The Dark World of Debt Collection

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Despite my continuing time-management problem of too much to do and too little time in which to do it, I do make time to read the small selection of magazines I get at the public library on a weekly basis. Since I don’t watch TV and I spend very little time online, this helps me keep up with current events. It is better than scanning the headlines of the tabloids in the grocery checkout line. Since I am thrifty (the goal of financial independence is never far from my mind), I get the magazines for free at the library rather than buying them. That does mean that I am always two, three, or even four to six weeks behind everyone else who bought fresh magazines at the newsstand. This doesn’t seem to matter that much.

debt collectorsWhat does this have to do with debt management? Well, I save money on magazine subscriptions. I also don’t have them lying around the house, waiting to be recycled at the doctor’s office. And, as I blow through them, looking for something that I HAVE to pay attention to because it meets my interests and goals, I run across stories like this one.

The New York Times publishes a magazine in its Sunday edition. Most of the time, other than the 7 by 7 KenKen grid, there isn’t much in it of value to me. But the cover story for the 17AUG2014 issue was different. Hugely different. I knew that debt collection agencies existed. I always knew to avoid going into debt. Try not to borrow money you can’t pay back and keep the fattest emergency savings account you can, even if it means you never eat out and only watch movies when the library buys the DVD and in general you live cheap, cheap, cheap. You know the drill. I knew that those payday loan places can destroy you financially. But I had no idea that the debt collection business was so big. So unregulated. So likely to come after you years after you thought you had left a debt behind. So Dickensian, in fact.

I should have known. A year or two after Bill and I got married, we got a call from a collection agency with regards to his ex-wife. Someone was looking for her to get money on an unpaid, years-old bill and ours was the phone number that popped. I told the nice collection agent that we didn’t know where she was either, the last we heard she had run off to Oregon with a glass-blower, and if they found her to call us, as she owed money to us too! (She didn’t, but it helped the guy to think that we were on his side and not protecting her.) He laughed and that was the end of that. Now I wonder, going on twenty years later, if that really was the end of that.

Apparently, if you default, your debts will never go away! The bank or the credit card issuer takes a write-off when you default in bankruptcy court. If you don’t save ALL the paperwork, proving that the debt was legally discharged, the fun begins. Your bad, uncollected debt gets bundled with other folk’s bad debt (it is called “paper”) and is sold, for pennies on the dollar to debt collection agencies. If they can collect only ten cents of each dollar owed, they make a pile of money. So these agencies try really hard to get you to pay back money you thought you discharged years ago.

Really hard. Harassment, threats of law-suits, constant calls, every way possible to get you to cough up a few bucks. Your debts can be sold and resold, sometimes fraudulently, until you pay up or end up in court. It is even possible, in this maze of fraud, poor regulation, and identity theft, to be harassed for bills you did pay off.

debt collection game New York Times MagazineCheck out the New York Times Sunday Magazine for 17AUG2014 and read the article. Many libraries carry it. The magazine has a very nice flow chart showing many possible outcomes (nearly all of them bad, for you) or you can play their online collection agency game.

Clearly, the only way to win this game is to never play it in the first place. Otherwise, save ALL your paperwork related to bills, debts, bankruptcy, and repayment plans. The way the law is set up, a collection agency doesn’t have to prove your guilt. You have to prove your innocence. Think about that the next time you decide to charge another piece of clothing when you have a closetful at home.