Debt collectors: Why are they so abusive?
Debt collectors have few restrictions and perverse incentives to use extreme measures on debtors. Here are five of the worst abuses by debt collectors.
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4. Extracting money from grieving relativesSkip to next paragraph
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What are the right words to say to a person who’s just suffered the loss of a spouse? If you’re a debt collector, it’s simple: “You can pay by check or money order.” A Florida woman was struggling with the loss of her husband when the debt collector called. Even though she was not legally obligated to pay her husband’s bill, that did not prevent the collector from hounding her up to 10 times a day. One consumer-rights attorney, William Howard, observed: “Collectors are starting to realize just how much money you can get from someone when they are at their most vulnerable.”
5. The profitable, perverted lawsuit mills
Remember the “robo-signing” scandal, where some mortgage lenders were signing as many as 10,000 documents a month, claiming to know the circumstances of the borrowers? That’s child’s play compared to debt collectors, some of whom sign 4,000 lawsuit documents per day. It’s only the first step in a brilliant, ruthless system to get courts to do the dirty work for debt collectors. For as little as $40, collectors can take those robo-signed documents and file suit electronically. Then they often send a plain letter by first-class mail, notifying people that they’re being sued. In some areas, as many as 94 percent of defendants don’t show up in court, either because they didn’t realize they were being sued, or they’re too scared. Of the ones who do appear, sometimes only 1 in 100 brings a lawyer.
The result? The gavel drops and a “default judgment” is issued. Now the debt collector can sit back and grin, because the court now sees to it that the collector is paid, using threats of wage garnishment, arrest, strip searches, and jail. In New York City, a study found that debt collectors filed more than 500,000 debt-related suits between January 2006 and July 2008.
Debt collectors use these extreme methods because they’re expedient. Instead of generating six- to seven-figure revenues by working with debtors over several years, they salivate at the prospect of eight-figure revenues they can bank immediately by intimidating and harassing debtors. Until these five areas of abuse are eliminated by regulators and our elected officials, debt collectors will continue to hold their premier position in the hall of shame.