Past Career Chronicles: Jon the Repo Man

The things we did before doing the things we do now.

At some point, you get far enough into a career that you can remove the earlier stuff from your resume and LinkedIn profile. My profile starts around the turn of the century, but I didn’t just start working that day. There’s lots of stuff I was doing before then, but it’s just not relevant for my current career. Many of us worked in restaurants, retail stores, delivery routes, and other entry-level jobs before starting a career. I’m no different - I had careers in the military and hospitality prior to my current career in technology. Sprinkled within those early years are ad-hoc jobs that I explored while looking for something that would light enough fire under me to call it a career. It was during those years that I ended up repossessing furniture for a chain rent to own franchise in western Canada.


The journey to the repo man was long and winding. I had worked in restaurants for years leading up to this. So long, in fact, that I was a Sous Chef at an upscale dining chain, as well as the assistant kitchen manager. That was my first career and although I liked it, kitchens are a young person’s game. The heat, the strange hours, and the physical labour of throwing big bags and bins of stuff around started to lose its appeal after about 5 years. I started looking for jobs that were less sweaty and had better hours so I could stop working weekends and evenings.

When you’re early in a career and have almost no experience in anything other than restaurants, it can be hard to find a decent job outside the industry. The only option open to most people is to start over, at the bottom, in some other industry. I was determined to do that even though I did not know what industry. I just knew that restaurants did not have enough upward mobility to carry me too much farther. I started applying for anything that looked even remotely interesting and somehow, I ended up doing telephone collections.

Collections

To this day I am not sure what attracted me to that industry. I assume it was the promise of a job with banker’s hours in a workplace bereft of stinking deep fryers and grills. But whatever the reason, that was a short-lived job.

Most jobs are far more detailed than they appear on the outside. As the old saying goes “don’t get to close to the ballet” and the collection industry is no different. The only exposure most of us have had to a collector is a voice on the phone, usually pretty rude and aggressive, demanding to speak to someone we’ve never heard of about “a legal matter.” That may seem like the beginning of the process, but it’s not. By the time a human collector is phoning people that debt is already old and the chances of recovering it are minimal.

Collections operate on what is called “the dunning cycle”. It starts with the collections agency purchasing debt. For example, if a person has defaulted on their bank credit card with a balance of, say…$15,000…the bank will try to collect that money. The bank’s own internal collections team will “dun” the debtor and do its utmost to collect that money. The bank isn’t in the business of collecting debt, so it will only pursue this for a while, and then write the $15,000 as a bad debt on their balance sheet. You may think that is the end of it, but that’s because you’re not close enough to the ballet yet.

Banks are really good at creating opportunities to make money. That $15,000 it just wrote off is one of those opportunities. The bank will sell that debt to a collections agency for pennies on the dollar. I don’t know what the industry rates actually are, but let’s say 25 cents on the dollar. That means that a collections agency pays the bank $3,750 which transfers ownership of that $15,000 debt to the collections agency. The bank has now written off the $15,000 debt and recorded $3,750 against it. It is out $11,250 and quietly leaves the room. The bank is done, but the collections agency is just getting started.

The collection agency now legally owns that debt of $15,000 that it purchased for $3,750 which leaves a lot of room for profit. As long as the collections agency manages to get that $3,750 out of the debtor, it breaks even. Anything the collections agency manages to recover above that $3,750 is free money. There’s $11,250 worth of wiggle room here and the dunning cycle kicks off in the hopes of recovering as much of it as possible.

The collections industry tries to be efficient. Automation is cheap, humans are not. When that debt is purchased, it first goes through automation. Generally, this takes the form of a series of subsequently more threatening letters being sent to the debtor’s last know address, as well as a series of robocalls to the debtor’s phone number of record. If these automated processes work and the debtor pays up, that is a huge win for the collections agency. It has recovered its debt, made a nice profit, and hasn’t spent a single human minute on it. That’s as close to free money as you can get.

However, many debtors don’t respond to automated letters and calls. After a debt has been through the automated phase of the dunning cycle without a result, it will get assigned to a human collector. All collectors are not created equal and generally, seniority is broken down by the level of debt owed. Debts of less than a few thousand dollars are usually assigned to junior collectors, whereas the big-ticket balances usually go to the more senior people. One of those collectors starts calling.

There’s an additional step that may be needed. If the human collector determines that the contact information for the debtor is not valid, then the debt can go into “skip tracing”. You can probably figure out that this is the process of “tracing” the person who as “skipped” town. Sometimes collectors do their own skip tracing, sometimes there are dedicated tracers in the agency.

Collections quickly lost its appeal to me, primarily because collectors are completely powerless voices on the phone. By the time a debt has been assigned to a collector, the damage has been done to the debtors’ credit rating so there’s not much leverage there. And, recall that the debt is really old by the time a human collector starts calling, so there is not much incentive for many debtors to pay up, especially to a (usually) rude collector. Many debtors don’t hide at all - they will pick up the phone every time you call and say “nope, not gonna pay you today, either. Have a nice day.” To make matters worse for collectors, regulations prohibit collectors from doing anything meaningful.

Collectors aren’t allowed to do anything but call and mail; they cannot hop in a car and go talk to debtors in person. Collectors are only allowed to call during certain times, are restricted in how often they can call, and the language collectors are permitted to use is heavily regulated. In short, collectors are just squawky voices on the line that can’t do anything real except be an annoying squawky voice on the line. Getting told to get lost a hundred times a day loses its appeal pretty quickly.

I decided that it would be better if I was able to actually go to people’s houses and workplaces to collect debts.

“Account Management”

I left collections and took a job as an account manager at a rent to own store. The RTO industry is huge and these days even extends into real estate. During my tenure, we were just renting out furniture and appliances. Ostensibly the RTO process is very straightforward. You come into the store and select a couch. If you pay $75 every month for 24 months then the couch is yours. If you decide you don’t want the couch, no problem. Just call us up, we will come to collect it, and you stop paying for it. Easy, right?

Not really. RTO places are unique in that they are not credit lenders and therefore do not have any of the restrictions that apply to lenders. Taking my couch example above, the customer would pay $1,800 for that couch over a two-year period. At our store, the rule of thumb was to get 3 times the value of the item so that couch would have retailed for about $600 at another furniture store. But, of course, that furniture store wants customers to pay for it, with cash or credit, before taking it home. We would give it to you for two months deposit ($150) and even deliver it. It is against the law in Canada to charge 300% interest, so a credit lender could not possibly hope to get that much interest for a couch. But RTO doesn’t lend money, so it can charge as much as it can possibly get for stuff.

Let’s get a little closer to the ballet again. Here are some of the nuances of the RTO industry:

Delivery

When I said we would deliver the couch to you, what I really meant is that we will deliver the couch to you. At the address you wrote on your rental application. We did not let customers pick up their own stuff; even small things like lamps had to be delivered by us. This policy allowed us to be sure that the customer does actually live where they said, and it allows us to be sure of where we last saw the item in case of problems later.

References

Because we were not extending credit, we did not run credit checks. That may seem foolish, but honestly - very few RTO customers have good credit. If they did, they would not be entertaining the idea of paying 3 times over for a couch. What we were more concerned about is our future ability to recover the item. Therefore, in lieu of a credit check, we asked for references. That was unpopular because nobody wants a rent to own sales guy phoning their buddy or employer to verify details about them. But, most of our customers were not in a strong bargaining position so that is how we went about our business.

At this point, we should have everything we need to close this deal. We know the customer, we’ve confirmed the information on their application so we have reasonable grounds to think this person is legit. Further, we have collected 2 months of rent on the item and lastly, we’re going to drive to their house and deliver the item for them which again confirms their address and living situation. Lastly, this customer knows that if they ever do not want the couch anymore, just call us and we’ll pick it up and they stop paying for it. That’s a pretty good situation. What could go wrong?

Repo

I knew going into this position that some customers are not going to pay and are going to try to keep the items. I didn’t mind the prospect of that part of the job because it filled that void that collections could not. Because the items are owned by the RTO store until the last payment is made, we can, and did, go to our delinquent customers’ houses to recover our stuff. It was more satisfying than being a powerless squawk on the phone. But, I was not prepared for how much of this new position would consist of repo. What I thought would be a fairly rare activity turned out to be 80% of the job.

There were four of us working at the RTO store - the manager and three account managers. Us account managers were paid a modest wage and were expected to make most of our money from bonuses. Monthly bonuses were triggered by many things, but the one we chased the most was the “100% paid-up” bonus. I can’t remember how much that bonus was, but it was enough that we were always trying to get it. You can probably guess from the name that bonus is triggered when an account manager has zero delinquent accounts on the last day of the month. We almost never got that one, but as the month went on our collections activities would rachet up to a feverish pace near the end in an attempt to make it. If one of us was close and the rest of us were not, we’d abandon our own collection activities to help the guy that was close. Some months we’d have all three vans on the road just hitting one account manager’s customers to help him get his bonus. Then, on the first of the month, it would start all over again.

There comes a time when a customer is no longer delinquent and is just not paying anymore. In those cases, we would have to go and pick up the items. Technically, it was not repossession because legally we had not ever relinquished possession - recall that the item remains the property of the RTO store until the last payment is made. But that is a legal nuance which doesn’t mean a hill of beans when you’re trying to take something back from someone who doesn’t want you to have it.

In theory, because the RTO store still owned the items, we could show up with a sheriff and take it back. In practice, much like banks don’t want to be in the collections business, we did not want to be in the repo business so we rarely did that. And, because of our exorbitant fees, by the time the customer stopped paying, we had usually been paid around the value of the item anyhow. But, we would still be penalized in our bonuses if we had delinquent accounts so account managers were stuck in this gray area where we had to find ways to cajole and convince the delinquent customers to let us pick up our stuff or bring their account up to date.

That Damn Dryer

This is the period of time when things got strange. Because we did not go the sheriff route, we had no authority to enter our customers’ houses without their permission. A lot of our customers knew this, and they would happily answer the door when we showed up and tell us to our face that they’re not paying and no, we can’t come in to get the thing. I remember one customer who “rented” a dryer from us. He had only ever made a single payment and it was years before I started working there. One of my fellow account managers inherited this customer into this list, and because of that, he had never made 100% bonus.

We’d go to his house periodically, hoping to find some scenario where we would be allowed to get the dryer. Maybe we were just hoping the dryer would break down so he’d willingly give it back to us, I am not sure. But I do know that this guy was so savvy about the laws that he didn’t even care if his kids answered the door for us when he was not home. I remember his teenaged daughter answering the door, but even if she said I could come in, it would not be legal because a minor can’t give that consent. It was a little frustrating, to say the least.

We became obsessed with this guy and his old outdated dryer. Finally one day, my store manager gathered us together and told us tomorrow morning was the day we’re getting that damn dryer back. We met at the store very early the next morning. Each of us got into a separate vehicle and we drove to this guy’s house. He parked on the street, and we parked (legally) in front and behind him. Maybe a tad too close, who’s to say? But, he was unable to get his truck out to go to work.

After a few hours standoff and hurling many threats at us, he finally threw the door open, called us one last really bad name, and then told us to come in to get our dryer.

My colleague got his 100% bonus this month for the first time in his career.

That one turned out well, but for each one of those, there’s a bunch that did not. In the end, the job just wore me down because it was too full of sadness and anger. With one exception, picking up our gear was never a happy affair. Customers were either sad that they could no longer afford a dining room table, or they were mad that we were taking their dining room table away.

The Aristocrat

On the other end of the customer continuum, we had a woman who took the rent to own concept in completely the other direction. This customer is the exception I mentioned in the last section.

She had rented an entire apartment’s worth of stuff from us, right down to the paintings on the walls and the lamps on the (also rented) tables. She paid on time, every time, and was a delightful customer.

She also changed every single stick of furniture in her apartment every few months.

She would come to the store, pick out an entirely new set of furniture from beds to couches and everything in between. She would pay her two months deposit and we would dutifully go to her apartment, remove all our existing stuff, and bring in her new stuff. We all knew each other so well that she would give us her key many times so we could do the swap out while she was at work.

Despite the fact that we always presented our service this way: “you’re just renting it but if you rent it for 24 months, it’s yours”, she was the only customer we had that really internalized that and had fun with it. She enjoyed coming home to a totally new apartment periodically. Who wouldn’t?

The bed incident

After many months of running around town arguing with people, creeping around their houses, peering in windows, and generally just being stressed out by all the crappiness around me, I had one final experience which ended my repo career.

The “bed incident” involved a customer who had a good payment record. He had rented 4 beds from us a few months ago, and out of the blue, he called us to pick them up. We generally don’t pry too much because, honestly, we’re just happy to either get paid or get our stuff back most of the time. One of the other account managers and I hopped in our truck and headed out.

The customer met us at the door and let us go upstairs to the bedrooms. It was a two-story townhome and there was almost no furniture in it. It was not dirty or damaged, it was just obvious that these people did not have much. We started taking the beds apart and loading up the truck. While bringing one of the last loads downstairs, I caught a glimpse of the small kids in the kitchen. Presumably, these were the users of these beds and they were looking at me crying while mom tried to shush them.

I remember realizing “Jesus…I am taking these kid’s beds away.”

Most of our customers were not nice people. Most of them either deliberately tried to steal from us and had no intention of ever paying us a dime past the deposit, or they started out fine but at some point decided we were the enemy and then decided to just stop paying us and steal our stuff. It’s really easy to get jaded and think they’re all like that. But the truth is that there were a bunch of customers that I never even met. They silently paid on time, their names were automatically checked off the list in the sales system, and I never even knew their names.

This was one of the customers who had just hit hard times. He was not trying to rip us off - he called us to pick up the beds before he was delinquent. And here I was taking a bunch of kids’ beds away.

I left the job not too long after the bed incident, and that was the end of my collections/repo career. It was an incredibly dynamic time of my life - you can’t go to work sleepy when all your customers are trying to outfox you. But, it also subjected me to a lot of things that I did not want in my life. Chief among those was the industry I was working in. Much like “payday loan” places, it seems the RTO industry disproportionately targets vulnerable people which wasn’t something I wanted to be a part of.