Collection Agency Launches Alternative to Charge-Offs and Repossessions

Stephens & Michaels Associates, a third party debt collection agency, has launched two new divisions, Avert Repo and Managing Collateral , in order to offer auto financers an alternative to “charging off” bad debt. “Charge-offs” are delinquent accounts in the final stage of the lender?s internal collections process, ones typically turned over to third party agencies for collection or repossession. Charging off allows lenders to account for a loss for tax purposes, but does little to help them re-coup the actual debt. Avert Repo is a program to help lenders in the final stages of the collections process before accounts are charged off and sent for repossession.

An estimated 1.1 million light vehicle repossessions occurred in the U.S. in 2005 making it a 550 million dollar industry.*

“We reduce the costs lenders face repossessing an asset,” says Marc Pellegrini, EVP of Avert Repo. “On top of repossession costs lenders lose an average of 7.5% of the principal owed during repossession and remarketing. Since three out of five defaults on auto loans in the U.S. are due to temporary financial hardship, we are able to support the customers at the critical point where an overdue account would normally go to repossession. Our goal is to rehabilitate the debt and return a healthy account back to our client. Avoiding repossession is our specialty, so an average of 50% of our accounts get reinstated.”

Pellegrini notes that Avert’s success is possible due to its collaboration with Managing Collateral, a division of the company that repossesses, transports, stores and remarkets secured assets.

“Certainly, repossession is the only route we can take in some situations. We know customers are motivated to bring their accounts current when repossession is imminent. They know we are working with them by monitoring their account closely, and that their debt is no longer the lender?s responsibility. While customers realize repossession is not our main goal, they also know repossession is an option we can and will exercise if a customer cannot be held accountable.”

In addition, Avert educates consumers on their rights and responsibilities through avoidrepossession.com , a consumer guide to assist the public with debt-management.

“We hope consumers inform lenders about Avert if they trust we can impact their situation,” says Pellegrini.