TESS VIGELAND: We Americans love our credit cards. And debt collection agencies love that we love them. Their business jumped eleven-fold in just over a decade,
from $6 billion worth of collections in 1993 to $66 billion in 2005.
But the industry isn’t satisfied with that success. It’s been frustrated by the folks it can’t seem to track down. But our electronic age is providing new solutions, as Ashley Milne-Tyte reports.
ASHLEY MILNE-TYTE: Sonia is a young mother from Staten Island, N.Y. She says she’s always carried some credit card debt, but she used to have an excellent credit score.
Then, she and her husband split up. Their little daughter had recently been diagnosed with autism.
Sitting in a cafe near her daughter’s school, Sonia says she couldn’t keep her traffic department job and care for her daughter. So she went on welfare. A lot of that care cost money. Her ex-husband was paying a few hundred dollars a month in child support.
SONIA: That’s all he could afford at that time. So I started charging the things that she needed for her autism, like pressure vests. A lot of people with autistic kids know what I’m talking about, it’s very expensive. Very, very expensive stuff.
Before long, she’d racked up $25,000 in credit card debt. She signed up with a debt consolidation firm that said it would help her pay back what she owed. But the company turned out to be a scam. They cleaned out her bank account. Then, collectors began to call and make their position clear.
SONIA: That just because I’m on welfare doesn’t mean that, you know – I still have to pay this debt, and I explained, she goes ‘I understand but we need our money. (
Third-party collectors in particular are relentless in following that money. After all, they bought the debt on the cheap from the original creditor, and intend to profit by reaping back the original amount.
Say you owe a thousand dollars on a Citibank credit card. Citibank will eventually decide to write off that debt. A third-party collector will buy it from Citibank, sometimes for pennies on the dollar.
And now, there’s a new electronic service called Collection Triggers that could make it easier for collectors to get their money. It’s being marketed by credit bureau Experian.
Michael McAuliffe is with the Family Credit Counseling Service. He says in the old days, debt collectors would periodically pull debtors’ credit reports.
MICHAEL MCAULIFFE: Now what happens is they can actually log their clients’ names with Experian, who will then notify ’em within 24 hours if some good things happen for that consumer, such as making payments on an old bill, bringing an account current, opening a new line of credit.
As soon as the collector receives the happy news, they can pick up the phone.
Joe Ridout of the group Consumer Action isn’t impressed.
JOE RIDOUT: One affect of this is likely to be that when someone finally is getting back on their feet financially and is right about to get off their debt treadmill, there’ll be a deluge of collection calls, because their ability to pay supposedly has improved. Even if that means nothing more than they have open space on a credit card.
He says Experian’s being irresponsible, almost encouraging people to stay in debt.
But Experian’s Dan Buell doesn’t see it that way:
DAN BUELL: The thing to remember is that this is a valid debt that was incurred. And often times – particularly in a post-judgment situation – this was a debt that was vetted with an objective third party, being the court.
Still, consumer advocates Joe Ridout and Michael McAuliffe fear an instant service like this could encourage some debt collectors’ unethical business practices. Both men say they hear regularly from consumers who’ve been hassled by collectors who are breaking the law – by calling at all hours, or threatening them with jail if they don’t pay.
McAuliffe used to work in the collections department of a bank.
MCAULIFFE: When I did it I had a partner, and he was the tough guy and I was the nice guy. And I would tell them that I’m just doing my job, I need to get this bill taken care of, if I’m not able to collect on it, I’m gonna have to hand it off to someone else, and you’re not gonna want to deal with him.
That was all above board, he says – things can get a lot uglier.
But Dan Buell of Experian says Collection Triggers’ technology aims to cut down on that ugliness. He says any interaction between a stressed-out debtor . . .
DAN BUELL: . . . and a collector who’s responsibility to the businesses and the shareholders is to collect that debt, that can be a volatile . . . a potentially volatile interaction. So what we do is we really bring some intelligence to it, so that they are collecting on the right account, at the right time.
There’s one thing both sides agree on: The debt collection industry is growing in part because there’s a lot more for collectors to do these days. Even the smallest infraction, like a late library book, can land on the collectors’ books, and lower your credit score.
In New York, I’m Ashley Milne-Tyte for Marketplace.
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