Rant: deadbeats
 

Ok, I've got to get this off my chest. As you guys probably know, I run a small used car finance company. We service the sub-prime market at high interest rates. While I understand and expect that this isn't exactly the "intelligentsia" segment of society, sometimes I'm still blown away by just how dumb some people can be.

Today I had the extreme "pleasure" of dealing with a customer who changed her mind and decided she didn't want the car she'd financed back in late October. She's made two payments and then decided she didn't like it. It's a MY 2000 car with 190K kms (just under 120K miles). Now, this woman is lucky she got a car loan at all. Double bankruptcy (2005 & 2008) and dumb as a sack of hammers. She says she wants something more like an 04 with with under 100K kms on it. She said that's what she asked for at the dealership, and didn't realize she was getting an older car with higher mileage until after she signed the paperwork. I explained to her that the vehicle make, model and year are indicated 7 or 8 times throughout the paperwork, and the odometer is very clearly disclosed on a page with her signature. I explained to her that she's in a legal contract to make the payments until finished, and that under voluntary repossession she'll get sued for the difference and have her bank account and wages garnished. Her response: "Who cares? I'll just go bankrupt again."

:mad:

ARRGGH!! Where the F*^K do these people get off? I mean, never mind a sense of personal dignity or anything like that, how do people think they can just walk away from this stuff? She's the same age as me (33) and she's been bankrupt twice already, and considering a third?! Man, I hope she likes riding the bus, because NOBODY will touch her with 3 bankruptcies.

Which then leads me to my next rant, bankruptcy trustees. There's a chain of "law firms" in Ontario that all ply their trade under "310-PLAN" (you can dial 310 anywhere without using an area code). Their advertising, website, blog etc all seem to encourage people to declare bankruptcy or at least file a consumer proposal. The whole thing just smacks of trying to get out of debt without actually working to pay it off. They of course are at the front of the line to collect their fee, leaving the creditors holding the bag. I once received a notice from a trustee a few years ago where a current customer was declaring BR (2nd time) with a lousy $10K in liabilities. WTF?

Now don't get me wrong, I fully understand the implications of the sub-prime market and the risk we run of having customers write off debt. In fact, you could even argue that we promote the cycle as we'll accept customers with a BR on their credit report. But we do differentiate (as best as we can) between people who have a legit BR and those that are deadbeats.

My personal belief is that anyone can make a mistake and declare BR to get a fresh start. We try to help those people, and are frequently successful. But a 2nd BR should only be allowed in special circumstances - otherwise you should be held accountable to your creditors. Absolutely no way should a 3rd be allowed. Send them to debtor's prison at that point.

Ok, to lighten things a bit, I present you with one of the funnier moments of my job. This is a real phone conversation I had a few years ago, calling a customer about a bounced car payment:
Me: "Hi, may I speak to so and so please?"
Kid, probably about 14 or 15: "No, she's not home"
Me: "ok, can I leave a message please?"
Kid: "uhh, I don't write too good and s##t" (I swear, that's an exact quote - I'll never forget it)
Me: "ok, do you have an answering machine?"
Kid: "yeah"
Me: "ok, then I'll call back and leave a message"
Kid: "ok, bye"

I call back again immediately.

Kid: "hello?"

where's the "slaps forehead" smiley?

I work the other end of your field, i am the repo guy.

I just had one of these jackals almost run me over (he backed right into me) and then he squashed me between two cars as he fled a few days before Christmas. Why he decided to flee in the vehicle after striking me and my partner is beyond me. Never mind that this occurred OUTSIDE HIS HOUSE, or that he is traceable through his wife/gf/babies mamma, the debtor.

Nope, his response upon being told he was being repossessed was to commit 2 counts of felony aggravated assault. Now the idjit is in hiding somewhere, a fugitive, all because he didn't want his car repo'd...which, btw, his wife voluntarily surrendered the very next day in a panic to try and minimize the ramifications of the stupidity of her husband/bf/babies daddy.

Some of these people are rock stupid.

You and I need to sit down over a beer some day and swap stories :D

I'm surprised there's need for confrontation anymore, though. We put starter disablers in all our cars now, so we can shut it down and locate it, then come and pick it up when it's convenient (or safe) to do so.

Unfortunately most big US car financing companies (Cap 1, Wachovia, Wells Fargo, etc) don't do this. It would surely simplify things immensely.

If you're ever in Philly, PM me i'll take you for that beer. ;)

Wow, I'm really surprised to hear that. We use Passtime, because that's what Carfinco (Canadian division of Wells Fargo) uses, so we knew we could trust the system. $400 per car including installation, and it's cut our repos down probably by 75%.

wow, i do not have the personality to do either of those jobs.

you guys must be steady under stress.

I wish they would use them... makes getting them 10,000x easier. A couple of the small buy here-pay here dealerships i deal with use them. It's getting to the point now in new vehicles where it's pretty much already a built in feature, you can just use On-star to zap the ignition and pick it up at the supplied GPS coords.

I relish the day. :)

Not really. I just remind myself all the time that it's a very small percentage of our customers that are really that dumb, and our customers only represent a small percentage of the population as a whole. It's not any more stressful than any any other small business owner would find his/her job.

SURE they will. If some sucker will accomodate her after 2 strikes, why not three :)?

Double BR is where all finance companies (around here at least) draw the line. We're pretty much the only company that will take doubles (though it's possible with 1 or 2 other companies, under very certain circumstances). Literally nobody will take triple - she'll have to buy a car outright. In fact, I've never seen a triple BR on a credit report. But if I did, no way.

I was just pickin' with ya :). You deal with people that I simply can't relate to whatsoever and I can sense your frustration...I would be the same way.

But you do raise a good point. If there's no "bottoming out" whereby nobody will rent you an apartment or finance you a car, what's to stop people from just continuously writing off debt?

I think one way it works (and here's my really cynical side coming out) is that the vast majority of people in these situations are just too plain dumb to understand how the system works well enough to take advantage of it.

If you had no pride or dignity and didn't really care about standard of living, you could theoretically get welfare and only occasionally pay rent or bills and continuously just find new sources of credit, then declare bankruptcy every couple years. I suppose eventually you'd make the rounds of ALL the credit sources and they'd learn your name, but it would take a long time.

Then again, if you were that clever, you'd probably just find more creative ways of making money.

I guess one of the hardest things to understand is the complete lack of dignity and pride to just say "screw it, I'll declare bankruptcy a third time". And remember, she's only 33, so has only really had a working live of 15-20 years. What the hell is she going to be like when she's 60?

I don't feel sorry for you at all.

You are charging high interest rates because these people are not credit worthy. If you want everyone to pay....then be more selective as to who you loan to.

It's companies like yours (in my opinion) that have contributed to the financial mess that the entire world is in. If it were up to me, credit would be restricted - way more than it presently is. But it's not up to me so I would be happy with the fools that "do" pay your high interest rates and fees.

That's the standard perception, and, as usual, it's completely wrong.

We charge 26% interest (our standard rate) because 1/4 of our customers force us to do so. Our net is around 5%. But 3/4 of our customer ARE credit worthy, in that they're not deadbeats. For whatever reason, they've had credit issues and are trying to rebuild. Sure, they bounce the odd payment, but they always make them up and are rarely behind on their payments more than a few weeks. But because we lose money on the 1/4 that are indeed deadbeats, we have to charge high interest rates. But I'll repeat, our net is about 5%.

Very rarely do our customers complete their term. A few get repossessed, but most get refinanced somewhere else, at a better rate. I'm always happy to write reference letters, and do so frequently for good customers. There's always someone else to take their place, and usually we have more applications than we have capital to loan out, so there's never a shortage of new business.

Rather than contributing to the global financial crisis, it's companies like mine that help honest people get back on their feet. If you want to point fingers at who caused the current mess, look at predatory lenders. We're not in any way predatory - we're not trying to screw people. Every single bit of our business is legit - there's no trickery or attempts to fool people. As I said, we don't need to play games to get more business.

Christien

Do you ever watch Till Debt Do Us Part.
I've never in my life seen people juggling 4 or more credit cards. People today want everything NOW. We don't need to save. If it gets to be too much we will claim bankruptcy.

Hey Bud,
I hate the bankruptcy laws and I hate the gubmint that upholds them.

I've been bitten seven figures buddy!

Maybe you should just invest your money in some land with me? ;)

Brian, yeah, I've seen a few episodes of that show. Most of those people are better off than our customers, because they understand that their debt is spiraling out of control, and they have the ability (both intelligence and career-wise) to do something about it.

Rob, what kinds of investments are you looking for, and what's the return? pm me if you'd prefer not discuss it privately.