Mistakes and Miscues with Impact on Legal Enforcement

[Bob Bernstein]

Hello all. I'm thinking about another book (or at least a series of articles) on the subject of enforcement of equipment leasing/finance obligations. I hope you'll share your stories (involving yourself or a "friend") who missed a step (even with the benefit of 20/20 hindsight) which could have made the collection/enforcement process more effective. This could be as simple as getting a personal guarantee in a given stuation to a much more complex strategy. Nothing is too simple or mundane to share. No comments are too complex to post. Every idea will spark another with me or someone else. Stream of consciousness. Brainstorming. Thanks.

[Tom Moore]

I have been in the leasing industry for many years. I started in collections, moved to credit and eventually found my way to Vice President of Risk Management (credit and collections) with an institutional lender. I run a lease brokerage firm now, so I have seen a lot of deals in my time. I know of mistakes made in documentation, lien registrations, etc that, had they been done properly, asset recovery would have been possible. However, I am not so certain hindsight should be used to question a credit call on a deal where a loss is imminent.

The current credit environment, competitive situation and other factors drive the ultimate credit decision for a particular deal. You don’t have to be a good credit analyst to structure an approval that will not come back to haunt you if the deal doesn’t stick. Everyone knows about guarantees, down payments, cross collateral and grandma’s money mattress. A good credit analyst will structure a deal that matches the lender’s current appetite while taking into consideration the competitive environment in that particular deal. The deal will not be risk free, but will likely get there over time and hopefully the account will stick until at least that time. Most deals do, some don’t.

I personally take exception when a person enforcing a deal that didn’t stick long enough calls the credit analyst’s approval a mistake or miscue. I have also seen losses created by collectors that are quick to pull the pin on a delinquent account when they could have nursed it along until the loss is eliminated or further minimized. In the end, you look at the deal and ask yourself would you do it again if the same deal were presented and then learn from the experience. You also have to ask yourself if the account should have been enforced at this time or could there have been a less costly conclusion and learn from that too. Just don’t call the original credit decision a miscue or mistake.