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Courts, lawmakers react to shift in how repossession companies do business

Apr 11, 2016

Credit Clyde Robinson / Creative Commons

Repossession companies want lawmakers to block a bill they say will harm their business and consumers.

The package of bills, SB 656 and 657, would exempt companies that serve as middle-men between lenders and the people who actually repossess cars from having to get a license to operate as debt collectors in Michigan.

There’s been a shift in the car repo business in Michigan over the past decade. Instead of lenders contracting directly with a bunch of different repo-men to get cars back, they contract with a single company, which then subcontracts the work. Longstanding repossession companies say these outfits, called forwarding companies, should have the same state license to operate that they do; that it provides some consumer protection.

George Badeen has been in the repo business for 40 years. He says these unlicensed "forwarding companies" have cut into his business.

“But at the same time consumers, people that we know, friends of ours that through no reason at all lost their jobs when factories closed, they got their cars taken illegally,” Badeen said.

“(Forwarding companies) have sought people out to repossess cars for them, some licensed, some not licensed, just regular tow truck companies just picking up people’s cars with no skills or training or under any kind of compliance,” Badeen said.

Badeen says forwarding companies continue to operate in Michigan without licenses, despite a 2015 Michigan Supreme Court ruling that the agencies are, in fact, debt collectors. The companies argued that they did not qualify as debt collectors, because the companies are contracting with others to complete the repossessions.

Badeen alleges Michigan’s Attorney General Bill Schuette has failed to prosecute these agencies for continuing to operate without a license.

Schuette spokeswoman Andrea Bitely says the AG “has never been on the wrong side of consumers” on this issue. She says anyone who believes their car has been repossessed by a company operating illegally in Michigan should contact the AG’s Consumer Protection division.

In the meantime, State Sen. Rick Jones, R-Grand Ledge, introduced legislation to exempt forwarding agencies from needing a state license, calling the requirement “onerous.”

“Not every wrecker driver or person who auctions a car off needs to have a license,” Jones said.