Debt Collectors are Playing Rough--and We're Surprised?
The NYT ran a front-page story this morning about the sharp rise in complaints against debt collection companies. The sharp tactics include freezing someone’s checking account for a debt she didn’t owe and calling someone at work enough to put her job in jeopardy.
I’m glad the Times ran the story, but this is the wheat that we’ve been sowing for years. When Congress handed the credit industry its wish-list in rewriting the bankruptcy laws last year, did anyone think this would mean debt collectors would become more gentle? Congress gave the creditors the whip hand, and they are whipping debtors harder than ever.
It isn’t just the bankruptcy laws that made things tough on debtors. Cutting back on legal services and limiting the kinds of cases they can take have left people with no place to turn. Even when debt collectors step outside the legal boundaries, most face little risk of exposure. For the handful of people who manage to get some legal help, settlements are done in secret so that other lawyers can’t use the information and the press won’t pick it up. (Notice one such settlement in the NYT article.)
Although some debt collectors step over the line legally, most don’t need to. The laws have been written so that collection agents can make people’s lives miserable under the full protection of the law. In our research of bankrupt families, for example, we talked to parents who said they filed for bankruptcy to stop the after-school debt collection calls. It seems that collection calls went up in the 3-6 PM hour—all the better to call and scare the kids who are home alone. If the debt collector can get them upset enough, mom would do about anything to try to make the calls stop. Some moms filed for bankruptcy, many more borrowed money somewhere else, sold off wedding rings and the television, agreed to crazy high-interest repayment terms—anything to get the calls to stop.
Debt collection is now one of the fastest growing occupations in the US. Many of the actual collectors are decent folks working for low wages while are instructed to make phone calls and follow scripts to squeeze other folkswho have fallen behind on their bills. The guys making the real profits set up the collection bullpens and never get their fingernails dirty.
American families are in trouble, and Congress weighs in on the side of the creditors, giving them more power to squeeze these families even harder. Someone may be crying foul, as the NYT suggests, but who in Washington is listening?
Comments (11)
what's this about freezing bank accounts?
My documentary/book in progress is at http://www.leftwingmediamachine.blogspot.com
July 5, 2006 5:37 PM | Reply | Permalink
I saw a column by Michelle Singletary in the Boston Globe about this on Sunday. Surprised nobody has alerted you by now.
July 5, 2006 5:50 PM | Reply | Permalink
Since 50% of bankruptcy is related to medical debt and since our medical system continues in crisis this is going to get worse before it gets better. Check out http://medicynic.com/?p=36 for more on this issue.
July 5, 2006 6:15 PM | Reply | Permalink
In my experience, the Fair Debt Collection Practices Act is somewhat easy to wield against collectors, if you're willing to stomach their abuse. Pretty much any lie by a debt collector is actionable, and many collection agencies will forgive the debt and/or send a nice check in exchange for not reporting them to the FTC.
Many of the collectors are NOT decent folks--they tell vulnerable people that not paying their phone bills will lead to them taking their house away (absolutely untrue) or their kids away (obviously untrue). Statements like those can easily cost collection agencies tens of thousands of dollars.
My advice to anyone who is suffering from the abuse is to take notes and be patient--eventually the collector will say something terrible and actionable on the phone. If you live in a state that permits it, record your phone calls.
Also remember that the collection agencies tend to pay less than 50% of face-value for the debt, often much, much less than that. Remind the collector of that fact.
July 5, 2006 6:17 PM | Reply | Permalink
I don't know why anybody is surprised. Nothing has changed. The stories Elizabeth tells are the daily grind of my practice. Winning a fair debt collection case isn't nearly as easy as some want you to believe. It is difficult to sue a company with tons and tons of money. Not many poor people have the stamina to take on bad collection agency. Proof is often difficult. Moreover, once an attorney is involved the collection agency will usually play by the rules. Anyway only a lucky few (usually people with an employer or union funded legal plan) are able to afford an attorney.
Ron Byers
July 5, 2006 6:42 PM | Reply | Permalink
Ron,
You are right on the money (no pun intended).
(soapbox on)
However, after having been through this process myself I have learned that an educated debtor CAN successfully enforce their rights by knowing how to capture proof of phonecalls that violate regulations, and identify collection activity that is actionable and documenting it as acceptable proof (without getting an attorney involved). If we are going to catch these guys doing it, the debtor needs to know what to do. Calling an attorney may help the immediate situation, but then they just get away with what they've done due to lack of proof.
Another thing I have learned in this process is that judges are biased, and prejudge when it comes to debt related lawsuits. I have a friend whe personally witnessed a conversation between the judge and an opposing attorney that demonstrated it - until he walked into the room. He heard enough, and saw their reactions, to know what was going on, and that his rights were being violated. I just wish I knew how to follow through on such a serious charge. Apparently this is commonplace. Judges are friends with creditor attorneys, and have serious bias against defendants. The system has become corrupted, IMHO, by the justifcation of these shortcuts to judgment. As John Fitzgerald Molloy, a former Superior Court Judge in Arizona, put it in his book "The Fraternity", "the all powerful tool used to increase the power of the Fraternity has been to sanctify, through the writings of judges, the particular words chosen by those who wrote our Constitutions, and to give these words sanctimonious, and above all else, expansive meanings." (Fraternity - Lawyers and Judges in Collusion)
The attorneys are clever at shifting the burden of proof to the debtor by eliciting statements of fact, when they should be required to prove their own case with a copy of a contract and documentation that they have damages to claim.
Since it gets down to dirty pool with these guys, a debtor has little choice but to play the game. That is why I recommend as a last resort to file small claims against collectors for violations after learning how to gather the proof. Small Claims court is less formal and if the debtor demonstrates that they understand their rights, and how to defend them in court, they can win, or at least get a dismissal. One of the best "dirty pool" players I've run across is Richard Cornforth. He is helping those in debt hell defend themselves pro se, and most of the time his strategy wards off a lawsuit from the collector - which I respect. If the creditor doesn't have real proof the debt is owed, then they need to have some mercy on the debtor.
In my opinion, a better solution is for our government to get tougher on lenders and require forgiveness of debt under certain circumstances that are beyond the control of the debtor. Then lenders might be more careful about lending, and our society would learn how freeing it is to live on cash instead of debt. I believe in debt forgiveness for the needy. It should be thought of as a form of charity, that benefits our society. If banks can't be profitable in that situation, then that may say something about what is wrong about our current central banking system. It doesn't work, we are just lulled into a sense of false security by our government and the Federal Reserve Chairman, while they attempt to delay the inevitable failure of our monetary system. They encourage us to borrow, to prop them up. Yet it is destroying our country.
As Americans it is our responsibility to know the law and defend its original intent to govern us in a free country. If we don't, we will lose our freedom. The first step is to stop teaching our kids in 1st grade that credit cards are money! And start teaching the principles of our Constitution, and individual responsibility.
(soapbox off)
Thanks, Prof. Warren for highlighting this news article!
Jim Anderson
The Truth About Credit
July 6, 2006 12:52 PM | Reply | Permalink
Before I was disabled (with job stress likely triggering a hidden birth defect), I worked as a credit card collector. We were taught the FDCPA from beginning to end and there is something everyone should know. At least as of 2000, only third party collection agencies are regulated under that law. In-house collection agencies voluntarily act as if they are covered by the law to prevent actual regulation. Therefore, only third party collection agencies are subject to the resulting lawsuits.
As for the character of the individual collectors, I can only claim that I have always tried to be a good person. Those places are little better than sweatshops to the employees. I got paid a wage and then a bonus for each payment taken over the phone. This bonus was taken out of the phone pay fee that was deducted from the payment.
If you (or even a co-worker in your unit) fails to collect enough phone payments, you are subjected to verbal abuse and threats of job loss. I was doing very well one evening and got called into the supervisor's office with the rest of my unit. We were all read the riot act about poor productivity.
After the others left, I presented my record for the evening to the supervisors. They told me that my job was not in jeopardy but that they had to abuse the whole unit because the person at fault was a senior citizen. Had they blamed her, she might have sued them.
It's pretty awful on both sides of the fight.
John
For more go to my online journal.
July 6, 2006 3:36 PM | Reply | Permalink
Some states do extend the protections of federal law to debtors who are being harassed by their original creditors. California is one.
July 6, 2006 9:37 PM | Reply | Permalink
Being a Business school graduate, I majored in Finance. My first regular job after college was with GMAC. I repossessed cars and made collection calls. I completely understand where you are coming from. Working collections at GMAC is entry level into management. If you get passed over for management training, you stay in collections. I was continually depressed and embarrased to tell other people what I did for a living. In the beginning I got a big thrill out of being able to legally steal cars. I could literally make a key for it, and just walk up as if the car was mine and use the key to drive it off. I did get pullled over by police occasionally, but once they were satisfied I worked for GMAC and was repossessing the car I was set free. I even did this in South Central LA - you know, where the riots took place. I could have been shot. I was young and stupid.
After I was passed over for management training because they put on a hiring freeze, I left the company. When I collected, I thought of myself as a mediator, and I sought to resolve the problem, without making personal attacks. I didn't think of the debtor as scum, but as a customer. My supervisor always laughed at me, and pressured me to do things that were not Kosher. Even though I got the expected results, I was considered too timid for promotion. I did not belong there. I felt much better about myself after I left.
I can see through the collector on the other end of the phone. If they are good at what they do, they are usually the real scum. They have little respect for people, and have to convince themselves of their own self worth. They convince themselves they are better than debtors, and debtors deserve what they get. They feel justified in trashing them, even in person. They are permitted to comb through your credit report, and background checks, and use whatever they find against you.
These guys care little about obeying the law. They know debtors don't have the energy or resources to press charges against them for violating collection laws. That is why I think it is important that we start fighting back and put these guys in their place. The treatment of people by collectors is simply unacceptable by any standard.
There is no excuse for the way collection companies treat their employees, nor the way their employees are treating debtors. If collectors have it bad, they've made their own bed. Many debtors are in their situation because they have been snookered into taking on too much debt, and are ignorant of sound financial planning. They didn't get there on purpose. Somebody needs to hold the lender accountable for their predatory lending practices, rather than beating up on helpless people.
Jim Anderson
The Truth About Credit
July 7, 2006 8:30 AM | Reply | Permalink
I always found my greatest successes as a collector to be linked to empathy. After all, the wolf was at my door, too. There was one particular person who enraged me and made me remember that not everyone in debt is a victim.
One night, I'd gotten into a long discussion with this man who told me that his daughter was dead. He was up to his eyeballs in medical debt and funeral expenses. I spoke very gently with him and suggested that he make a minimum payment for the only good reason to make such a payment: you gain time. He refused but I could understand why.
A week later, I was talking with someone about his sick daughter and the voice sounded familiar. When I looked down at the notes on the file, I saw my own code documenting the death of this man's only daughter. (We worked off auto-dialers and often had to speak to the cardholder before we even saw a name on the screen. There's no time to look over a file much less get a sense of the person.) Needless to say, I was enraged.
Despite my professionalism, I could not let this go unchallenged. I told the man that I was glad his daughter had gotten better since the last time I'd spoken with him and he thanked me. Company policy forbade me from raising my voice or calling him a liar much less any of the other things I heard every day.
Be careful applying state law to debts. In every case I've seen, the law where the company is incorporated is the law that applies. Because of this, most collection calls actually come from within a few miles of my home.
John
For more go to my online journal.
July 7, 2006 2:54 PM | Reply | Permalink
My sister had this happen to her. I told her to call the phone company and have them place privacy manager on her phone. Now the children do not answer those calls.
July 10, 2006 8:17 AM | Reply | Permalink