In 2025, repossession and recovery best practices and strategies are shifting as borrower-sensitive regulatory standards necessitate the replacement of manual auto claims processing with automated processes.
The balance of how to recover outstanding debts while staying compliant with evergreen regulations as well as current with AI-powered tech is no small feat – and it’s one that CROs and CLOs across the country are navigating. There are several key elements of managing repossession and recovery risks in 2025. Let’s break them down.
Who (or What) is in the Regulatory Hot Seat?
The regulatory landscape is riddled with ambiguity and lawsuits right now. Here are a handful of lending and recovery processes that are taking the heat of the regulatory scrutiny.
- State-specific recovery requirements: Regulations governing repossession vary from state to state, and this includes where recovery activity is taking place - not where your lending institution is located. Vague knowledge of the state-by-state legal landscape isn’t cutting it anymore.
- Recovery process documentation: Actions taken during the repossession processes must align with applicable laws, and have corresponding documentation to prove that laws and best practices were adhered to.
- Proof of fair-market prices: In some jurisdictions, lenders are required to provide proof that repossessed vehicles were sold for fair-market prices. Failing to do so can result in legal consequences.
- Damage identification and insurance claims: Potential legal action, disputes, and increased deficiency balances loom over vaguely documented damage to repossessed vehicles. It is best practice to identify and document damage to these vehicles and promptly file insurance claims to minimize deficiency balances.
- Ancillary product refunds: When repossessing a vehicle with attached ancillary products (e.g., extended warranties or GAP insurance), lenders processing manual refunds are faced with unclear guidelines for when these refunds are due and for how to calculate them. The consequences? Class action lawsuits, scrutiny by regulators, and brand reputation damage.
- Lien verification: Bad actors are washing titles to commit title fraud, made easier by the widespread use of electronic titles. Not only can this fraud lead to financial losses, but it can also stack up significant legal issues when it comes to repossessing vehicles with unverified lienholders.
- Comprehensive and correct information for repo agents: Repo agents must be equipped with comprehensive and correct information (i.e. borrower's location, vehicle condition, and any relevant documentation) about the borrower and collateral to eliminate questions if vehicles are being repossessed with full regulatory compliance.
Manual versus Automatic Process: What’s worth outsourcing to automation?
Risk management is an ongoing process, and regular updates are essential to mitigate emerging risks. Review of collection and repossession policies and procedures should be conducted annually, at minimum, to ensure compliance with evolving regulations and best practices. Part of this review should include reevaluation of what processes stay manual and what can be outsourced to automation.
Ultimately, what is worth outsourcing will come down to two things: Your efficiency ratio and budget. The important question to ask is, What efficiency ratio can our budget afford?
Drive Better Auto Claims Results: Three Technologies to Improve Recovery Efforts
Technology isn’t just bettering our day-to-day lives. It is also improving recovery efforts, reducing errors along the way. Here are the top four technologies lenders are using to automate and improve recovery processes.
- Geo-location LPR: License plate recognition (LPR) leverages a database of geo-located license plates and is proven to help repo agents locate vehicles faster, getting more jobs completed with higher accuracy. Combining LPR technology with insurance tracking delivers real time notifications on targeted vehicles with inadequate or lapsed insurance. Combining automated systems with LPR technology can alert lenders when insurance lapses, enabling timely intervention with lender-placed coverage until adequate insurance status is restored. This automation of tracking vehicles, and their insurance statuses ensures that collateral is adequately protected throughout the loan term and helps you stay in compliance with insurance requirements.
- Product cancellation and refund automation: The regulatory scrutiny ramp up around product refunds on cancelled ancillary products requires the utmost transparency in the refund process. With technology enhanced refund calculations lenders can get more accurate refunds faster to apply to deficiency balances. On average, each refund amount is $380.1
- Aggregate recovery marketplace: The key to timely repo job completion is assigning jobs early. This ensures that delinquent loans are addressed promptly, reducing the likelihood of further financial losses. As the performance of repo agents varies significantly, lenders now prefer to aggregate jobs through a marketplace that increases efficiency of repossession and skip tracing. This resource uses robust documentation of the appraisal methods and buyer negotiations, and batches your jobs with other financial institutions’ jobs so they are worked in a more timely fashion than if they were submitted individually. Plus, collaborating with our marketplace providers gives digital tools to optimize the sale of repossessed vehicles.
Ultimately, emerging risk management best practices don’t only help achieve your FI’s unique goals. They also minimize compliance vulnerability and maintain transparency and fairness for lender and borrower throughout the process. Does your institution have industry-tailored technology solutions to reduce errors and speed up recovery timelines?
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