The Dark Underbelly of Debt Collection
The Boston Globe has just laid out a one-two-three-four-part series that both politicians and Pulitzer Prize panels should be carefully studying. The Globe team wrote about what happens when someone falls behind on a credit card. The stories are shocking: People have been sent to jail over credit card debts. People have been bullied and threatened and treated like dirt. People who needed their cars to get to work were forced to pay ransoms of thousands of dollars more than the original debt just to get their cars back after a collection agent wrongfully seized it. The stories show how hard-working people hanging on to the fragile edge of the middle class had their lives turned upside down by a credit card bill they couldn’t repay.
But the part of the story that really tore at me was the regulatory angle. The Globe articles are replete with stories of courts that rubber-stamping creditors’ claims—even when creditors list false address so the debtor never even gets notice of the court hearing. Read about collection agents who run the show at small claims courts. Read about constables with criminal records for assault who are given the right to arrest people for non-payment of debts. Read about attorneys general who don’t care what goes on.
It isn’t just the debt collection agents who get a black eye in this series; it is the government officials who are charged with the responsibility to watch out for the public and who instead made themselves the dupes of out-of-control debt collectors.
Do three things: First, read the series. Second, drop an email to the Globe to tell them what you thought—this makes a huge difference on the amount of follow-up reporting. Third, post a blog here about what you thought was the most outrageous act or your view about what is happing.
I want to taste this awful stuff one more time. The people who were featured in the Globe articles deserve at least that much, and the officials who didn’t help them deserve so much more.
You know, we often hear about collectors here in Oklahoma threatening to put people in jail for not paying their debts. In Oklahoma, it would be a violation of a criminal statute if they got caught doing that here (even though it probably wouldn't be prosecuted). The crime is called "extortion."
On top of that, I am truly shocked that people are being put in jail over debts. I would think it would raise constitutional problems of the court imposing a criminal penalty for civil wrongs, violation of the prohibition on cruel and unusual punishment and a few other constitutional principles. You can't hold someone in contempt for inability to pay a debt to a purely private actor. I would think if that was done, once the person is released from jail it would be a kind of bankruptcy -- that is to say that they will have paid their debt (to society?) in full.
I was always under the impression that Article 3, Section 8, clause 4 of the U.S. Constitution (creation of the bankruptcy courts) was included in order to eliminate debtor's prison.
Another astonishing thing about this is that it is happening in, of all places, Massachusetts. I would have thought of Massachusetts as the one place that consumers would find protection for their rights.
Find the Truth. Do Justice.
August 2, 2006 1:36 PM | Reply | Permalink
Is this really surprising, considering we live in society that operates on the morals of "caveat emptor".
August 2, 2006 2:52 PM | Reply | Permalink
I guess this is the Republican 'War on Poverty.' I think we can safely say that the Poor have lost, and that the war has now been extended to their neighbors the Working Class and the Middle Class.
August 2, 2006 3:02 PM | Reply | Permalink
Read your credit card agreement
If you are late 3 times in a 6 month period, they can up your interest rate to 40%..
I know, when my daughter got sick, it happened to me.
I am re-reading "Grapes of Wrath."
The parallels are quite disturbing.
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August 2, 2006 4:09 PM | Reply | Permalink
It is guaranteed to get worse unless we elect a Democratic Congress in November. It isn't guaranteed to get better with a Democratic Congress, but there is a chance it will. I find that a gamble I cannot turn down.
All of this results from the Republican/media campaign to make "liberal" a bad word. That campaign succeeded beyond their wildest dreams. Next, I suspect, will be goons with badges beating up union workers on strike.
EDIT: I tried very hard to read that series, but had to quit halfway thru the second part. The effect on me is to wish our country could redo the French Revolution - get rid of all elected officials who have accepted as much as a two cent stamp from anyone. This series just pounds home the fact that we no longer have a government for the people. It isn't worth saving.
Hoppy in Sacramento
August 2, 2006 4:36 PM | Reply | Permalink
I'm going to do as Elizabeth Warren Suggests.
I'm also going to suggest a fourth thing to do: Send both Senators from MBNA a little e-mail telling them how much you appreciate what they've done for Middle Class America. This goes especially for Senator Biden, for whom I'd vote for President when a notedly hot place freezes over.
William Greider called Biden and his ilk (including Joseph Lieberman) "Enron Democrats" back in 2002. He said
Thanks for the point to the Boston Globe. It is one of the handful of newspapers which rises to do noteworthy investigative reporting from time to time.
aMike
August 2, 2006 5:11 PM | Reply | Permalink
I just posted this e-mail:
As for Most Outrageous Act, choosing among them is like choosing one's favorite fatal disease. I'd have to check "all the above" if that category was allowed.aMike
Everyone make sure you read the multimedia version. The enhancements really are enhancements.
August 2, 2006 6:23 PM | Reply | Permalink
The "lateness" isn't the only issue. My practice is to put every possible expense on my credit card and to pay off the balance every month; I get money back with the card I have, and that is why I do it. I am careful to NEVER leave a balance or to pay late.
I recently put 5 airline tickets, some furniture, and regular monthly expenses on my account. The charges were close to $6,000 for that month (I had planned for it, and paid it off) BUT!!!!
Guess what the credit card company said my minimum payment was? $20!!!!
They are setting traps for those who are not sophisticated enough to realize the hole they dig themselves once they pay the minimum for even ONE month! After that, the interest just adds up, and it is a profoundly difficult financial debt to overcome.
My point is that the credit card companies are helping to create this problem, and more realistic minimum payments (say 25%) could make consumers/debtors aware of the pathetic downward spiral of spending more than they make and can afford.
...A quick example: I have preached to my children the above message for years. My daughter has a "Victoria's Secret" credit card. I recently noticed that she had a bill of $255, and that she had paid them $10 the previous month. I showed her that of the $10 she had paid, $5 of it went toward interest, and so she had only reduced her debt by $5. She said, "I thought they only charged you interest if you paid late."
This is a smart, college junior (majoring in economics, by the way!). I could hardly believe my ears!
The truth is we all pay a price when people get indebted to the point that they can't pay it back, and although everyone is responsible for his own debts, the credit companies also unscrupulously abet this situation.
Other than for long-term, equity-building expenses, purchasing what you cannot afford TODAY -- NOW -- is wrong. We all need to acknowledge this fact, and also to live with it.
Jan Knaus
August 2, 2006 6:29 PM | Reply | Permalink
Yeah, yeah, my dad gave me the same lecture, and I know it.
Try having a year of a spouse not earning, then couple that with an illness of the other spouse, then add to that a child getting seriously ill.
Know that "deductible" you got on you med insurance? Try paying that and the $78.00 you owe the ambulance company the $1650 you owe the hospital, the $350 you owe the neulorlogist, and pay the $450 you owe the pediatrician, and then come up with the $600 per month for the meds your kid needs to avoid getting grand mal seizures. I forget what I owe the lab.
Would you use your credit? Damn right you would, as do plenty of folks that have one or (in my case) all three of these scenarios happen in the space of a few years.
You think people are getting in trouble charging frilly undies?
Boy. You are one misinformed person. Most people are charging groceries, drugs, and things they need to live.
Not extras.
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August 2, 2006 8:56 PM | Reply | Permalink
But Valdron here are the Democrats from the Senate that joined the Republicans:
Daniel Akaka (Hawaii)
Max Baucus (Montana)
Evan Bayh (Indiana)
Joe Biden (Delaware) senator@biden.senate.gov
Jeff Bingaman (New Mexico)
John Breaux (Louisiana)
Robert Byrd (West Virginia)
Maria Cantwell (Washington)
Jean Carnahan (Missouri)
Thomas Carper (Delaware)
Max Cleland (Georgia)
Hillary Clinton (New York)
Kent Conrad (North Dakota)
Tom Daschle (Sorth Dakota)
Byron Dorgan (North Dakota)
John Edwards (North Carolina)
Dianne Feinstein (California)
Bob Graham (Florida)
Fritz Hollings (South Carolina)
Daniel Inouye (Hawaii)
Tim Johnson (South Dakota)
Herb Kohl (Wisconsin)
Mary Landrieu (Louisiana)
Patrick Leahy (Vermont)
Carl Levin (Michigan)
Joe Lieberman (Connecticut)
Blanche Lincoln (Arkansas)
Barbara Mikulski (Maryland)
Zell Miller (Georgia)
Patty Murray (Washington)
Ben Nelson (Nebraska)
Harry Reid (Nevada)
Chuck Schumer (New York)
Debbie Stabenow (Michigan)
Robert Torricelli (New Jersey)
Ron Wyden (Oregon)
36 of the 50 Democratic Senators at that time voted FOR the bankruptcy reform bill. In all fairness, if you live in a glass house should you be throwing stones?
August 2, 2006 9:17 PM | Reply | Permalink
LIEberman.
Figgers.
That boy is TOAST!!
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August 2, 2006 9:40 PM | Reply | Permalink
Would I be overly cynical to suggest the Clinton was the age of caveat emptor. With Bush/Cheney we're squarely into the era of fuck your brother and shoot your neighbor if you think it will make you a dime.
August 2, 2006 9:44 PM | Reply | Permalink
Collection people are aggressive and obnoxious and very difficult to fight. I had to threaten to sue to get them to stop calling me when they had the wrong social security number and a different middle initial yet put a mark against my credit. It took me over a month to get the negative data removed. It was a nightmare.
We need change in the way they are allowed to abuse consumers.
I too was amazed because the company which did this to me was also in MA.
August 2, 2006 11:05 PM | Reply | Permalink
"Liberal" became a bad word because the Great Society and liberal policies on crimeled to an explosion in the criminal underclass, not because of mere propagnda campaign.
If liberals stop (1) hating whites, (2) trying to disarm law-abiding citizens and (3) stay tough on violent criminals, they could probably get a lot more of the progressive agenda passed on issues such as debt collection.
Of course, "conservative" or at least "neoconservative" is rapidly becoming a dirty word because of Fearless Leader's stupid was in Iraq, so the liberals are getting their revenge.
"You say I'm a dreamer. We're two of a kind. Looking for some perfect world that we both know that we'll never find." - Thompson Twins, "Hold Me Now"
August 2, 2006 11:25 PM | Reply | Permalink
Look, it isn't just credit card debt -- it is much worse.
I am an older woman, and have difficulty getting around. This spring, I discovered that a couple of my window fans had failed when I tried to install them. Eventually I got a ride to a Window Fan Big Box Store, and when I tried to check out, they told me the check was invalid because of a report that my identity had been stolen. There was no such report, and the check was damn good. Of course they would accept a credit card -- but not a check backed by a couple forms of ID and all the rest.
I probably spent six hours on the phone dealing with my bank which claimed it could do nothing about third party vendors who approve or disapprove checks, and then the firm in Florida -- with which I have no contractual relationship, -- went into a song and dance about the hoops one needed to jump through to get to buy window fans at a big box store when -- finally -- you had gotten a ride to one.
I absolutely need to buy a new Washer and Dryer. A few weeks ago I got a ride to Sears, looked at the products, ascertained that they delivered and installed, picked out what I wanted, and essentially got told you have to put it on a credit card to buy it. Now I have an old Sears account that I have not used since the 1980's. I do not want a new one. What I want is a new Washer and Dryer to replace my 22 year old ones that are nearly non-working. I want to pay cash. -- well what I mean is I want to write a good check for the full amount. You can check the check before you do the delivery, installation, and removal. It is almost not-do-able. The point is, they seemingly now have rules that require you be in the credit system -- essentially so they can find new and better ways to screw you. If you don't apply for credit and don't have an active credit card, you cannot buy. I suspect part of all this is about Homeland Security wanting paper trails for transactions -- but really -- a new Washer and Dryer? What vast threat is washing your sheets and other stuff?
I hesitate to realize that I also need a new main TV -- what kind of battle will that be to pay for a new one in cash?
August 3, 2006 2:23 AM | Reply | Permalink
Liberal became a bad word for many reasons, including the Voting Rights Act. Was that an example of "liberals hating whites"?
Nixon and Ford were President during the rise in crime in the 1970s. It's certainly fair to blame LBJ's economic policies, pursuing the Vietnam War without paying for it, for some of the problems of the 70s.
Crime came down during the Clinton years and is going back up under Bush.
The "liberal blogosphere" has been gung-ho about some candidates who, among other things, do not favor gun control. Hackett for example.
Try to get away from your GOP-induced cliches.
August 3, 2006 2:52 AM | Reply | Permalink
ROTFL. So.... 14 of 50 Democrats had the sand to vote against it? And how many Republicans voted against it?
The fact that 36 of 50 Democratic Senators at the time voted for it just shows how bankrupt and corrupt your political system is. And how absolutely compromised and captured by the right wing even the Democratic Party is.
Let's face it. The Democratic Party wouldn't support the Civil Rights acts of the 60's today. Sure, they'll vote for them because they're institutionalized now. But if these were brand new pieces of legislation? Forget it.
The sad fact is that your leadership on both sides caters to the rich and the powerful, and loathes and despises the poor and the working class. The middle class is in an awkward position in that they are still sought, but they too are hated, which is why they're under such brutal pressure.
And for the record, I'm Canadian.
So, don't mind me, I'm just going to pick up another one of these stones here.
August 3, 2006 4:42 AM | Reply | Permalink
Translation: Opposing lynching, defending civil rights, opposing Jim Crow laws, and not hating blacks enough.
Translation: Prosecuting drunken rednecks for shooting black people and dragging them behind trucks.
Translation: Put more black people in jail.
Yeah, right. Seen it, heard it, read the codebook. You may not be a racist yourself, but your phrases are straight out of the KKK. I'm not impressed.
August 3, 2006 4:57 AM | Reply | Permalink
I suspect if you had gone in there with actual dollar bills, you would have had no problem buying what you wanted. A lot of businesses don't want to mess with checks now, especially on big-ticket items, because so many checks come back on those items.
There is an entire underground economy that buys large items with checks from closed accounts or puts stop-payments on the checks (and a few other nefarious schemes) and then sells them for drug money or what are actually theft rings that sell them and then pocket the money. I suspect these businesses have had a rash of these schemes lately.
What the businesses are doing is getting the money from the credit card company and then passing the risk-of-loss onto the credit industry. Many of the criminals do not qualify for credit, so that reduces the business's exposure to "leakage" (theft).
Believe it or not, there is a method to their madness.
Find the Truth. Do Justice.
August 3, 2006 5:44 AM | Reply | Permalink
Medical bills are over half of all bankruptcies, as has been discussed on here before. I can tell you that both because of the Harvard study and my own practice in bankruptcy law.
I am supporting Dr. David Hunter, the Democrat running for the open 5th Congressional District here in Oklahoma, who is an Ear, Nose and Throat doctor here in OKC. He supports creating some sort of National Health Care system (his idea is to create a Trust like the one that runs the Post Office) and he supports repealing the bankruptcy law if elected to Congress. If any of you can help, his campaign headquarters phone number is 405-297-9807. his website is Dr. Hunter for Congress.
However, there is about a 10-15% market share, if you will, of people who "spend money they don't have, to buy things they don't need, to impress people they don't know." If you include people who are married and live above their means who then get divorced, you might add another 5%. If you include workers who lose their job, who fail to live below their means and fail to plan for contingencies of losing their job by having enough savings, you could add another 5-10%.
Find the Truth. Do Justice.
August 3, 2006 6:09 AM | Reply | Permalink
So, they were living within their means, but the catastrophic event of divorce sinks their boat is what you are saying? Because, you know, everyone who gets married is actually planning on getting divorced.
Give me a break. Most Americans are living paycheque to paycheque and that's all. Here's a statistic for you: Real wages have dropped 21% in the last 25 years. That's right, Americans are falling behind, not keeping up. In order to preserve a declining standard of living, most American families are doing two things: They're taking second or even third jobs, with both spouses working. And they're going into debt. Basically, they're all working their asses off to tread water.
Which means, there's no savings, there's just constantly running the treadmill. Working harder and harder, taking that second or third job, doing that overtime, the wife going to work, and still, the dollar doesn't stretch as far.
Then eventually, you hit a speed bump. The price of gas goes way up, or there's a medical emergency, or there's a divorce or someone loses a job and suddenly, there's nothing but debt.
So spare me the moralizing. By your own account, you can realistically pass judgement on about 10 or 15%.
August 3, 2006 6:29 AM | Reply | Permalink
Elizabeth Warren's my hero because she takes the time to ferret out the little details on how the do-no-work banking/credit industry spends its time maximizing profit by using Americans as voodoo dolls.
Capitalizing on the majority of honorable Americans who believe in paying their debts back, this industry's work is finding new ways to exploit and then abuse that good faith.
What is produced by bankers? Wealth you say? More money to invest, you say?
Not at all. The rule that activates the application of interest to deposited funds does the wealth building. The buying and selling of the many investors does the wealth building. The quality of work of everyday folks who design, build, maintain and protect capital do the wealth building.
And the bankers don't even protect the money. Ex-police officers by and large do that as security for banks, and then, IT guys, armored trucks and companies that build bank buildings with vaults in them. Think about it: banking isn't investment really at all. Banking is a game, no less than casino games, which persuades people to keep their money safe in a particular place so that when the accounts run short and the fees and bouncing checks loom in the coming week, people take out loans or lines of credit to cover themselves.
More later on the "responsibility" question.
August 3, 2006 6:32 AM | Reply | Permalink
Every last one of them. The idea of a "moderate" Republican is a myth. Not an Olympia Snowe, or a Lincoln Chaffee, or an Arlen Specter.
August 3, 2006 6:41 AM | Reply | Permalink
Everybody knows the war is over
Everybody knows the good guys lost
Everybody knows the game is fixed
So they roll with their fingers crossed
August 3, 2006 6:45 AM | Reply | Permalink
Sorry if I gave the impression that everyone can avoid debt. I didn't mean that. My point was that the credit card companies encourage people to get in over their heads. It is so much easier to use a credit card than it is to apply for a loan with a decent interest rate, and then they stick it to the very people who are most in need. By making the minimum payment so low, they entrap vulnerable people into a cycle of debt that is virtually impossible to get out of.
There is no question that medical expenses are a big factor in this, and it is another aspect of what needs to be cleaned up. No other western country has this problem. Most other ones don't have to factor in thousands of dollars to get their children launched through college either.
We are so backwards, and credit card debt is a symptom; not the disease. The disease is "Entitlementitis" and it seems to be something that the republicans all want to catch and keep.
Jan Knaus
August 3, 2006 6:54 AM | Reply | Permalink
This is excellent campaign for any opponent when these Senators run for re-election. I suspect it would be very effective, particularly with the middle class who are drowning in credit card debt.
August 3, 2006 7:23 AM | Reply | Permalink
Furthermore, the 'live within your means' thing is tricky. Very very few of those families who have been living a lifestyle above their means are spending the money frivoulously. Mostly, they're living that way so their kids can get ahead. College costs and admissions expectations are ever-rising. If middle class parents want their children to get ahead and compete with the upper class, they need all the same computers, camps, expensive lessons, instruments, special sports equipment, etc. Maybe not strictly necessary- but it sure seems like it if you love your kids.
August 3, 2006 7:26 AM | Reply | Permalink
This is somewhat true, it seems a real issue is the mortgage. Too much house with too little income. There was an article that talked about why young couples are winding up in bankruptcy and the biggest factor was kids. Couples with kids, generally over extended themselves on the mortgage to live in communities that had good public school system. Because of that the couples tended to be 'house poor' and unable to afford basic living expenses...but their kids were in a good school.
August 3, 2006 7:34 AM | Reply | Permalink
Yes, Oprah did an entire show on this...she called it the Debt Diet. It was frightening how folks had over 60K dollars in credit card debt with an income of 100K and paying the minium on their cards.
The show gave excellent advice and the financial advisors were very good...much of the information is still posted on Oprah;s web site.
America definitely needs to go on the Debt Diet.
August 3, 2006 7:35 AM | Reply | Permalink
Yes. This is awful when it happens. One of the new things consumers can do is put a freeze on all their credit, thanks to the identity theft criminals, this is now possible.
No one can open accounts nor solicit you nor can employers or others who wish to perform bkgrd checks, check your credit without calling to ask you.
August 3, 2006 7:42 AM | Reply | Permalink
And evrybody knows
That's the way it goes
August 3, 2006 7:45 AM | Reply | Permalink
I totally understand.
Believe it or not cash transactions, raise eyebrows as though you are a criminal laundering money. I decided to use cash for most transactions after watching the Oprah Debt Diet program. I could not believe how folks looked at you so suspiciously, in fact, I did not pick up on it at first. Until one clerk said, hmmmm, hardly anyone uses money if they are a good citizen, as she counted the money for a 300 dollar transaction. I was like WTF?..then I replied "having a problem counting over ten dollars..good citizens learn how to count to a hundred by first grade..guess that register only tells you the amount of change to give, huh...not how to count the amount you receive? Maybe you need to call the manager to come and count it for you."
The nerve of these people.
It is totally ridiculous how people infer you are not a citizen in 'good standing' unless you use credit cards for transactions. I refuse to succumb to the debt 'worthy' madness.
Imagine allowing such skepticism to deter you from using cash and force you to use a credit card (to save face, no less) ..so now what I do is use American Express travelers checks.
It's crazy but folks think you must be affluent and 'well-traveled' when you use those...the most common comment now is 'are these left over from a trip...where did you go?
I can't tell you how many 'new places' I have traveled to recently.
August 3, 2006 8:03 AM | Reply | Permalink
Maybe I missed the moralizing. I didn't read the remark as anything more than a statement of fact. I didn't see the author passing judgment on it.
aMike
August 3, 2006 8:08 AM | Reply | Permalink
Wow. That's horrible!!...there should be some way that consumers could go to court and stop that type of usury. It should be friggin illegal!
August 3, 2006 8:10 AM | Reply | Permalink
It is not easy to discern, initially, because he throws in the campaign pitch in the middle, but, he is juxtaposing the 'market share' of bankrupticies due to medical bills vs. those people who "spend money they don't have, to buy things they don't need, to impress people they don't know."
August 3, 2006 8:16 AM | Reply | Permalink
Yes it is!
Maybe the Democratic Party could take up the case for reforming Usury Laws.
How much does anyone want to bet that the national banks, small loan companies, and installment plan sellers were major contributors to the politicians who agreed to relax Usury Law? So let's get out there and smite the usurers hip and thigh.
It is interesting to me that every major religion condemns usury. Would that the religious right were as interested in condemning this kind of public economic behavior as it is in condemning private behavior between consenting adults. Visser and McIntosh have a very informative History of Usury Prohibition. The bold face links to it.
aMike
August 3, 2006 8:42 AM | Reply | Permalink
Gotcha. I thought the reference was to moralizing about divorce. I kinda sorta think this may be just a matter of writing with just a bit less clarity than desirable. :-)
aMike
August 3, 2006 8:47 AM | Reply | Permalink