This is an open letter to my (non) friends in the Collection Agency and Debt purchasing industry.

You may not have noticed it, but you folks are getting some pretty bad press recently. All of it, not just much of it, well deserved and brought on by your own excesses and how you inflict yourselves on people like me.

You know who I am. Your target – the “debtor.”

I am the one you keep calling – legally between the hours of 8:00 a.m. and 9:00 p.m. at night. The one you are sending those “dunning” letters to; the one you sometimes refer to among yourselves as “the deadbeat,” or “slug,” or … worse.

Well, I am tired of being held in this fashion, and I humbly request that you no longer label me a “debtor.”

I am a citizen.

I am a father, a husband, a wife, a mother, a grandparent, a student. It happens that I owe money, on accounts that are extremely past-due, and am stretched from payday to payday.

Once I was called a customer. A valued one, at that. And then I came to be labeled as a “consumer” and didn’t quite command the same level of respect. Further along, I became “past due,” then a “problem account.”

At the end of this dis-assembly line of pain, you people showed up and I became a debtor. That is quite a convenient title for you to assign me. After all, no one would treat a customer or a citizen in the way you treat me.

I don’t envy you your job, I want you to know. And I do respect those among you who are chasing down legitimate debt which hasn’t been through the debt-resale market a half dozen times where my unpaid receivable was purchased for just pennies on the dollar.

You bottom feeders, who buy and pursue debt “out of statute” or which have no credible backup, are despicable. You back up the court system with lawsuits that you know I will not show up to dispute (whether because of my ignorance, fear or the time and money it takes from me), falsify papers, and then report me to credit bureaus to further drive a stake into my financial heart.

$110 Billion Dollars in Credit Card and other debt you will be purchasing this year alone!

You range in sophistication from fly-by-nights to wall-street-backed investors! Like vermin, you scurry about from debt crevasse to debt crevasse to search out the vulnerable. You are very big business. That delicious “spread” between the purchase cost tens of thousands of dollars in technology and talent you must expend to “recover” that loss makes it all worthwhile.

One of your brethren, Arrow Financial Services which was at one time the country’s largest debt buyer, was acquired by Sallie Mae in 2004 – making this student lender the nation’s largest collection agency! And now, you are making even our children into debtors – “educated serfs” to support this industry’s greed for profit-at-any-cost.

How dare you.

You bankers, wall-streeters and negligent government people have even turned my beautiful country into a “debtor” nation – of major proportions.

As defined by the U.S. Treasury, there are two calculations for debt. “Debt Held by the Public” being U.S. Treasury securities held by institutions outside the United States Government, and “Gross Debt” which includes intra-government obligations such as the Social Security Trust Fund.

As of July 28, 2010, the “Total Public Debt Outstanding” was approximately 93% of our annual GDP of $13.3 Trillion. The “Debt held by the Public” was some 60% of this, and “Inter-governmental Debt” being 32%.

What are you “bill collectors” going to do about THAT mess? Foreclose on the White House? Put the entirety of our country into a Debtor’s Prison?

That last reference is not a laughing matter. In your own, ingenious and devious ways, your industry is attempting to bring that Middle Ages institution back into existence.

The Minnesota newspaper, Star Tribune, this year ran a video interview “Debtor Prison Returns to the U.S.” in which reporter Glenn Howatt discovered that “Creditors are becoming more aggressive about old debt…and when they (the debtors) ignore a court judgment the (bill collector) has a right to get a warrant for your arrest.”

He described one woman, arrested over a $250 JC Penney Credit Card bill, who was processed through the jail system – complete with having to don an orange jail suit – after being hauled in by a Sheriff’s deputy.

“They (the collection agency) manipulated the policeman into being their enforcer,” the unhappy debtor complained.  But, it is all legal, all by the book, and all at the taxpayer’s expense and not borne by the debt collector.

“That’s not supposed to be their job…they have more important things to do,” she lamented.

Would JC Penney have put this person in jail? Of course not. They just enable the debt purchaser, as a surrogate, to perform this unconscionable and unsocial act. That debt purchaser has very little interest in anything other than profiting off the original creditor’s credit loss.

Here is my plea to the Bill Collector

You could come to the “other side.” You could show backbone and refuse to pick up the phone to continue to harass your less-fortunate fellow citizen. Are you aware that there are “debt collectors” who have become heroes?

One such person is Jacquie Reynolds (?) who went onto YouTube to let the world know why she had just been “released” from her job as a collector for the Bank of America.

Working as a Customer Service representative (the corporate code word for bill collector) for a brief stint in 2009, she was a top performer in her department. Until she began to feel that “there was something inherently evil in my job.”

“I’ll never forget one cardholder,” she relates. This was a 24-year-old single mother who had just lost her own mom and her husband (all in the same year) and has learned that she had cancer.

“She told me she couldn’t afford the 29.99% interest she was being charged, the late fees of $35 each time she was late or paid less than the amount due. I couldn’t put her on our (debt relief) program because she did not have enough income. It wasn’t up to the Bank of America to help her figure out how get out of debt.”

She went on to relate further horror stories…but, as a “bill collector” reading this, you really don’t want to hear stories. You only want to hear when you can expect ‘the check in the mail.”

Much to Jacquie’s credit, she quit that job, saying “At the end of the day, I did the right thing, and I am sure that God will bless me.”

Ah yes…Jesus – what would He say about us “debtors?” Well, that will be the subject of a full chapter in Written Off – America and Americans when it comes out this fall.

In the meantime, Mr. or Ms. Bill Collector, if you continue to call me a D—-r, I will surely continue to call you B——-s. Care to renegotiate the relationship?

Listen up! I am writing this piece specifically for those of you who are struggling to be successful. 

Lord knows, given the financial sinkhole that we are in – some of us more “sunk” than others – it is imperative that a lifeline to sanity be thrown out to you.

I am sure that we will all agree that it can’t be just another piece of Social Media “How-To-Use-Twitter-and-Retire-at 21″ fluff or Law-of-Attraction psycho-babble.

I assure you that this is real, tested and secure.

This does require a level of belief on your part that our passage through life – physically, emotionally, mentally and (dare I say it) spiritually – can be illuminated by a few simple (not easy) guidelines and instructions.

Are there really five steps to success?  Yes.

Moreover, you are already experienced!  I can declare with confidence that you may have already been through the five steps at crisis points in your life and have come out on the other side “successfully.”  Not having a frame of reference, you just weren’t aware of it.

The difference going forward now will be that you will have a User’s Manual.

Five steps to Success. It’s really that simple. It’s just not that easy.

So, tighten your seat belt and come with me on this ride. It is a ride I personally have not always enjoyed over the span of my adult life, but understand it as a requisite for growth.

For the purposes of this teaching – because that is what this is – we must agree on the definition of success…and that can be elusive.  For some, it consists of acquiring wealth, position or power. For others, it could be in gaining wisdom or spirituality. In today’s reality, it could mean putting food on the table or having a paycheck that will cash.

Whatever definition is true for you, you won’t have to give it up to benefit from The Five Steps.  Keep your definition, and make room for the one below for the moment. And, that is:

Success: The progressive realization of a worthwhile goal.

The very fact that it is “progressive” should be of solace. Things take time.  Behind every “overnight success” story is a history of hard work, disappointment, mis-steps and mini-triumphs.  It takes what it takes.

Perhaps that is why “time” was created…so that everything wouldn’t happen at once.   Time gives you the opportunity to manifest the “real-ity” of your dreams and goals…and for the moment we will consider them to be “worth the while.”

Now, back to the topic – Five Steps to Success.  On reflection, I believe you will discover that every event of impact in your life and the lives of others will be ruled by these five steps.

Step #1 – Acknowledge the Truth

You may (or may not) be surprised at the difficulty of completing even this first, basic step.

Most people struggle, question, or go into combat against the truth.  Evidence can be found in statements like, “This can’t be happening to me.” “That isn’t true.” “No way.” Or even, “Maybe for you, but not for me.”

Truth – and I am not even talking about truth with a capital “T” – is not where a lot of people live. Look around you. Do you really think that we are living in anything other than a shared illusion?  And that “truth” must be avoided at all cost to protect the reality we hold in common?

How can we claim as truth that all men are created equal, and then enact laws – and wage wars – to be sure that this will not be the case? How can we trumpet the superiority of unfettered (free market) Capitalism, and yet see how this has led to a financial meltdown of unprecedented damage within our lifetime – and still defend it?

What about your own truth? Are your finances a disaster? Does your job (if you have one) suck? Is your marriage or relationship lacking, or at a dead end? Is it time to ‘fold ‘em’ and move on to a new life? Then, why aren’t you moving forward?

Because, most people do not want to acknowledge the truth. And, until they they (you?) do, will be stuck in that reality.  Perhaps we can’t deal with the grief that such an acknowledgment would bring?

There are parallels to be found in The Five Stages of Grief, the pioneering work on death and dying written by Elizabeth Kubler-Ross a few years back.  Based on her research and conclusions, whenever we experience a significant loss we must go through our grief if we are to heal.

How many of us still set the table for two, when only one remains? Like a very dim-witted mouse, how many of us go back to where the cheese was, and is no longer?  Again, and again.

Whatever the larger truth is for you – acknowledge it – “The truth shall set ye free.”

Step #2 – Surrender to the Truth

If you think the first step was tough – try this one.

People would rather battle truth to the death than to accept it. Again, there are parallels to the grief process.  First, we resist the truth (denial), and next we find ourselves deep in anger.  As part of the grief process, this is normal, it is natural, and can be anticipated.

You don’t happen to be angry about anything, would you?  If so, you are “stuck.”

The anger which flows like molten lava from the ranks of the “Tea-Party” folk is a great example.   Although they have succeeded in getting past the first stage (they have “acknowledged the truth” about the terrible state of the nation’s economy), they are in large part mired in anger and blame.

They are in no way surrendering to that truth. They would (as we all do) rather search about for a guilty party and vent their wrath. They are caught up – lost – in the terror of their version of reality.  The likelihood of their moving on to the next of the five steps is as likely as their finding the north pole by heading south.

Which begs the question – what makes your version of anger – or how it is directed – any different or more justifiable? Why aren’t you surrendering? Would you rather be right, or would you rather be effective?

Surrendering does not mean resignation, an important point to understand and practice. It means to accept “what is,” and is a necessary prerequisite to doing “what’s next.”

Step #3 – Trust the Process

What the hell does that mean?

That means, my friend, that all of us are “in process” in some fashion or another in our daily struggles. By understanding and consciously incorporating this principle, we will correctly worry and agonize less about the outcome and more available to creative solutions.

Consider:  we are undergoing this experience for reasons beyond our limited understanding; and that there could be a purpose beyond what are senses are telling us.

And that requires faith.

Sometimes this faith can be found in a higher being (Father And I Together Here), other times in believing in ourselves or others, or in our chosen path.  Sometimes, it is in wisely stepping back to allow matters to take their own course – without our permission.

I can fairly well guarantee you that life goes on largely without our permission, anyway. But, it does require our participation.

Which leads to Step Four…

Step #4 – Participate positively 100%

We are going to be led into temptation here; watch out.

Let’s imagine a situation in which a divorce is coming about…an event that occurs regularly in our lives or in the lives of our friends and relatives. In this case, let us say that this is happening to us, and that we are following The Five Steps faithfully.

We have acknowledged the truth (this marriage is over), surrendered to the truth (accepted the divorce papers), are hopeful for a resolution that will work (trusting the process), and now the partner is making – demands!

What constitutes a positive response here – that we roll over and give in to every demand? Locate a more aggressive attorney to protect us? Tough call.

Participating Positively 100% means to choose the path or solution that serves the truth at question. Not your truth, or the other party’s truth, but perhaps the children’s truth – or the truth that giving up a little now may likely result in a better relationship later.

If that isn’t comprehensible, than ask yourself what participating “negatively” would look like.  That doesn’t take much imagination. Once you identify that course…and the logical results the will come about…do the opposite.

Step #5 – Everything serves the Process

To quote Stephen Covey – “We are not human beings on a spiritual journey. We are spiritual beings on a human journey.”

Taken from this higher point of view, it can be argued that everything that happens is for our own best interests…if we understand that our best interests is to grow. “Ships in harbor may be safe, but that is not what ships are made for” must be your going forward mantra.

Glenn Beck serves the process. Hurricane Katrina serves the process. The greedy bastards of Wall Street serve the process. Plowing your way through this blog…serves the process.

If there is one ray of hope and wisdom we can extract from the bible, it is in understanding that “…and it came to pass” did not continue on to say “…and it came to stay.”

You and I were built to be survivors. Sometimes, in spite of circumstances if not because of them.

If you follow The Five Steps, it will be impossible to not see your life and your process as anything less than successful.  Don’t believe it?  OK, go back to the top of this blog and begin with Step #1.

If you still don’t believe the game is rigged and that there is a coordinated attack on the financial well-being of Americans, perhaps reading through a submission to “Written Off – America and Americans” may change your mind.

A lead attorney for a small law firm in Old Forge, PA, was led to share his thoughts regarding bankruptcy here in the U.S.

He titled his contribution: “The 2005 Bankruptcy Amendments – A Law Passed for the Rich People, by the Rich People.” (You can see his full contribution here on our featured submissions page for Chapter 1.)

That sounds a bit (quite a bit) left of center, but his experience with that law over the years has given him an understanding that needs to be revived and put back to work – that bankruptcy law was created to help people get out of debt.

Bankruptcy as a law and practice was not – until 2005 – designed to further burden those in debt to satisfy the unrelenting greed of bankers and credit card lenders.  No longer.

According to news reports (8/26/2010), bankruptcy filings are up some 21% over last year and the highest since the Bankruptcy Code was amended in 2005 to make it harder (as the attorney put it) “for all the little people to file.”

There are 1,512,989 additional “little people” now under the presumed protection of the courts. In Massachusetts for the first six months of this year, the rate was 25%. Sources quoted in one city’s newspaper attributed the increase to two things: failure of homeowners to successfully create a loan modification program that the banks would fund, and high unemployment.

Actually, there were three reasons; let us not forget the credit card industry.  As one bankruptcy attorney in that state described it, her clients were driven underwater by card policies that mandated rate increases, fees and overdraft charges that rocketed monthly payments “from $200 to $400 or $500.”

As most families carry an average of five credit cards, you do the math.

But, back to our Pennsylvania attorney

His question: was the Bankruptcy Code so broken before 2005 that it needed an overhaul? His answer: NOT.

“From 1989 to 2005 I worked on loads of business and consumer bankruptcy cases. The system worked well. People needed financial relief, and that need grew more and more as time went on. The United States Trustee’s Office, the bankruptcy cops, did a good job at spotting abuse and acting on it.”

And, abuse such as hiding assets and understating income which was a common practice to be “stopped” by the victimized card companies via changes in the BK law, was rare.

“One cannot commit fraud if one has no money with which to behave in a fraudulent fashion,” the attorney related. “These people did not game the system. They were all just broke, and needed a new start. They were not committing abuse, but rather were seeking protection from it.”

Why that law was changed, and who changed it, makes for compelling reading. It also makes for a lot of anger…if you have any capacity left for that emotion…for the way that the common person has been and is being treated by our financial institutions and the government meant to protect them (us).

I invite you to read through his contribution…and then come back with your own stories as well as with your own solutions. And…don’t forget to hit that ‘share’ button.

Let’s set a match to the rage of others as well.  The toes of any number of congressmen and women would benefit from this sort of high-octane warming.

The World View

Germany’s respected Der Spiegel magazine just published an article called “The Erosion of America’s Middle Class – On the Way Down.”

In this careful analysis of today’s America, author Thomas Schulz contrasts our rich congratulating themselves for donating billions to charity, banks showing record profits, a wall street returned to DOW 10,000 and higher – against the growing gap between rich and poor that is causing our middle class to disappear.

This article and the video interview that follows with a Chinese economist are stinging enough to perhaps wake up those of us still complacent, unbelieving…or yet in shock. America is driving over a cliff, and it would appear that the rich have their foot on the gas pedal.

A few article insights:

Ventura, long a “storybook California” city with its rich homes and beautiful beaches, has launched a program allowing people to sleep in their cars within city limits. Why? Police discovered that the cars parked in front of driveways were new and well-tended, and the people sleeping in them were former owners and neighbors…not Mexican transients.

Four out of ten Americans who consider themselves middle class now believe they will be unable to maintain their income or social status.

“Food insecurity” is on the rise, with 50 million Americans unable to afford enough food to stay healthy…and one in eight adults and one in four children now surviving on government food stamps.

The overwhelming majority of Americans – after almost 30 years of economic growth – are earning on an adjusted basis less than what they earned in 1978: $45,879 then vs. $45,113 now.

In this same timeframe, the number of U.S. billionaires grew by a healthy 17 percent in 2009.

Where did all the money go?

The German reporter poses his answer to the question, where did “All the enormous market gains and corporate earnings, the profits from the boom in the financial markets and the 110-percent increase in the gross national product in the last 30 years” go? It went to those who had always had more than enough already.

To those who had more than enough…already.

Our government spent $182 billion to bail out a just one company – AIG, while communities across the country are closing schools, eliminating bus service, and even turning off the lights.

Insurance companies which fought health care reform bitterly are showing heavy profits - on Americans who are paying twice as much for health insurance than they did in a previous decade.

Wall Street pays out obscene bonuses (for people who accomplished…what?) while the new “Working Poor” live from paycheck to paycheck – some 61 percent of Americans, at this point.

Does Capitalism inherently require that the rich get richer?

Writing “The End of the ‘End of History:’ The Structural Crisis of Capitalism and the Fate of Humanity,” Minqi Li a professor at the University of Utah relates another world view of America’s financial situation and how it – and China’s economy – is leading to a fact-based disillusionment with capitalism.

“The global capitalist economy is now in its deepest crisis since the Great Depression. Even the world’s ruling elites no longer have any doubt that a significant historical turning point has arrived.”

He continues: “The neoliberal phase of capitalist development is coming to an end. This will prove to be the end of the so-called…era of global counter-revolution it signifies.”

“Ruling elites?” “Global counter-revolution?”

As well as I can understand this, the “ruling elites” are those at the upper reaches of the rich and highest levels of government. The “counter revolution” will be those who comprise the seriously-have-not’s.  This may not yet include the middle class – they haven’t experienced full pain or a full realization of what lies in store.

What is in store is termed by Professor Li, as the “structural crisis” that capitalism encounters along its way to accumulating wealth.

In an interview with “RealNews,” Professor Li declares that capitalism’s “structural crises” have happened before, but that this one is significantly different.

Professor Li claims that capitalism has “exhausted” its “historical space for social reform” which in the past enabled recovery.  Why is this? Because it is not possible to combine a redistribution to the favor of working people with the requirement of “capitalist accumulation.”

Simply put, the rich absolutely require the system to make themselves richer. Nothing personal – just the way it is.

Although my reader (even this writer) may bristle at the idea it is a requirement that Capitalism must “exploit” a cheap labor force – most recently being workers in the non-Western world – but the numbers seem to dictate that.  Unfortunately, that resource is not sustainable. The very creation of factories inevitably leads to demands on the part of labor for better wages and living conditions – thus reducing capitalist profit.

It’s even more grim than that.

“After centuries of accumulation, capitalism has exhausted the environmental space,” Li says, “so much so that the global ecological system is now on the verge of collapse.” He then lists a UN study showing that by 2025 as much as 70% of the world’s population will live in areas of water stress, soil erosion, expanding deserts, deforestation, ocean acidification – all threatening the global ecological system.”

The Chinese worker to the Rescue?

Although Professor Li’s interviewer, senior editor Paul Jay, points out that even many of the financial elite are beginning to call for greater financial regulation to keep the finance sector from “running amuck.” Isn’t there a likelihood that America’s workforce may actually gain some ground? That argument doesn’t win Li over.

“The ruling elite is answering this crisis,” Li says, “by reducing fiscal deficits and backing off from their historical commitment to worker’s health care and pensions while in the U.S. the congress fails to pass climate change laws.”

As for worker resistance, even massive demonstrations in Western Europe has not yet changed the capitalist mindset. Capitalism has to have its profits…whatever the cost to the social order. Consider the Newly Poor to be “collateral damage.”

The potential rescuer?  It will be the Chinese worker who will challenge the Chinese capitalist system.  No longer willing to endure sweatshop conditions and survival wages, they are demanding greater wages and conditions.

You remember – the conditions which Americans believed they left behind after the last Depression and the enforcement of greater disciplines by the New Deal on the financial sector.

But there is no “New Deal” possible in America – and no “FDR” to rescue the ordinary citizen. If this isn’t a revisit to “Workers of the World, Unite,” I would like to know what is.

Der Spiegel article
Real News interview

Visitors and contributors to this site know that it is my belief that the ways in which we hold economics, credit and debt has been the essential cause of the economic meltdown we are in.

Moreover, that this mind-set has got to change if we are all going to come out of this in some semblance of sanity and wholeness.

Not surprisingly, the people who are profiting from The Way It Is are not overly welcoming to a change in thinking. Surprise! The collection industry.

This business is both benefiting – and reeling from – the fallout caused by poor lending and/or financial practices worldwide. A flood of billions – not millions – of dollars in debt has brought out the worst in them in all too many cases.

The FTC reports that no other service category can match that of collection agencies and attorneys for the number of complaints filed for allegedly illegal or abusive tactics. The natural result: reams of bad press and an entire sub-industry that makes money suing agencies and “counseling” debtors. 

Open to change?

Yesterday, I put the willingness of this group to change by accepting an invitation from the editorial staff of insideARM, a major educational resource for the industy to publish a guest blog, titled “Let’s Drive a Stake Through the Heart(lessness) of Old Debt.”

The blog was directed to the owners and employees of an enterprise which profits from the financial miseries of the casualties of our economy.  Doggedly “doing our job,” they make little distinction between debtors abused by financial institutions or those who can pay, should pay and won’t pay a legitimate debt. 

Not surprisingly, the blog provoked a lot of response – some people finding areas of agreement, but the preponderant being critical. I couldn’t have been more pleased. The battle is engaged, and the conversation begins.

To visit this blog and read the (sometimes personal) comments it attracted, go to: http://bit.ly/9LefiM.

I can’t be the only person in the U.S. – or throughout the world – calling for change in the way that a ‘debtor’ and ‘debt’ is handled. I invite you to visit that site to share your own personal and/or professional struggles.

Perhaps we can “change the hearts and minds” of people in that business sector. Lord knows, the time for change is here.

It takes one of us to start something; it takes all of us to finish it.

Well, it finally happened.  Student loans, both federal and private total, have now surpassed the $826.50 billion in revolving credit cards!

Not only do credit card institutions securely hook our children the moment they enter school with low-interest (to start) credit cards, our own government is driving a stake even further into the heart of their financial future.

According to a recent story in the NY Times, there is $605 billion in federal student loans outstanding (half of it incurred in the last four years), and $167.8 billion in private student loans.

Here’s the sweet (to the banker) kicker – federal student loan borrowers enjoy almost none of the protections extended to users of other lines of credit.  No bankruptcy protection, no statutes of limitation, no truth in lending laws, no state usury laws, and on and on.

A boon for the collection industry – legalized extortion!

According to information released August 6 by StudentLoanJustice.Org, even with an appeals process for defaults, about 20 cents of every dollar repaid by these guarantors (or the federal government) are siphoned off – before anything is applied to principal and interest and the usual, usurious penalty fees.  20%!!!

The borrower’s wages (assuming he/she gets a job in this recessionary environment), their income tax returns – even Social Security and disability income, may be garnished without a court order.  Adding injury to the insult, borrowers needing state professional licensing to work will have their licenses suspended!  We’ll teach YOU not to pay your debt!

“In a sense,” the report continues, “defaulted borrowers are given the choice of either finding a way to repay a vastly inflated debt, or face the rest of their lives as indentured, marginalized, second class citizens.”

As you can imagine, it is the lenders – with the latest spin being the taxpayers – who claim to be victim of these “deadbeat” students.

Truth alert:  More industry spin at work.  The present and profitable reality is that one-in-four will default on their student loans. The delicious difference is that where the recovery rate for defaulted credit cards is about 25 cents on the dollar – the recovery rate for defaulted student loans is 123%.

The very real but incalculable cost to America and Americans is the damage done to those who intended to use their education to better themselves and their communities.  These people were to be our future nurses, mechanics, salespeople – taxpayers!  As employers are now allowed to pull credit reports on job applicants, our defaulting student loan applicant almost automatically is assured a “No, thank you.” 

Those who want to expensive private schools to earn a more prestigious degree are denied the gainful employment sufficient to even pay back the loans!  These are the people who are now marginally employed, living either on the welfare of their family…or the state…and are poster children examples of the products of Predatory Lending.

Examples

• New Yorker: “Without going into great detail, I borrowed money for school in the late eighties and early nineties.  I believe the actual amount I was loaned totaled somewhere in the area of $30,000.  Unfortunately, my loan went into default, and then into judgment.  I am now paying interest only on the outrageous sum of $77,000.  Interest and penalties have practically tripled the principal of the loans and are still accruing daily.  I will probably be paying this off for the rest of my natural born life.  This is the price of education in our fair country.”
• Petra: “I am a single mother, currently unemployed.  I have been chased around and abused by the Department of Employment (DOE) and its agents for the past 20 years.  A $40,000 loan has now “grown” to an astronomical sum of $152,000 and I receive letters and phone calls almost weekly threatening legal action and seizure of assets.  This agency is worse than any collection firm I have ever had the misfortune of dealing with.
• Valerie: “I took out a student loan for my daughter 15 years ago when I had a job with Grumman. I was hit by a drunk driver and became disabled at this time (and) was supposed to be absolved because of the disability…as time went on we sent Dr. reports and they said they didn’t receive them, we kept sending reports but they just kept ignoring them. Now they are garnishing my $550.00 disability check.”
• Maine: “I took out approximately $70,000 in loans for college and grad school.  I work as a social worker with the elderly and make $30,000 a year.  My loans are now $129,000.  I have deferred, consolidated and defaulted for eight years.  I have made payments when I could and then would stop because I couldn’t pay what they were asking.  (Some) $19,000 are private loans held by OSI.  They won’t accept reasonable payment arrangements.  The worker at OSI was rude and threatening and when I talked with her “supervisor” he said I could not talk to anyone else about this and that she was specially trained to do this.”

Unabated Power

“Student-loan debt collectors have power that would make a mobster envious.”

this was told a reporter was told in a WS Journal interview with Elizabeth Warren, a Harvard Law School professor and bankruptcy specialist.

Let me ask you this.  If you and I knew that powerful predators were out to maim and eat our young, wouldn’t we get out the bait and traps and destroy these vermin with no compunction?

I personally don’t see any difference between loan predators and varmints, do you?

Apparently, our own federal government not only cannot make that distinction, but will not.  As reported by Mother Jones, the new Consumer Protection Bureau – created to crack down on shady real estate loans and predatory lenders – was not given that same authority to deal with student loans described as by New York Attorney General Andrew Cuomo as the ‘Wild West’ of lending.

The same article revealed that it is the for-profit colleges and institutions run by private companies (think Trade Schools) trying to make money that are the biggest venue for lending – some 42% of their students have private loans.

“Private student loans are exactly the kind of dangerously under-regulated financial product that the Consumer Financial Protection Bureau needs to oversee,” Pauline Abernathy, vice president of the Institute for College Access and Success, said. “Failing to give the new bureau full authority over all private student loans would leave young people and other vulnerable consumers, and our economy, at the mercy of unscrupulous lenders.”

Care for an example?

Stephen Burd, the editor of the New America Foundation’s Higher Ed Watch blog, has written (that) Sallie Mae has often allied itself with for-profit colleges—not all of them reputable—thereby helping fund private student loans “with interest rates and fees totaling more than 20 percent per year, to financially needy students who normally wouldn’t qualify for them because of their subprime credit scores.”

I don’t know about my readers, but I am oiling up my traps!

More details can be found at: http://studentloanjustice.org/

I am sure you are familiar with the concept of “lemon laws” as it applies to car dealers and manufacturers, and you may even have had a personal experience in purchasing a defective vehicle.

The world ‘lemon’ applies to (as defined by Wikipedia) “anything that was defective or broken or which breaks constantly, particularly a car.”

Hmmm, anything broken…or which breaks constantly. Sure sounds like the banking system and its credit products (cards, loans, mortgages, etc.) to me. The parallels are stark: If this industry ain’t “broke” and rife with used car salesman types, which is?

Bankers have more legal wiggle-room than used car dealers, likely thanks to their selective purchase of Legislators.

Unlike the dealer or manufacturer, there is no warranty provided on the product.  Ergo, they get a (presumably) free pass on any responsibility for delivering flawed goods.  Nope, we don’t even qualify for a 36,000 miles or a 25% increase in fees safety valve, whichever (guess) comes first.

Let’s consider what happens in the auto world.  When no Manufacturer’s Warranty exists or if state laws are of no help, federal laws step in. Wikipedia provides a list of some of the problems/issues which may be present and actionable:

• Prior history of mechanical problems known to the seller: Laundered Lemon.
• Previously salvaged or wrecked.
• Stolen, stripped and rebuilt.

Detect any parallels?

When the Senate dragged the Wall Street Bankers before them and tried to determine exactly what these people were selling, and to whom, there wasn’t a soul who could describe in simple terms their “products.” They were barely willing to lift the hood.  These were products that they, alone, knew the value – or lack – of, and which they sold to the unsuspecting victims who wandered into their lots.

Believe it or not, enlightenment does exist – in the car trade.  Just why the “lemon law” was needed was described in a 1970 paper by the economist George Akerlof. In this academic study, he discusses ‘information asymmetry’ – you know, when the seller knows more about a product than a buyer.

This research, in which he used the market for used cars as an example problem of ‘quality uncertainty,’ earned him and his partner a Nobel Memorial Prize in Economic Sciences in 2001.  The paper concludes rightly that owners of good cars will not place their cars on the used car market.  All of you economists reading this blog will understand this to be – the bad (money) driving out the good.

Maybe this explains why people are putting their money into gold, rather than into banks?

Where is our protection? Where in the Yellow Pages can we find “lemon law” attorneys who have practices not limited to automobiles?  No need to worry about the cost, if we can create laws similar to those in California in which not only are automobiles covered – but anything mechanical.  As allowed by both state and federal law, the offending party must pay legal fees if they lose the case.

Can you imagine any bank winning a case brought by consumers, given a similar playing field?

As ever, the problem lies in convincing your elected (and therefore beholden to you?) politician to enact such laws. Just how likely will it be to get the same people who bailed out BOTH the banking and auto industries to impose a much-needed financial lemon law?

Even Libertarians put their ideological thumb on the scale of justice (they seem to oppose anything regulatory) and suggest that used-car markets haven’t broken down, and that the lemon problem creates entrepreneurial opportunities.

I don’t want more ‘entrepreneurial opportunities’ to right wrongs.  I want justice.

There isn’t a person out there (other than the banker) who isn’t sick of the fact that only lemons are available, and the “cherries” seem to be in short supply.

I wonder where that lot is?

There has got to be a stop put to this…incivility.

I halt just short of using the words that really and colorfully describe the approach and tactics used by too many people in what we call the collection industry.

Over the last several months for my book-in-progress, Written Off – America and Americans, I have asked people to relate their experience of either being in debt, or being the person chasing after those who are in debt. Some of the stories are enough to cause anyone – on both side of the equation – to break into hives!

What we are going to consider in this blog is the need to revisit the fashion in which debt collection is practiced here in the U.S.  My feeling is that the answers will require that we move far beyond just observing the “letter of the law” required by the Fair Debt Collection Practices Act (FDCPA).  It is about living the golden rule.

“Do unto others as you would have others do unto you.”

Not only is this the basis of ethical and humane interpersonal dealings, it can be seen as the foundation stone of the idea of everyone’s right – that we have a right to be treated with respect. Yes, that includes the “deadbeat” up next in the collector’s call queue…

Somewhere along the way, we have lost the memory of how to treat and respect each other. The evidence of that is found in any number of human-to-human interactions, but in all industries (with the exception of banking and oil) not nearly so flagrantly as in the realm of “bill collecting.”

I have some solutions to offer, but let me first provide instances of what can modestly be called “excesses” that I have uncovered in my research.

“Pay your debts or your children will be taken away…”

…was one of the lines used by a Florida-based agency when collecting on accounts owed in southern Illinois.” “We will call the state child protection agency and have your children placed in foster care.” If that didn’t motivate (or, if there were no children?) they would pose as attorneys and threaten to have the local sheriff arrest them.

A now-infamous CNN online article “Confessions of former debt collectors” created a slideshow featuring former collectors who left their industry – and why – which really showed the industry in its worst light.

Example comments from the ex-collectors:

     “I was absolutely ruthless when I first started out as a debt collector. I had a black heart…”

     “Collectors I knew regularly held contests to see who could make the most people cry in one day.”

     “I heard so many coworkers call people ‘good for nothing losers’ and tell them to ‘get off your fat a** and go find a job.’

     “I learned that you can have a certain inflection in your voice or use certain words to belittle or demean people, and this is encouraged.”

     “…there’s no point in telling a deadbeat that they’re a deadbeat. They already know it.”

What was not given equal emphasis in the photo-article was the abuse that the collectors often took from debtors…nor the fact that the preponderance of the people leaving that industry got into jobs that were socially responsible and in many cases found careers in fields in which they could help or counsel debtors.

One, Michelle Dunn, has gone on to write 11 books in her field, started the American Credit and Collections Association, and is a published columnist for almost a dozen newspapers and national magazines.  Oh yes – and acknowledged as one of the Top Five Women in Collections according to Collection Advisor and her peers.

Still, the damage is done.  What’s the effect?  Blowback, of course!

Few people outside the industry give respect to the importance of this work in bringing back money that otherwise would be lost by America’s businesses. Or, how many of those working hard in a tough job still demonstrate compassion and sympathy for the debtor.  Essentially, they are stereotyped.

As described by DebtPrison.net, “bill collectors are not your friend, and though they may appear concerned, they are really only concerned about their paycheck. Collectors work off of commission, often receiving 10 to 25% of your payment to the collection agency. So if they get you to cough up $100… they just made $25 buckaroos. These collectors also have a monthly quota to achieve. If they fail to meet the monthly collection quota they can be let go.”

The counter-industry has websites, books and seminars galore to help the afflicted debtor.

One example, “The Debt Machine: How the Collection Industry Hounds Consumers and Overwhelms Courts” released by the National Consumer Law Center presents a strong argument for stronger and updated consumer protections.

“The recession has thrown millions of consumers into the jaws of a giant collection machine,” said Robert Hobbs, NCLC deputy director and report co-author. “Existing laws and regulatory efforts have lagged behind what is needed to effectively monitor powerful, wealthy and ubiquitous collections companies.”

“Millions of American families have been subjected to debt collection abuses in recent years,” Hobbs said. “Some have been struggling to pay accumulated debts. Some who don’t even owe the debts have been targeted by a sloppy and over-aggressive debt industry.”

“The Debt Machine,” their press release declares, “tells the stories of consumers who have been dragged into a morass of annoying phone calls, false claims and harassment. It also identifies the financial links between debt companies and some of the nation’s leading banks, documents the buying and selling of billions of dollars of debts and describes the critical role played by hundreds of specialized law firms.”
The report is posted on-line at “www.nclc.org/images/pdf/pr-reports/debt-machine.pdf.

So, what is to be done?

It should seem obvious that the industry is being berated for pursuing the “gold” rather than practicing the “golden rule.” “Get the money” is the motivator behind every phone call made to the debtor, whether individual or corporate.  But, is that single-minded orientation really effective?

The industry’s own statistics seem to show that the industry makes money in spite of itself – simply by playing the law of averages.  If they are handed 100 accounts to collect at say, $1,000 apiece, they will have $100,000 to work with; they will be fortunate to collect 14 of these accounts and recover $14,000.  The original creditor, who will pay out contingency fees ranging from 15-25%, will be fortunate to see 9% of his original portfolio.

The agency, after subtracting costs, will still end up with a fair return on invested dollars.  In other words, “business as usual” is good enough – no matter the high turnover of collectors or the social blowback – so why change?

Eventually, someone will stop and take stock of this way of doing things.

I predict that they will put pen to paper and determine that – if debtors were treated with more respect – that collections would actually go up and the cost of collection (i.e., replacing burned-out collectors) would go down.

Will the rule of gold someday enjoy a marriage with the Golden Rule?

Whaddya think?

What is it about us as a people, a country, as proud Americans that causes us to prefer to listen to lies but to turn a tin ear to truth?

Shades of The Pentagon Papers! Echoes of Gulf of Tonkin!

Our “now” example of self-imposed hearing loss is the revealing of thousands of pages of secret U.S. military files which show a harrowing, “boots-on-the-ground” view of the Afghanistan war. And it is ugly.

In it, we discover that coalition forces have killed 100’s of citizens in unreported incidents, soaring (and also unreported) Taliban attacks, and evidence that the insurgency is being actively supported by neighbors Pakistan and Iran.

As expected, this violation of secrecy was met with outrage.  As those on the right could not attack the veracity of the material – they chose to attack the newspaper that, albeit selectively, printed the documents. You know, their favorite demon, “radical left’s” institutional organ, the New York Times.

The government’s response was equally predictable.  These wonks deplored the “serious damage to national security.”  The Afghan government found it “shocking.”

“Serious damage to national security”

Hasn’t this country, quite well on its own, quite successfully damaged our national security?  How does $300 BILLION of our treasure and the loss of 1,207 American lives stack up in comparison to the “dangerous” 9,000 pages of documents of any kind…if truth is revealed?

“Danger to our National Security!”  This has got to be the most abused patriot-phrase of all time, perhaps second only to “This gives aid and comfort to our enemies.”   I do remember the latter as a favorite Bush tactic – which allowed our government to prohibit the photographs of military coffins on their way back to the U.S. 

But, Obama?  The leader promising to provide us change that we can believe it?  Show me the change.

And, I must ask my fellow Americans – just how “dangerous” is truth when it leads to understanding?  I would think that we would welcome any segment of socieity or the press whose goal it is to publicize information that otherwise would never see the light of day.  If these people are our enemy…what does this say about the people who foster and further lies?  Which are the patriots?

Pfc Bradley Manning is the person who delivered these documents via a third-party to Wikipedia.  He is in military detention in Kuwait and faces up to 52 years of imprisonment.

Why Wikileaks?

A PressThink reporter answered the question correctly. “If you’re a whistle blower with explosive documents, to whom would you rather give them? A newspaper with a terrestrial address organized under the laws of a nation that could (editor: and does) try to force the reporters you contacted to reveal your name…or to Wikileaks which has no address, answers to no subpoenas and promises to run the full cache if they can be verified as real?

What does it mean for this Whistle Blower?

What does it mean for Pfc Manning, who is an extreme example of individuals who are rightfully and righteously motivated by the public’s right-to-know?  A class of citizen that believes publicizing secret documents and classified material in order to expose corruption, deception and crimes against humanity is absolutely necessary in a society that fancies itself as ‘free?”

As I pointed out in a previous blog, “Whistle Blowers – Where are you when we need you?”, our true national security calls for more – not fewer – such people.

Daniel Ellsberg, the 1971 leaker of the “Pentagon Papers,” calls this “the greatest leak in 40 years.” Could this be our government’s version of the BP Gulf Disaster? An outing of a government that has drilled too deep and with no plan – other than keeping reporters at a distance?  Do you want actual diplomatic cables exposing massive corruption of both U.S. and puppet government officials to be kept secret?  Will that make America safer?

These are not just documents…they are worse than dry words, however horrifying.  Actual videotapes show U.S. soldiers chortling with glee as they gun down unarmed civilians, including children, and even a Reuter’s camera crew.

All this in a military action we call “Operation Enduring Freedom.”  Which “enduring freedom” here at home is being sacrificed to keep Lies on the throne?  If we stand by to see Pfc Manning convicted of “violations” that may actually lead us to an open and lively AND HONEST debate on our presence in that God-forsaken middle eastern country, of what violation are we guilty?  The answer?  Of not supporting the truth above all else.

Because, we can’t handle it.

(For more: www.bradleymanning.org)

FTC to Collection Agencies/Attornies:
“You are either with us, or against us.”

Julie Brill, commissioner, minced no words when speaking to an assemblage of professional collectors and debt buyers at that industry’s association meeting – ACA (American Collectors Association) International in Las Vegas earlier this month.

“You can listen to me and listen to the Commission…or not.”

This came after her announcing a newly-released report from the FTC on this industry titled “Repairing a Broken System” in which abuses were enumerated. A number of specific recommendations to protect consumers from debt collection litigation included:

*States should adopt measures to ensure that consumers will defend in litigation.

Ex: The infamous process of “sewer service” by debt collection attorneys needs to be reigned in, along with limiting ARM lawyers to use continuance to extend trials.

*States should require collectors to include more information about the debt in their complaints.

Ex: debt collection lawsuit complaints should include the name of the original credit and last four digits of the original account number, the date of the default or charge off and amount due at that time, the name of the current owner of the debt…and more.

*States should take steps to make it less likely that consumers will unknowingly waive statue of limitations defenses available to them.

Ex: calls for a more clear and uniform statute of limitations for debt, as well as require ARM companies collecting on out-of-statute debt to clearly inform consumers that they cannot file suit on the debt…and more.

*Federal and state laws should be changed to prevent the freezing of a specified amount in a bank account into which a consumer has deposited funds that are exempt from garnishment.

Ex: at present, funds frozen in consumers’ accounts may likely include government payments such as Social Security (exempt from garnishment) and result in significant hardship for consumers. The desire is to limit the amount that banks can freeze in accounts receiving exempt funds.

*Debt collection arbitration should give consumers meaningful choice, eliminate the bias and appearance of bias in the arbitration system, and be conducted in a manner more likely to motivate the consumer to participate.

Ex: it is an open secret that Arbitration clauses included in most consumer contracts (read your credit card standardized legal boilerplate) requires a form of arbitration which in practice seems clearly skewed in favor of the creditor.  As a professional mediator, I can only believe that this is surely a violation of that industry’s practice and ethical construct.

The full text of the FTC’s report can be downloaded here. The report is from the Federal Trade Commission website.

As could be imagined, and reported in an article by Patrick Lunsford in an editorial at insideARM, a Kaulkin Ginsbert publication which serves as the industry sounding board and resource, Ms. Brill’s comments did not go over that well with many of the attendees.

In the aftermath of this article, some of the comments which arrived at the website ranged from heated to supportive.

“By HUGE majority, the most common FTC complaint is trying to collect money not owed. Many definitions to that phase. Wrong party,no longer enforceable by law, or creatively adding on fees not provided by contract, or statute. Doesn’t sound like the real issue is consumers that refuse to pay bills they know they owe and all about consumers that refuse to pay bills they know they ‘don’t’ owe.”

“Of course the FTC has some changes they want to make. If there were no changes to make; how could they justify their jobs. Pretty soon it’s going to be a crime to suggest that it is wrong not to pay back what you borrowed.”

“I am a consumer that ran into troubles – NOT OF MY OWN MAKING! (company went bankrupt owing me a ton of $$, including $30k worth of expenses on MY AmEx & Diners)…I have had to deal with the gamut in getting out of the mess. I can say that the DEBT BUYERS have consistently been the biggest ‘breakers of the law’…”

“The FTC just needs to target the violators and let the good agencies out there do their jobs. There are many honest agencies out there and the FTC needs to realize that. There is a ton of money that gets put back into the economy because of agencies and there is a bunch of money in the hands of Debtors that hide behind the laws and the low-life Attorneys.”

“Why do you think the credit industry is in shambles?? Because these regulations are in place to protect the consumers. Instead of giving these banks “bail out” money, they need to reform the FDCPA so it does protect the consumer, but at the same time, does not make collecting legit debts impossible.”

So, where do we go from here – both as issuers and users of credit?

From my experience, there is blame enough to go around – but the credit industry and those serving it (agencies, attorneys) deserve the majority of the scorn. From banks which – and this will sound incendiary – issue credit cards and charge exorbitant fees and interest charges to deliberately keep people in high-profit debt, to bottom-fishing low-life debt purchasers who use “legalized extortion” and worse to collect on their booty, this world is a sewer.

A good dose of “Roto-Rooter” is called for…and any reasonable and responsible member of the ARM industry will agree with me.

Stay tuned…this only gets better.

(To access the article quoted on this subject click here.)