Collateral Recovery

Importance of Repossession Under The Uniform Commercial Code


The ability to repossess collateral to reduce losses from a defaulted loan, as allowed under Uniform Commercial Code 9-503, and the right to dispose of property, UC 98-504, are two of the most important laws affecting the financial health of the United States! In the last report by the Board of Governors of the Federal Reserve System, 41% ($288,925,000,000) of all installment loans outstanding were for auto loans. The ability to repossess an automobile if the loan defaults, provides the security for these type loans. Without the ability to repossess, this important source of funds would dry up. Few products have ever become as important to both our way of life and our economy as has the automobile. Without funds available to purchase on installment, auto sales would fall drastically, and with devastating results to both the auto industry and the nation's economy. It is easy to see the immediate impact to the auto manufacturer, the corner gas station, the auto parts store, the radiator shop, the tire shop, auto mechanics and dealers, fabric manufacturers, electronic manufacturers, glass manufacturers, and hundreds more. Add to that the grocer, department store, and every other merchant where those now unemployed did shop -- well, the circle keeps growing.

The present laws for self-help repossession are in effect in every state except Louisiana and Wisconsin. The laws are only as good as the lender's ability to execute them.

The Loan Collection Specialists, much like the laws, are often overlooked for the valuable role they play in our economy. In 1985 and 1986, many auto manufacturers began using special financing as an incentive to sell their automobiles. Other lending institutions found their market changing to financing used and foreign autos. Since the loan amounts were often smaller, to maintain volume it became necessary to approve a higher percent of loans that often included marginal loans. Experience now shows beyond a doubt, the institutions with proficient Installment Loan Collection Specialists made this transition with success. Those without the specialists suffered greatly. Having good loan collectors absolutely gives the flexibility necessary for lending/leasing institutions to compete in todays changing markets.

The modern collector is a professional specialist with the ability to work out payment schedules that will both benefit the lending/leasing institution and maintain the debtors' good credit and standing in their community.

The Professional Loan Collector today must constantly keep up with new rules, repossession laws, bankruptcy laws, and do an effective job while sometimes walking the fine line in compliance with the Fair Debt Collections Act. They must maintain a network of reliable sources of information with public utilities, personnel departments, other collectors, and repossessors. They must keep a diligent eye on expenses, yet hire the most professional outside help available when needed.