Debt Collecting: Morally Neutral, Or Morally Bankrupt?

Jerry Ashton

All of our industry’s complaints about the ways in which debt collectors are vilified in the press and targeted by consumer groups and governmental agencies aren’t working. Even our attempts to direct our critics’ attention to the real bad guys – the (very few) bad apple “rogue collectors” and the intentionally irresponsible “deadbeat” consumers – are falling on deaf ears.

Just this month, an assistant editor on the New Deal 2.0 blog posted an article titled “Debt Collection Agencies Gone Wild.”  In fairness, the author affirms that the role of personal responsibility needs to be emphasized, noting that the FDA doesn’t prevent prescription drug overdoses and consumer financial protections cannot rescue people who simply do not want to pay what they owe.

But the article takes aim at debt purchasers, collection operations that the author claims “act more like organized crime than private businesses.” It cites increased complaints to state agencies regarding threats of violence and use of profanity and notes that similar reports to the FTC increased 17 percent in 2010.

What alarmed the author, and should alarm you as well, is the increase in debt collection tactics which are resulting in people actually being jailed – a 21st Century twist on “debtor’s prisons.”

In Minneapolis, the use of arrest warrants in debt cases jumped 60 percent in the past four years, to 845 cases in 2009.  Judges have signed off on 5,000 such warrants since early 2010 in nine counties studied by the Wall Street Journal.  People have been jailed for a debt as small as $85.  And, in an age of budgetary stress, did I mention an overburdened legal system now being clogged?

I won’t even go into the article’s complaints about the abuse of social media in which collectors “friend” debtors in order to snoop about their personal information for clues on their employment situation, their vacation trips, or favorite expensive restaurants.  Let’s just allow “all’s fair” in debt collection if such ploys do not break the law or breach the FDCPA.

Our job is tough enough as it is, and we are working in a contaminated environment in which the smell is getting worse.

One of my contemporaries once described collectors as being “the guys who clean up after the parade.”  The Great Recession is one miserable parade we are cleaning up after.

The real problem, the “never-to-be-asked question” that our industry will not address, is the legitimacy and the morality of much of the debt we are given to work.  If we make the lack of personal responsibility on the part of the debtor fair game, at what point do we also take responsibility?

I’m not talking about the obvious and relatively easy choice, such as declining to pursue out-of-statute debt or employ tricks to get a debtor to re-start the debt statute of limitations clock.  I’m not even talking about debt that is shabbily documented but still pressed because it has been assigned to us by “reputable” clients.

I’m talking about the increasing percentage of debt that falls on a collector’s desk that is in itself questionable.  The dollars owed may have been foisted off on unsuspecting consumers by financial institutions which placed these people at risk from day one.  With the expectation and awareness that a large number of these consumers would eventually, even inevitably, default, the extra fees, late charges, escalated interest and “collection costs” that further increase the debt burden were already figured into profit and loss projections.

If Our Client Isn’t Moral, Why Should We Be?

“You owe it, you pay it” can no longer be the position of the bill collector when approaching a debtor, if our morals serve as our compass.  Isn’t it time for us to question those debts centered around or caused by the great mortgage frauds?  Payday lenders?  Advance-fee loans?  Gambling?  Unscrupulous contractors?  And, don’t even get me started on student loan debt.

I must bring to your attention the discussion that is taking place within ACA International as to dismantling the Asset Buyers Division and minimizing the role of debt buyers in the ACA ranks.  Has this segment of our world proven to be less scrupulous in the way it buys/handles/collects on debt?  Conversely, does the traditional collection agency’s foibles cast a bad light on debt buyers?  Are there any “good guys” here?  And, how can you prove that?

It makes no difference to me as to how people attempt to re-arrange the deck chairs on this particular Titanic.  We have hit an implacable iceberg of mostly-righteous consumer complaints about our ethics and our morality, and are taking water.  We never questioned our route, nor our speed, and we are paying for it.

It’s time we grabbed the wheel and established our moral authority by joining with consumers and agencies and proclaim that we will not work illegitimate or immorally-derived debt!

Either correct the course, jump ship, or go down with it. Your choice.