Initial Agent Vetting

Anytime you have to repossess collateral, the lender assumes meaningful risk.  Courts have found repeatedly that lenders are responsible for the acts of their sub-contractors. This is why the initial agent vetting process is so important. As one of the top nationwide heavy equipment repossession management companies, we’ve vetted thousands of recovery agents and understand the process better than anyone. With industry requirements constantly changing for agents, here are the steps we recommend be undertaken before doing business with a repossession agency:

• Background checks on all principles
• Obtain copies of all required licenses/bonds
• Detailed insurance review (per clearly defined coverage requirements)
• Reference/client checks
• Employee training process
• Site visit – every storage location
  • Physical security
  • Data security
  • Policies and procedures

 

Proper Contract and Documentation

It is essential that the relationship be codified via a comprehensive contract that contains the following requirements:

• Background check on ALL new employees (repeated every 3 years)
• Drug screening on all new employees
• No sub-contracting of repossession work
• Detailed specifications of insurance requirements
• Secure and proper record retention
• FULL indemnification
• Confidentiality
• Handling of personal property – particularly important given today’s regulatory environment
• Service standards
• Complaint handling procedures
• Fee schedule

 

Insurance Requirements

When it comes to heavy equipment repossession, proper insurance coverage is critical. Check out the below table of suggested coverages and amounts. From our experience in the industry, the coverages and amounts are more than sufficient in the case that a repossession goes wrong.  Also, as a heavy equipment lender, you should always be listed as an additional insured.

 

The minimum insurance coverage required here under is as follows:

Coverage Name	Description	Min. Required Amount
Workers Compensation   Employer’s Liability		Statutory Each Accident – $100,000 Disease – $100,000 Policy Limit – $500,000
Automobile	3rd party liability for property damage & bodily injury from the use of company owned, hired or non-owned vehicles.	$1,000,000
Drive Away	3rd party liability for property damage & bodily injury from driving a vehicle recovered pursuant to a repossession order.	$1,000,000
Garage Keepers	1st party direct and primary liability for vehicles damaged in your agency’s care & control.  Policy must stipulate direct and primary coverage.	$350,000
On Hook	1st party liability for damage to vehicles while being towed by your agency.	$100,000
Employee Dishonesty	1st party liability coverage for property or money in your care & custody.	$500,000
General Liability	3rd party liability for property damage & bodily injury from your operations. Must stipulate that coverage applies to wrongful repossession.	$1,000,000 per occurrence $2,000,000 aggregate
Other	Any other insurances, coverage amounts and/or bonds which may be required as a condition of maintaining the Contractor’s licenses and/or the licenses of any of Contractor’s employees which are engaged in providing services to ALSR.

 

Ongoing Agent Monitoring

As with many vendor relationships, proper measures have to be put in place for continued monitoring. Although a repossession occurs and your assignment is completed, you should still request the following from your agents:

• Annual site visit/inspection
• Attestation of compliance with contract provisions
• Sampling of records audit
• File audit
  • Documentation
  • Licenses
  • Bonds
  • Insurance review

 

Summary

We can all agree that recovering heavy equipment collateral is no small task but with the right partner by your side, it’s manageable. If you decide to use a direct agent strategy, the above information will help you make the right decisions in the process. Another option for equipment portfolio managers is utilizing a national repossession management company who handles the entire repossession process for you.  For more information on our nationwide heavy equipment repossession services, contact Doug Melson at doug.melson@alsresolvion.com.

 

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