Debt's Grim Reapers

Article excerpt

Byline: Gary Rivlin

America's overconsumption binge has left consumers with piles of unsettled bills. Meet the debt Collectors going to scary lengths to collect.

We all know the drill. Threatening letters that arrive in the mail, a phone that constantly rings.

But Alexis Moore needed a job, and needed one fast "if I didn't want to end up living on the street," she says. Moore vividly remembers her first day working as a bill collector. A manager handed her a spiral notebook of "talk-offs"--sample scripts--and then, after a short pep talk about daily quotas, "let us loose," Moore says. Sixty people sat crammed into a small Sacramento, Calif., office, each working the phone in a cramped cubicle, overseen by a single supervisor who prevented collectors from breaking the rules--or sometimes ensured that they did.

"Every day I was on the job, I was asked to break the law," says Moore. She primarily called debtors living in California, where strong consumer laws protect people from harassment. Yet when someone would hang up on her, "I would get direct orders to immediately call that person back"--and to keep calling until they talked. Federal law strictly forbids a debt collector from informing a third party--a close friend, a co-worker, even a parent--about a debt, but Moore's bosses told her to ignore that, too. "When we couldn't reach someone, we were instructed to contact a neighbor and ask them to pin a note to a person's front door, saying to call us because they owe us this money," says Moore. The collectors were even ordered to phone people's relatives to try to enlist them in the cause. "Those who didn't like it were told, 'You'll do what it takes or you'll find another job.'?"

"The ones who weren't good at collecting were under constant pressure," Moore says. "Their supervisors would tell them, 'Fucking threaten them if you have to, just collect the fucking money.'?" (As she says, "the 'f-word' was used all the time.") Moore wasn't fluent enough to handle collections in Spanish, but she understood the language well enough to know that at least a few of her co-workers were threatening debtors with deportation. Others would intimidate people by saying, "We know where you live so you better pay up." Moore worked the phones for five years at various collection agencies before setting herself up as an industry consultant.

These days there's no shortage of potential business for Moore. Think of the country's bill collectors as the people who clean up after the parade. The prolonged binge of overconsumption that Americans enjoyed through the great crash of 2008 means there's plenty of bad debt to go around. Credit-card companies alone charged over $100 billion in 2010--and that doesn't include all the money people owed directly to hospitals, cellphone carriers, auto lenders, and a long list of other businesses. And of course this time of year means many consumers are feeling a financial squeeze, especially after a busy holiday retail season.

Though these should be rich times for the debt-collection industry, it's not easy prying money from people who simply don't have it. Collection rates are way down since 2008: according to one industry estimate, where debt collectors once recouped 30 cents of every dollar owed, they're now bringing in 20 cents. And with their profit margins shrinking, many collectors are putting an even tighter squeeze on those in the red.

Is it any wonder, then, that the Federal Trade Commission receives more complaints about debt collectors than any other industry--or that earlier this year the agency reported a threefold jump in grievances since 2002? More than 50,000 people contacted the FTC in 2010 to complain about severe harassment--a 25 percent increase over the number in 2009. Another 18,000 complained that a collector used obscene or otherwise abusive language (a 22 percent jump in just a year), and more than 4,000 consumers said a collector threatened them with violence--a startling 66 percent rise. …