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 folks who 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?
