6 Questions Every Credit Union Must Ask When Assessing Asset Recovery & Disposition
Asset recovery and disposition is something few credit union executives enjoy talking about. Still, compliant recovery and disposition processes that perform well against industry benchmarks are a key component of solid auto loan portfolio performance.
To assess how well your recovery and disposition processes are performing, there are six key questions every credit union executive should ask.
1. When signing on with a recovery agent, how well does your credit union vet the agent?
Credit union staff should require agents to provide a business license, evidence of at least $1 million in liability coverage, and any bonds state or local jurisdictions require the agent to have. Once those documents are received, your credit union should archive those documents, so they are easily retrieved upon request by auditors or regulators.
Requiring agents to provide an annual update of those documents is where many credit unions fall short. An annual review of agent documentation is a must to ensure agents remain compliant year after year.
2. How well are agents performing on updates and positive resolutions?
Agents should proactively provide account status updates every 48 hours, and should be achieving positive account resolutions in the 65% – 70% range.
3. Once an asset is recovered, how long is it taking to sell the asset?
Repossessed assets are like melting ice cubes in the credit union’s hands—they gradually lose value day-after-day. A good rule of thumb is to aim for selling the asset within 30 days of recovery.
4. What was the percent of wholesale book value earned when the asset was sold? In the wholesale car business, this is known as the retention rate.
There are several valuation guides credit unions use, including KBB, NADA, Manheim Market Report (MMR), Black Book, and others. While we recommend MMR, what’s most important is that your credit tracks the retention rate over time.
For example, credit unions using MMR as a valuation guide should consistently be earning in the mid-90% range of gross MMR.
5. What fees is your credit union paying for recovery and disposition?
Two important tips here:
- Insist on a detailed sales and expense summary from every provider, both repo agent and auction provider. Every dollar charged to the vehicle should be clearly and plainly described.
- Some credit unions pay disposition providers on a sliding scale, the higher the value of the vehicle, the more the credit union pays. Negotiate for flat fee pricing, so you always know what your fees will be.
6. How intense is the bidding competition for your credit union’s assets?
To ensure active bidding on your assets during sale day at the auction, your credit union should be receiving prime lane position with an early start time from its auction provider. Your provider should not be lumping your assets in the miscellaneous fleet/lease lane late in the day. The more dealers bidding on your vehicle assets, the higher your sale price will be. As a general rule of thumb, there should be at least as many bidders online as there are in the lane.
Asking these six key questions will go a long way toward making your credit union’s recovery and disposition processes compliant and performing well to industry metrics.
Element has partnered with CU Direct for over a decade, delivering recovery, skip trace, titling and asset disposition solutions to credit unions nationwide.