Financial Crisis in Aisle USA

Most people – especially those at the receiving end of a collection call – have no idea of the importance of the “bill collector” in today’s economy – the guy or gal asking you – quite firmly – to pay that overdue bill.

How essential – and derided – is this class of people here in the U.S.? And, why?

The answer: greatly and oftentimes, unfortunately.

So, put your own personal experiences aside for the moment, and rummage through the facts and (reported) complaints that I have gathered.

Pro – the Industry: The collection agency industry payroll reached nearly $5 billion in 2005 and is decidedly higher than that in 2010. That year alone, collection agency owners and workers directly and indirectly support some 426,700 American jobs with a payroll totaling $15 billion.

“Collections is the Bethlehem Steel of Buffalo,” reported one person who recalled the industrial giant that once employed 20,000 people in the region. “You can make a decent living in a town where there isn’t a lot of opportunity.”

Between 5,000 and 6,000 people earning $30,000 to $40,000 a year now work at roughly 110 collection agencies in and around Buffalo, an industry created with the help of seed money from the state of New York. The industry has been a rare economic bright spot in Buffalo, the nation’s third-poorest city of its size, a place where 30 percent of the people live in poverty.

Con – the Debtor’s Side: The FTC reports that it receives more complaints about debt collectors than any other industry. Example as to how this is earned:

A person who had been airlifted to a hospital after a second heart attack and fell three months behind on his mortgage found this message on his home answering machine:

“S_____ M____, you need to call (mortgage holder) and get your act together and make your payments on your mortgage and quit playing these games. Why don’t you have that helicopter pick you up and bring that payment to the office?” Or another:

“When I see you. I’m gonna f— you up. I want my money, and I want it now. I hate people who lie to me and abuse my company. … If you bring my money back, you don’t have to worry about me, just disregard my message.” Or:

“You haven’t heard the last of me. But if it takes me a year or takes me two, believe me, I will find you. You better move. But if you move, you better move to California, ’cause I do travel. And I like traveling. Goodbye.”

Pro – the Industry: Also from the 2005 statistics, the collection industry returned $39.3 billion that year to businesses that extended consumers credit. The impact – debt collectors saved the average American household $351 in that affected businesses would have otherwise had to raise their prices to cover bad debt.

Con – the Debtor’s Side: (From a newspaper site) “More likely, that money is sucked away as profits for those companies (especially banks, which have done awfully well in the recent past). The study is more evidence of the re-distribution of wealth away from the poor and middle-class to the rich.

Collection agencies just add muscle to the legal but unethical process of stripping lower classes of any wealth they might be able to accumulate.”

Pro – the Industry: (same newspaper site) What I object to is the belief that the act of collecting debt should be characterized as bad/fraudulent/theft and so forth – it’s a contract. We have all had tight times, but it is a contract and we should feel the moral obligation to fulfill it.

Con – the Debtor’s Side (same site) Being one of those consumers who was once able to pay off the debt I had accumulated… it bothers me that people make such over simplistic statements about debt. I was downsized out of my job and the only other job I could find was at less than half of my previous salary.

It was a choice between place to live and credit card.  I said all of that to say this, everyone in debt is not there due to fiscal irresponsibility. Some of us were placed there by an ever changing economy and job market instability.

Pro – the Industry: Creditors respect the statutes of limitation as well as bankruptcy as a measure of fairness to the debtor so that he / she (1) will not have to worry about being sued for the rest of their lives; and (2) so that the debtor can properly defend himself with fresh evidence and witnesses, if any.

Con – the Debtor’s Side: Although under federal and state laws you can’t be denied employment or housing based on the fact of your going bankrupt, employers and landlords can and do discriminate against applicants with bad credit ratings. A poor credit rating could result in your living in substandard housing and being denied good-paying jobs.

Soo, what’s the Bottom Line?

Everyone needs to be paid, or they will not be able to pay others.

 The collection industry is growing precisely because of this need, and because it is willing to put its own money (wages, technology, offices) to prove that its services will both be effective and affordable.  After all, how many companies will offer to work on a contingency basis?  Try getting your babysitter or your banker to extend that sort of offer.

The real question that needs to be answered by this industry, is whether or not they can do their work without recourse to illegal activities, unwarranted threats, or browbeating the person on the other side of the phone.

We all know the bill must be paid; do you have to be such jerks in the way you ask for the money?

I will be more impressed by bill collectors wanting to be seen as the “good guy,” when they can also demonstrate being the “nice guy” as well. Contrary to the industry attitude, these two qualities do not contradict each other.