In Defense Of Debt Collectors

If I were a debt collector, I would be pretty unhappy about an AP article that came out yesterday. It portrays the career as one for felons and bullies. And indeed, there are some collectors who do use unlawful tactics. But there are also bad eggs in other industries who sometimes break the law. There are dirty doctors, lawyers, cops and hedge fund managers, to name a few. I don't think the article fairly singles out the collections industry.

In my prior life as a consultant, I actually had the opportunity to meet quite a few debt collectors. It definitely does take a special breed of person to call people up and demand they pay the money they owe. Imagine, for a moment, calling a single mother struggling to make ends meet. She owes, say, $500 on her credit card and is several months delinquent. She tells you that she lost her job and needs her unemployment money to pay the rent and for food for her children. You can hear it in her voice that she's near tears.

Yet, it's your job to look past all that. She owes your company money. Her current financial situation doesn't matter much to your boss, or his boss, or the company's CEO: she needs to pay the bill.

So what do you do? You have to shrug off her troubles and tell her that she needs to pay. There was a contract in place where she promised to make payments on the card in accordance to what she spent. But do you have no heart?

Talk about a grueling job. What an awful thing to do day-in and day-out. You basically have to demand money from people, most of whom can't afford to pay. I know it's something I wouldn't want to do. Yet, is AP really playing fair in beginning its article about Buffalo's collection agencies by characterizing these collectors as follows:

When Tobias "Bags of Money" Boyland went looking for a new career after serving 13 years in prison for armed robbery and drug dealing, he quickly found something that suited his sensibilities: He opened a collection agency.

Really? Because this epitomizes anyone willing to help a firm collect money that it's legally owed? The article continues by explaining that many collectors have gotten in trouble with the law. It even presents a little data showing that complaints about collectors are up. Just look at this chart!



This looks bad, doesn't it? Look at 2008. It's increased so much that AP took the time to highlight the associated bar. Eyeing the graph, it looks like the bar went from around 71,000 in 2007 to 79,000 in 2008. That's an increase of 11%!

But wait a minute -- overall delinquencies were also way up. The time period in question was during a deep credit-driven recession. In other words, there were a lot more people getting calls from collectors too. If the number of delinquencies increased by 11% or less, then AP might be onto something. That would imply that complaints are increasing at a greater rate than delinquencies. So how much are delinquencies up from 2007 to 2008?

25% for Consumer Loans (which includes credit cards)
103% for Residential Loans (which includes mortgages)

That's the increase in delinquencies at the end of 2008 versus the end of 2007, according to the Federal Reserve. In light of this data, it's pretty clear that there were actually fewer complaints per delinquent account in 2008 than in 2007. The collectors are doing better, not worse.

Now don't get me wrong. There are some collectors out there who are awful people -- criminals even. But as I mentioned at the start of this post, the same could be said for any other industry. And while I admit that it takes a special kind of person to be able to bully struggling people for money, that's the job. Remember, delinquent borrowers aren't being unfairly singled out with these firms trying to steal their money; they had contractual agreements and aren't holding up their end of the deal. So these "bullies" aren't stealing anyone's lunch money -- they're trying to prevent people from stealing theirs.