes repossessions can be super hard. The cars can be hidden by the consumer. They can be locked behind the gate, they can be in the garage. What can you do in that situation? Mike, if. If you know the car is a certain place, but you would have to do something illegal to get it, what are the options to repossess that car?

I don't know that there are a lot of options. There's one option, one main option is to use the legal process to get a court order to get the vehicle back. In Texas, it's called sequestration. Some states it's replevin, but it's an order by the judge ordering a sheriff or constable to go out and take possession of the property. And they can, you know, in uniform and with the badge and the gun, usually carry a little more weight than say, would a repossession agent. The other thing is, if the person refuses, which we find on occasion, they refuse to honor that writ, then we file a motion with the court to have them held in contempt and. And the judges will actually issue a bench warrant to have them picked up and brought before the court to explain why they refuse to honor the court's order so it can be effective. The downside to sequestration, it takes a little more time, obviously, than just a repossession and cost because typically you're going to need to get an attorney involved. And so there's going to be legal costs, there's going to be filing fees and that sort of thing. But that is typically the main option. The only option. I know. If you can't make a peaceable repossession.

Yeah, that makes me think, Michael T. We kind of glossed over this, but you know, Texas is kind of the Wild west, right? Do you guys do your own repossessions or do you Hire that out to an official repossession company. And what would be your advice to dealers who are maybe still doing their own, you know, self help? I'm going out at night after I shut the dealership and I'm picking up a car.

All we use all third party repossessors. We don't have any in house. We don't do any of that. We have done some of that over the years. That's a highly liable business if you don't have the right people doing it. It's a dangerous, it can be a dangerous business. It's not, it's not a business we want to be in. So we hire all third parties to do that. And they have to be insured. You know, they have to, they have to follow all the rules. We check them once, once every six months, make sure that they're in their compliant on insurance, on the live. They have to have a certain limit, a minimum liability insurance on their policy. They have to maintain. It has to be pretty high. It's a, you know, well above a million dollars of liability.

We want to be protected dealers that are doing it themselves.

Well, most of the ones that are doing it themselves are trying to save themselves some dollars because it can be expensive. So they're probably trying to save themselves money and in the end that will, it has the likelihood of turning out badly for them because they're going to do something wrong. They're going to get somebody injured, they're going to rebuild says a car when they shouldn't. They're going to cut a lock on a gate. They're going to do something because you know it's their property. They feel like it's their property. And there's a, there's right and wrong and legal and we have, we have to constantly fight that in our own selves. Yeah, I want my car back. You're not paying for it, you're driving it. I want my car back. But we have to do it the legal way and that can be quite dangerous.

Yeah. And I found part of the worst part and one of the biggest arguments outside of the liability and the fact that, you know, I'm not going to go out and repossess a car because my life is worth more than that, you know, 2005 Ford Focus that I'm going out to get. So I'm not going to, I don't know, have you.

2005 Ford Focus.

But also my point is the worst part is if you get there, you are the dealer. Guess what? They want to negotiate with you because they know you're the guy to negotiate with. So now you're stuck on their lawn because they boxed you in with another car and you're having to negotiate with them. So that's one of the biggest arguments I have for just send it to a third party. Their job is to get the car and bring it back to you and then we'll talk. Once the car's in my yard, I'll talk to you, Mr. Customer. But until then, that car's got to come back.

And Mike Dunnigan, is there anything in the O, triple C or in Texas law that says, hey, you can't repossess cars on your own? Is there a legal, is there anything legal in there?

No, there's no prohibition. But I think it goes back to just common sense. As Michael T. Said, I have found over the years that the greatest potential source of liability for a buyer, pay here dealer or any car creditor is a wrongful repossession. Especially if there's some injury or something that happens. And a lot of times the actual owner or third party will attack the repossessor. The repossessor is doing nothing wrong, but the situation escalates, somebody gets hurt. And so anyway, I think it just makes sense. And I've written articles and in my Texas repossession book guide for dealers, I point out what I call due diligence in the repossession arena. And it's not just self doing it yourself in house versus hiring someone, but it's hiring the right person. And again, dealers, just like Michael T. Said, will try to save some bucks. And my point is, in the repossession process, it is a mistake to go for the low bidder and you just want to pay whatever it takes to get someone who is properly insured, who is trained and who because in Texas, by the way, Texas Supreme Court has ruled that the lienholder has liability for the wrongful actions of a repossession agent, even if it's an independent contractor. And so you're going to be liable regardless of who it is. Why not spend a little extra money for the insurance? And I mean insurance to you as well as the insurance that that repossessor has. And we have seen some very, very expensive lawsuits where the repossessor did not have insurance. In many cases, the repossessor, once the lawsuit is filed, disappears and so there's no witness and then sole liability on the part of the lienholder. In this case, buy here, pay here dealer for whatever happened out there. So to me, it's worth it in your budgeting and in your business plan to go ahead and use the due diligence on that repossession since it is such a high potential liability area.

Yeah.

And Mike, can you also clear up a myth for us? Is it legal for me or my repossession company to charge the debtor a fee to get their personal items out of the car?

Yeah, good question. And In Texas, the OCCC's position has been that our statute does not allow that. And just at common law, certainly getting the personal property of the debtor, you don't have a lien on it, you have a lien on the car. But since you don't have a lien on that personal property to hold it for return of keys, for payment of processing fee or repossession fee, is improperly holding someone else's property that you don't have a lien on. And that's conversion or theft, criminally or civilly. And so anyway, my advice is don't charge a fee for any of those things when it comes to the personal property. You just give it back upon demand. And we run into some cases where some repossession agents will want to charge a fee. They take the car to their lot and they want to charge a fee. Well, that charging that fee will be charged against the dealer as the lienholder because they're the agent of that dealer. So as part of your due diligence, again, make sure that that repossessor, if they're handling the personal property and the return of the vehicle, makes sure that they're not doing anything improper that would reflect back on the dealer.

What if.

What if we repossessed the car and there were personal possessions in that car.

And.

We never hear anything from the customer and it's been a month and what are we supposed to do with those personal possessions? Is there any statute on that? Do we have to make sure we keep them for a certain amount of time? What does that look like?

There is a statute. The after you give notice to your customer that there were personal effects in the repossessed vehicle, then after 30 days you can dispose of the property if they haven't picked it up. Most dealers, I think probably bag and identify those personal effects, hold them in my. The repossession notices in my book for strict foreclosure and for private sale actually have a little clause at the bottom. Check here if there's personal property, and then it states that you've got 30 days to come and claim it. And so you don't have to send out a separate notice. It's part of your repossession notice to start that 30 day period. Having said that, I will tell you that it seems like a lot of these people, if you dispose of that stuff on the 30th day, they show up on the 31st or the 32nd day wanting their stuff. And I think it just makes sense to hold it for a longer period of time to try to avoid getting into any kind of a hassle over those personal effects.

We had somebody actually about a month ago call us, see if we had their personal belongings and we had repossessed their car over a year ago. No, of course we don't have it. What are you talking about?

Oh, man.

Well, Jeff, what else you got there, buddy?

Michael, Mike and Michael, anything? Closing remarks, words of wisdom you have for the dealers that are listening.

Here's something I would suggest as we phase out of, hopefully phase out of the pandemic era. Many dealers did sort of back off of their repossession collection policies. The OCCC sent out a letter recommending, urging dealers not to repossess. They didn't say you can't or that they didn't even have the authority to prohibit it, but they urged caution, they urged working with people. And I think a lot of dealers did that. Here is what I see as a potential issue. As you transition out of that and get back to, say, your normal procedures, you want to be careful that you haven't lured your customer into thinking that this pandemic, the pandemic procedures have become permanent and then all of a sudden you change on them. I think we need to be cautious. And I have, in my book, what I call a cure letter, which is to say, you know, in the past we've accepted later partial payments or we've worked with you going forward. We are not going to accept later partial payments anymore. You must bring your account current by a certain day, put a reasonable time period. That gives them notice that the rules have sort of changed, changed here, but it's still legal and it's still fair. But to not notify them of the change of circumstances or policies, I think may bring on some of the complaints from the CFPB about unfairness or about sort of, that you've waived some of your procedures and all of a sudden you're changing without notifying is unfair. And so anyway, that would be my advice as we phase out of pandemic mentality. And go into back to normal. Make sure your customers know and understand if you're going to change your policies.

Yeah, that's very, very important to communicate that to your customers, that, hey, you know, we are, we're back to normal. And also communicate that to your collectors. I think a lot of the collectors have fallen into bad habits in giving breaks and pushing payments out and deferment, deferment, deferment. And kind of being a little fast and loose with some of those policies. Michael T. Any closing comments, remarks and words of wisdom you have for the audience?

No, I'm just, I'm glad. We're hopefully all the states are getting back to some normalcy, what we call normalcy. But we really didn't change our policies during COVID so we really haven't changed. We don't have to go through a change back. I don't feel we still give. We try to be overly sensitive to customer needs. If they're, again, it goes back to communicating if they're, if they're on the phone with us, talking to us and attempting to pay. We're not going to pick that car up, and we're not going to pick it up. Mike mentioned the 1201 list, and some dealers call it a 601 list or, you know, there's no list like that. Like, if you miss a payment on Saturday, I'm going to, you know, I get you at 600 one kind of thing. So. But we know we're well out into the 30 to 45 day before a customer even gets on the repossession list. So we, and we're making, you know, lots of attempts with the changes that have been made recently where you can only, you know, you're kind of limited to how much contact you can make with a customer. Those might change some things for us in the future. We'll have to just kind of see how that works out.

But.

That'S, that's such great sage advice from, from one of the best in the industry for sure. And it's, it's about communication. It's about working with your customer. We're going to make more money by collecting those payments than we are repossessing the cars. And if push does come to shove in Texas and you have to repossess a car, just do it the right way. And I'm sure you can reach out to Tiada or Mike Dunnigan himself and to Michael T. Because I know he knows a lot about this and do it the right way and then you.

Don'T have to worry about it.

Right.

Let me mention Tiada has a website, a lot of content articles that I've written and others have written and some general information knowledge base on a lot of these topics that we've talked about. And so if you're a member certainly of Tiada, take advantage of the website to get the information or Tiada for its members does take calls with questions, compliance questions as part of the service to its members and so take advantage of that.

We're sure good advice there.

Absolutely. Gentlemen, thank you both for being here. Thank you to Tiada for putting this together and hopefully one of many up and coming education series that we're putting out in conjunction with Tiada. Again, thank you both for being here.

You're welcome.

Appreciate it. Thank you.

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