Pay Up, Or Else! Debt Collection in the Recession

As we’ve seen over the last few months, the world of finance is changing at a rapid pace.  A number of programs have been introduced to head off rising foreclosure rates, and a new law was signed to curb abusive practices in the credit card industry.  While the government works to stabilize the economy and create a fairer lending system, Americans still have several hurdles to overcome before they regain their financial footing, in particular, realizing that our former economy no longer exists.

In recent years, many consumers found that they could live the American Dream. Homes were sold as an investment that could only increase in value over time, and credit was remarkably easy to obtain. Unfortunately, the economic crisis has shattered many of those dreams and left millions of homeowners in the middle of a nightmare – dealing with collection agencies. In the first quarter of 2009 credit card delinquencies reached a record 6.5%. With more and more consumers falling behind on their monthly payments, the climate seems ripe for the collection industry, but problems in the housing and employment markets have made their jobs a lot tougher. Unemployed consumers are more resistant to bill collectors, many of whom, in turn, have adopted more aggressive collection policies.

Most collectors have a very good understanding of the consumer’s situation.  An experienced bill collector will know that you are stressed, probably at least a little scared, and knows you want to pay the bill – most people do.  What you’ll find as a result is that many collectors are overly aggressive, bossy, and impossible to negotiate with.  This type of collector relies on your fear and ignorance of the laws that govern third-party debt collection. There are other collectors who are polite, pleasant, and persuasive.  These collectors are trying to get you to relax and let your guard down. Most collectors fall somewhere in between. They may begin the conversation politely, but become more aggressive if you can’t agree to their repayment terms.

The absolute best thing someone dealing with bill collectors can do is talk to them.  Tell the collector your situation, why you can’t pay, and when you think you will be able to start paying.   It is also very important not to make any promises you can’t keep.  Don’t bother telling them the “check is in the mail” because they’ve heard it a million times before.  At the core of your plan to deal with collection activities is prioritizing which of the bills you need to pay.  This will help you determine what will be left over to satisfy collectors.   Be sure to take care of your essential bills first (mortgage/rent, utilities, car loans, etc.).  Work with the collectors using the funds you feel you can put toward your accounts after your essential needs have been satisfied.

Collectors are often unwilling to work within the financial parameters that the consumer finds comfortable.  They want to be paid immediately. In this circumstance, collectors may employ an arsenal of tactics to secure the amounts they’d like.  Therefore, you should be aware of your rights should a collector cross any legal boundaries. The Fair Debt Collection Practices Act protects consumers from unfair and abusive collection practices.  The law regulates professional, third-party collection businesses, agents and attorneys, but not “in-house” collectors or employees of creditors who collect their own debts.

According to the Act, collectors may contact debtors in person, by mail, telephone, telegram or fax.  However, a debt collector may not contact a debtor at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless the debtor allows it.  Also, a debt collector may not contact a debtor’s workplace if the collector knows that the debtor’s employer does not allow personal calls. Collectors may also contact other people, but only to find out where the debtor lives, what their phone number is, and where they work.  Such contacts are limited; however, if a collector believes they have been misled, they may contact these individuals again.

As mentioned earlier, collectors are notoriously aggressive, particularly during hard times, and have been known to bully consumers.  However, the Act establishes that collectors may not harass, oppress or abuse debtors or any third parties they contact.  Examples of harassment would include threatening violence, using profanity or making continuous or repeated telephone calls. Also, debt collectors may not use any false or misleading statements when collecting a debt. To review your rights, you may access the Fair Debt Collection Practices Act here.

For more information, or to speak with a certified credit counselor please contact Cambridge Credit Counseling at 800-897-2200 or www.cambridgecredit.org.

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One thought on “Pay Up, Or Else! Debt Collection in the Recession

  1. Hi, Thomas:

    Touching base on the forthcoming book “Collateral Damaged: The Marketing of Consumer Debt to America,” by Charles R. Geisst (Bloomberg Press; Aug. 2009) which explores why the marketing of credit to consumers lies at the heart of today’s credit crisis (more below.)

    I’d like to send you a copy for your consideration as I thought Geisst’s insights might be of interest to your readers. Let me know if you’d like more information on his work and/or background. Thanks for your consideration and hope to hear from you soon.

    Best,
    Lauren

    Lauren Kroeger
    Nissen Public Relations
    P: 973.410.1234
    lauren@nissenpr.com

    COLLATERAL DAMAGED by Charles R. Geisst

    During World War II, U.S. consumer debt stood at $6 billion—a meager amount compared to today’s excess of $2.5 trillion. Debt has now reached historic levels while net worth has been rapidly declining. Credit addiction, which took hold with the increased use of credit cards in 1970s and 1980s, is now at the center of the global financial crisis.

    However, today’s credit crisis did not happen by accident. Rather it is the result of Wall Street’s orchestrated maneuvers to fuel what New York Times bestselling author Charles R. Geisst calls “cannibal consumption.” In COLLATERAL DAMAGED: The Marketing of Consumer Debt to America (Bloomberg Press, August 2009, Hardcover, $27.95), Geisst explains how a nation of savers became a nation of consumers and how Wall Street turned Americans addiction to spending into the toxic securities that have crippled the global economy. A thorough and penetrating analysis of how the marketing of consumer debt has radically transformed global economics, COALLATERAL DAMAGED connects the dots from consumer spending, to credit cards, to home equity loans, and beyond.

    COLLATERAL DAMAGED is a compelling and comprehensive history of consumer credit that traces its origins through the post-World War II credit boom to the meteoric rise of mortgages and personal credit cards. Geisst explains how credit and debt exploded in the 20th century as wealth increased, information sciences improved, and how the political environment encouraged borrowing to help fuel consumption. He also details how securitization aided and abetted “cannibal consumption” and how it helped destroy both the housing and consumer credit markets.

    Geisst also looks at the politics of debt and the numerous pitfalls of consumer borrowing and lending. He explores how the 30-year debt revolution, which began in the U.S., was subsequently exported to Britain and Europe and how markets and societies worldwide will change as a result of the current crisis.

    More than just an in-depth account of credit and debt, COLLATERAL DAMAGED also offers a series of cogent proposals for how the U.S. can restore order to the markets, including how debt can be brought back to the issuer’s balance sheet and why regulators must be educated in financial engineering, as are the architects of structured-finance instruments.

    For anyone interested in economic history or for those in the credit markets, COLLATERAL DAMAGED is an essential guide to understanding the current credit crisis. Charles R. Geisst has published eighteen books on finance and economics, several of which have appeared on the New York Times, Wall Street Journal, and BusinessWeek bestseller lists. He is a frequent guest on radio on television shows.

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