Repo Companies Predict Boom as Consumers Miss Car Payments

Repossession companies are reportedly preparing for a boom period as consumers struggle to pay bills.

“As the economy curves down, our industry curves up,” says Ben Deese, vice president at North Carolina-based Home Detective Co told Bloomberg News Wednesday (April 19) in a report on the resurgence of the $1.7 billion repo sector.

The report notes the industry is in the midst of a major shift from the COVID era, when government relief efforts put repossessions on hold and left many agents unemployed.

As recently as last winter, the federal government was cracking down on the industry, with the Consumer Financial Protection Bureau (CFPB) warning companies against illegal car repossessions.

The agency said in February of last year that an investigation found illegal seizures of cars, lax recordkeeping, unreliable balance statements and “ransom for personal property” amid an increased demand for new automobiles, PYMNTS reported.

“With today’s high car prices, auto lenders and investors might be tempted to seize vehicles for resale in the hot used car market,” CFPB Director Rohit Chopra said at the time. “No American ever wants to wake up to see their car stolen. Auto loan servicers need to ensure that every repossession is lawful.”

Now, repo compares are facing a labor shortage as consumers fall behind on payments, Bloomberg said.

Its report points to figures from Fitch Ratings showing the percentage of subprime auto borrowers at least 60 days late on their bills at 5.3%, compared to a seven-year low of 2.58% in May 2021. It’s even higher than in 2009, the apex of the financial crisis.

As PYMNTS wrote in January, auto loans — like many other types of debt — are more expensive than they have been in decades. Upwards of 15% of car buyers had a monthly payment of at least $1,000 in the last quarter of 2022, a number that was 10.5% a year earlier.

More recently, we noted findings from the Federal Reserve of New York’s March Survey of Consumer Expectations, which showed U.S. consumers are less optimistic about their ability to obtain credit than they've been in nearly a decade.

A little more than 58% of households said credit is harder to get than it was only a year ago, the highest reading on record.

The Fed also found that the “average perceived probability” of missing a minimum debt payment over the next three months rose by 0.3% to 10.9% in March, though the central bank noted that this data point is still below its 12-month trailing average of 11.4%.