Although repossession agents are not generally the most popular people in society, they do fulfil a necessary role, ensuring that banks, car dealerships and financial lenders retain their investments. Suitable bailiff or repossession agent insurance protection will help you to conduct your business efficiently, legally and professionally.
As part of its motor trade insurance portfolio, Tradex offers repossession agent insurance for the collection, delivery and storage of repossessed vehicles or end of lease collections.
Repossession: Fair and Legal
The Financial Conduct Authority (FCA) supervises and regulates all the firms in the UK that provide financial products and services. For those taking part as agents in the repossession sector, it is necessary to understand the processes involved and the FCA’s regulatory requirements for vehicle recovery and collection.
Agents must ideally be registered with the FCA and be familiar with data protection and Treating Customers Fairly (TCF) regulations, which require a repossession company to have a policy in place to outline ways in which staff can achieve the fair treatment of, and best outcomes for, customers.
FCA’s other requirements also include the inclusion of a comprehensive motor trade insurance protection scheme to ensure customers, staff, company assets, as well as those of the lenders, are protected.
A repossession agent will often work for several types of clients including a financial institution such as a financial firm, credit company or bank. Used car lots, vehicle dealerships and rental companies may also be on the agent’s repossession list.
What Cover Does an Agent Need?
When you are trying to win a vehicle repossession contract, any prospective client will insist that you have the right level of repossession agent insurance in place. Finding an experienced motor trade insurance underwriter such as Tradex will be vital in saving you valuable time and money, preparing a flexible and affordable policy tailored to your particular business needs.
The level of cover you will need depends on the type of business you run. This can include everything from being a sole trader up to a large-scale business operation with employees and multiple premises. Part-time repossession agents can also be covered. Tradex works with a panel of leading insurers to provide a competitive policy. Cover can include:
- Road risks for multiple drivers to tow-away or drive-away vehicles
- Own vehicles covered including personal and business vehicles
- Cover for delivery and storage of repossessed vehicles
- Public and employers’ liability
- Goods in transit insurance
- Buildings and contents insurance including yards
- Office contents and other equipment
- Money cover
- Business interruption
- Other motor trade activities such as buying, selling and storing cars
- Extensions for a secondary non-motor trade occupation
- Bonus Booster available. Offers those without a no bonus a six-month policy to accrue a year’s no claims discount and subsequently use this with Tradex on a full-term policy
Why Do Companies Repossess?
If a person has a lease or finance on their car, it still belongs to the lender until it is paid off entirely. If it is not paid, then the vehicle remains the property of the lender who has the right to seize the vehicle if:
- A person falls behind with their payments
- The loan agreement is breached in in some other way, for example, driving without a licence
- The lender finds out that the information given when applying for the lease was misleading
- The car is seized as part of a court order
How quickly a lender is able to repossess a vehicle depends on the type of lease or finance agreement in place. With both a personal contract hire (PCH) and a personal contract purchase (PCP) deal, the lender can repossess the car at any time.
The difference is that with a personal contract purchase, the company will need to get a court order if a third of the contract amount has already been paid.
In addition, a lender needs to give 14 days’ notice if a vehicle is to be repossessed, giving the owner the opportunity to remedy the default.
If a lender goes forward with the repossession, they will try to sell the car off for its market value. If it sells for less than what is owned on the vehicle, they may be able to claim it back from the person registered to that vehicle.
What are Agents Legally Allowed to Do?
Repossession agents are legally allowed to take back the vehicle, but there are restrictions on how far they are allowed to go. For example, you are unable to clamp or tow a vehicle if it is locked inside a garage or parked on private property.
If a vehicle is in a public place such as a road or carpark, a repossession agent is within their rights to use a clamp or tow the vehicle.
When a vehicle repossession agent recovers cars from people who have defaulted on their car loan, the vehicle will then be delivered back to the creditor.
A repossession agent needs good people skills, perseverance and patience. The FCA rules are very precise on how customers must be treated and regulatory compliance must be met to enable the best possible customer outcomes.
The general process of repossession:
- The vehicle is immobilised with a wheel clamp – if not parked on private property and unless instructed otherwise
- If the vehicle has to be repossessed, the debtor will need to remove all personal belongings from the vehicle
- The necessary vehicle documents such as the V5 and MOT certificates, need to be collected
- A detailed vehicle condition report should be taken, including photographic evidence as proof. The debtor should be given a signed copy of the report and the termination notice
- The vehicle is then recovered to an agreed destination
FCA Insurance Rules & Regulations
According to the FCA, agents must have in place appropriate motor trade insurance cover to provide financial protection against risks across all operational activities. The main cover it stipulates includes:
Fully comprehensive motor trade insurance
A fully comprehensive road risk insurance policy will give additional cover for vehicles being driven (either on the road or about the yard) for repossession purposes. This will include both the vehicles being repossessed as well as those owned by the business itself. Optional personal vehicle insurance can also be added to some policies.
Goods in transit insurance
This is for vehicles being recovered and transported on a car transporter or low loader while they are on the move and ‘under your custody and control’. Typically, goods in transit insurance will offer cover for theft, loss and damage caused by accidents while in transit and damage caused during loading and unloading, such as a car being dropped or scraped. This is there to protect the lender’s assets and cover any costs that may be incurred as a result of the damage.
Employers’ liability insurance
If you are going to employ people for your business, you are legally bound to provide cover for costs linked to employee illness or accident whilst working. You can face a hefty fine if this is not put in place. Employers’ liability insurance must be taken out as soon as you become an employer, it will need to cover you for at least £5 million and come from an authorised insurer. As well as full-time employees, you will need to cover part-time, volunteers and casual labour.
Public liability insurance
As you will be working with the public on a daily basis, this will provide cover for the costs associated with any harm that happens to members of the public or damage to their property caused by your or an employee’s business activities. This will also cover any legal costs if you were to be taken to court so that you are not out of pocket.
If you were to provide an inadequate service or inaccurate information that led to damage or injury, you could be sued by a client for professional negligence. Professional indemnity – also known as product liability insurance – can provide protection against claims. Whilst Professional indemnity insurance is not a legal requirement, if your profession is deemed high-risk, some professional bodies and clients may request you have a certain level of cover before agreeing to do business with you.
When taking out a motor trade insurance policy for your repossession business, the amount of cover provided must be adequate to fulfil any indemnities, compensation claims and other costs due to third parties to the extent that you are able to maintain business continuity and meet service level agreements.
A Combined Insurance Policy
If you own or lease your own premises, it is worthwhile considering a combined motor trade insurance policy. Together with road risk insurance, you can include your buildings and contents. If leased, check with your landlord initially to see what level of insurance is already in place for the building so you are not doubling up on cover.
Generally, buildings and contents will include cover for your stock, tools and equipment from flood, storm damage, fire or theft. If you have an office, it may be worthwhile adding in office contents such as computers, together with cash that you may have on the premises.
As well as buildings cover, an added business interruption insurance policy could cover you for the loss of income during periods when you cannot carry out business as usual due to an unexpected event, including damage to the premises or equipment by fire, storm or flooding or the breakdown of important equipment.
Starting a Repossession Business
1. Learning the rules
Before doing anything else, you will need to determine which legal requirements you need to meet in order to start a repossession business. The repossession industry has strict rules in place, and you must have a good understanding of the FCA laws that govern this type of business in order to avoid mistakes.
It is recommended that you spend time working for an established repossession company to learn more about how it works and to gain some valuable experience before venturing out on your own.
2. Constructing a business plan
You will need to do a business plan if you are hoping to raise the necessary capital by applying for a business loan or getting funding from private investors. This will include details of the start-up and running costs of your repossession business including repossession agent insurance, equipment, premises, any plans for future employees and marketing. Additional information needed will be a profit and loss forecast as well as financial details to cover the cost of your equipment and business operations for the first six months.
3. Investigating the proposed location
When scoping out your repossession business premises, keep in mind that you will need office space for administration as well as a secure parking lot or garage to store repossessed vehicles. It should also be readily accessible to a motorway or good road links.
Premises in an area with a low crime rate will also improve your chances of reduced premiums as will the presence of security lighting, secure fencing, CCTV and alarms (though these can be proposed and installed at a later date).
4. Researching your insurance options
When investigating all your motor trade insurance options, make sure you include the right level of liability insurance. While public liability insurance is not a legal requirement, it will protect your business in the event that you are sued by a member of the public for injury to themselves or their property during the course of business. Liability coverage should also cover accidental repossession (in case you accidentally repossess the wrong car).
5. Interviewing and hiring employees
As repossessing vehicles carries a lot of rules and regulations, it will be necessary to hire people who are experienced, capable and have clean records (both DBS and driving licences). Make sure you do the requisite background checks when employing any staff be it full-time, part-time or casual.
There will also be significant training and continuing learning activities expected for all staff within a repossession agency to fulfil FCA regulations.
Employees should be very good in dealing with the public, as well as knowledgeable about consumer rights to avoid any wrongful or potentially illegal repossessions.
Having experienced and more mature drivers will also help to keep insurance premiums reduced as younger or inexperienced drivers are considered at greater risk of accidents and therefore a higher liability. Again, a clean driving licence is essential and preferably a considerable number of no claims years.
6. Marketing your services
When starting out, there are a number of financial institutes and car businesses you could contact including banks, new and used car dealerships, rental agencies, and car loan companies. Contact these businesses directly to set up a meeting and place flyers or ads in local newspapers and trade publications to let people know of your services. Create business cards and list the types of vehicles you specialise in repossessing on the reverse.
Attend networking events and Chamber of Commerce meetings in your local area where you may meet small business owners who need your services or can put you in touch with others in the industry.
7. Employee training
With any repossession company, initial and continuing employee training is essential if you are going to run a successful business recognised by the Financial Conduct Authority and other relevant bodies. Any prospective financial businesses will expect you to have in-depth training procedures in place before they will trust you to repossess vehicles from their customers.
The FCA states that all agents must ensure their staff are appropriately qualified to carry out their roles with skill, care and due diligence. This includes Continuous Professional Development (CPD) to ensure that the skills and knowledge of staff are refreshed in line with market, legislative and regulatory changes.
As a minimum, the FCA says that all managers and staff should be provided with foundation training covering the following areas:
- FCA Principles of Business
- Treating Customers Fairly
- FCA conduct rules
- Vulnerable customers and associated FCA rules
- Data protection
- IT security
- Fraud, anti-money laundering and anti-bribery and corruption
- Incident management – persons of responsibility for incidents
- Health and safety – including COVID-19 requirements
- Diversity and inclusion
- Complaint handling and agents’ complaints process
Carrying Out a Repossession
When asked to repossess a vehicle, agents need to ensure that they have the sufficient information and authority to carry out vehicle collection and recovery practices. Lenders will need to provide the following information to agents before they are able to continue with a repossession.
A clear letter of instruction form, including:
- Reason for instruction
- Client contact details on the instruction, so the customer can contact the lender directly upon visitation if necessary
- Copies of any court documentation required on request, or indemnification where this is not provided and instructions have been made - except with regard to section 92 court orders
- Arrears/ balance so customer can be informed of the amount outstanding
- Vehicle Registration Mark (VRM) or number plate and the Vehicle Identification Number (VIN) which is the vehicle’s unique 17-digit serial number
- Name, address, DOB, phone number and email address of the customer
Where agents have not been provided with the relevant information, or are missing other information, they should seek to obtain this from lenders before doing the repossession, particularly if the omitted details could present risks to the customer or agents.
According to the FCA, agents or field officers must not engage in misrepresentative discussions or use coercion when in contact with the customer in order to facilitate the removal of a vehicle from their possession. This type of behaviour could include agents suggesting they have the authority or a court order to do the repossession for the removal of the vehicle that is on private property (when they are not legally allowed).
Agents must ensure that recovery vehicles do not exceed statutory weight limitations set out by Road Vehicles Regulations and that loads are secured safely.
Treating Customers Fairly
The FCA rules of Treating Customers Fairly is an important part of an agent’s job when carrying out repossessions.
The principals are to ensure that a firm observes the proper standards of market conduct. The FCA states that a firm must pay due regard to the interests of its customers and make sure they are treated fairly by the lender and the agent. This includes providing clear information and communication that is clear, fair, and not misleading.
A repossession agent is also responsible to arrange adequate protection for a clients’ assets when responsible for them.
Investing in Repossession Equipment
The most expensive investment in your repossession business is likely to be the purchase of a flat-bed tow truck with a hydraulic system or electric winch to lift the vehicle onto the platform without causing any damage to the vehicles you repossess. Alternatively, if you are collecting or delivering several vehicles, a vehicle transporter may be more suited to your business.
Repossession agents need to ensure that recovery vehicles do not exceed statutory weight limitations set out by the Road Vehicles Regulations and that loads are secured safely.
In the UK, any operator transporting loads above 3.5 tonnes of gross vehicle weight (GVW) – the maximum combined weight of vehicle and load – on behalf of another party for hire and reward, requires a vehicle operator’s licence.
Overloading recovery vehicles poses serious safety risks not just to the operators but the public too and will leave any motor trade insurance cover obtained by the agent potentially void. This could land your business in severe financial trouble should you be sued or claimed against for damage or personal injury caused.
It is the agent’s responsibility to also ensure that the recovery vehicles they use are suitable for collecting and transporting vehicles based on their payload, together with having fully working and well maintained operational equipment.
It will also be necessary for the repossession agent to abide by environmental rules and emission regulations for their truck, as well as putting safe loading practices in place.
If you are considering becoming a car repossession agent, contacting an experienced motor trade insurance underwriter such as Tradex can help provide advice on the exact cover you need to make sure your business navigates the many rules and regulations alongside this lucrative business.