February 18, 2012

Fort Worth firm creates high-tech aid for a repo man

FORT WORTH -- On the streets of Laredo, repo man Rey Martinez bags three or four cars a week using license plate recognition cameras and software that instantly alert him to targets.

Sometimes he gets a ping for a vehicle while cruising a Wal-Mart parking lot. Occasionally he snags a car that pulls in front of him on the road.

"We follow them and eventually they stop and we explain to them what's happening and we take the vehicle," said Martinez, who owns Home Chasers Auto Recovery.

He's just one of 550 recovery firms nationwide, many with multiple cameras, that utilize the vehicle-location technology developed by Digital Recognition Network, a Fort Worth company that pioneered the use of license plate recognition by the repossession industry.

In four years, the company with 42 employees has helped recover more than 40,000 vehicles worth $360 million, said Chief Executive Officer Chris Metaxas, a New Yorker who joined DRN a year ago from LexisNexis, one of the world's largest online database services.

DRN captures plates on up to 50 million vehicles a month and has a database of more than 700 million data points, according to its website.

"Our secret sauce is the ability to take the fast-moving image and take it apart, pixilate it, resolve the image on the license plate and verify with some level of integrity that the thing they passed is what it is," Metaxas said. "It stores the information in a database that obscures anything that is personally identifiable; it's just a number."

A repo man, who pays $10,000 to $20,000 for cameras, can also use DRN's database to see where a license plate might have popped up previously.

"We make them a little smarter," Metaxas said.

DRN is also partnered with Vigilant Solutions, a California firm that provides plate recognition technology to 2,700 law enforcement agencies.

Police use the plate readers for everything from locating stolen vehicles to finding missing children or "to crack homicide cases," said Brian Shockley, Vigilant's vice president of marketing.

Vigilant's database can track a vehicle's location history and provide real-time enforcement in the field, he said.

"There's a national database by the FBI of vehicles of interest in crimes. As license plates are scanned they are automatically compared against that national database, and an alert pops up if they come across a vehicle of interest," he said.

Replacing eyeballs

Metaxas likens DRN's system to "replacing human eyeballs at rapid speed."

"Imagine traveling around the block really slow to look at license plates. Now he can go faster and get the same data," he said "For a repossession purpose, you really want to know where they are, and they are usually parked somewhere close to their house," he said.

DRN's system is not an intrusion on privacy, he said. "It's the same thing as walking down the street. A license plate is not personal or identifiable."

Metaxas and Shockley say steps are taken to ensure the databanks aren't used for something like locating an ex-girlfriend.

"We do this in a way that is private and secure. We have to meet the stringent guidelines of financial institutions. We do that right," Metaxas said.

Shockley said every inquiry to Vigilant's database has to be related to an ongoing investigation.

But Matt Simpson, a policy strategist for the American Civil Liberties Union of Texas, says the plate readers prompt a "host of privacy questions."

"It's yet another situation where technology has raced ahead of the laws that regulate it," he said. "What we end up with is basic guarantees from private companies and law enforcement agencies saying that they are using it responsibly."

Last June, DRN and Vigilant helped defeat legislation in California aiming to outlaw the use of the technology for business and public safety uses.

Afterward, Metaxas said in a news release that legislators realized the ability of the private sector to create value by providing data to police to ensure public safety. He said the lawmakers' action "reinforces the trend of private companies helping government protect and lower the tax burden on citizens."

'Cost effective'

DRN's clients are lenders that then give assignments to repo men.

Martinez, who is the only operator with the system in Laredo, says the technology has paid off for him.

"The more plates I put in the system, it's getting better and better," he said.

But his success is difficult to match in the competitive Dallas-Fort Worth market, where 15 to 18 firms use the DRN technology, said Jason Karns, general manager of Quality Recovery Service in Garland.

"It has almost become industry standard. Most of the sizable companies here use it," said Karns.

"Basically, it's just a tool, and the more tools you have the better. But it wasn't the saving grace that everyone thought originally. Still, it's cost effective for us," he said. "If you don't have it you're at a competitive disadvantage."

George Badeen, president of the trade group Allied Finance Adjusters, says the technology has cut into revenue for small repo firms.

"We used to get $200 to $400 to track someone down. Now the big conglomerates just put it online and somebody will find it. Now we get $275 for a repo based on a camera hit," he said.

But there are plenty of targets. Industry statistics provided by Badeen show that 9,570 vehicles were repossessed in Fort Worth in 2012. Texas led the nation in recoveries in December with more than 7,000 (12 percent of the national total).

Son of a repo man

DRN was the brainchild of Fort Worth lawyer Todd Hodnett, who grew up working with his father in the repossession industry, according to the company website. Hodnett declined to be interviewed.

After working in law, Hodnett took a leave of absence to help his father and realized that the industry needed the sort of sophisticated software used to manage case law.

He hired programmers, who created a database of cars for repossession. But repo men had to enter the plate numbers by hand to build the database.

When Hodnett saw an article about police using cameras to record plates, which they compared to numbers on the FBI's database, he realized the technology could be paired with his database.

"Like any startup, it took good people working their butts off to get this going," Metaxas said. "Our founder was working his day job and then scanning cars at night."

Whitney Neves, vice president of brand and corporate development, said DRN has evolved.

"It's been a learning experience from what Todd first envisioned. It's not so much about gathering the data; we're learning what our clients are looking for," she said.

"You can teach a dog a new trick, and we're the dog. We're evolving as we try to figure out how to gather information and to make it an appealing option for banks," Neves said.

The next step, Metaxas said, is "moving upstream within the banking institutions" to use the same intelligence for credit card and consumer loan divisions. "Repossession is a form of debt collection, and we want to broaden that out," he said.