Do Not Be Fooled By Friendly Debt Collectors

The New York Times is reporting that debt collectors is working to shed their bad image of harassing people, but do not be fooled by that.

Collectors are being trained to appear (and I think the operative word is “appear”) to be more helpful and sympathetic, and act like you are a force for good. For example, they have taken to call debtors “our customers,” and they are pushing consumer tips on the ideal way to respond when a collector comes calling.

So many people are in so much debt that the government says bill collecting is one of the fastest-growing businesses. By 2016, employment in it is projected to exceed half a million workers, up 23 percent in a decade.

The number of borrowers who were at least four months behind on a credit card, auto, house or installment loan doubled after the 2001 recession, to nearly seven million, according to credit bureau data analyzed by a Federal Reserve economist.

And, it debt collecting is big business money wise as well. In 2005, 150,000 such debt collectors took in $51.4 billion, a PricewaterhouseCoopers study indicated.

ACA International, through its foundation, is developing a personal financial management course, which it plans to post on its Web site next month and promote in national newspaper advertisements. A draft version offers a view from the collector’s perspective: It recommends that consumers who are victims of identify theft contact the Federal Trade Commission, but does not say that they can do the same if they have complaints about collectors. “You attract more flies with honey than with vinegar,” the ACA foundation’s chairman, William E. Wilcox, said. “This is just a start.”

But the other reason that the industry is requesting that collectors put a smile on their face when collecting is that they are under more scrutiny of collectors by legislators and regulators.

“Collectors are in a jam,” said Robert M. Hunt, a senior economist at the Federal Reserve Bank of Philadelphia, who follows the industry. “The business is so big and the anecdotes so nasty, they can’t hide.” Much better, Mr. Hunt said, to take the initiative. Many people said the collectors misrepresented the character, amount or legal status of a debt. Others said the collector harassed them by calling repeatedly or continually, used obscene language or threatened dire consequences if no payment was forthcoming.

And, then come the lobbyist. The National Association of Retail Collection Attorneys, has hired a leading public relations firm, Waggener Edstrom Worldwide, and started pressing its arguments on Capitol Hill.
“When changes are made by Congress or regulators, we want to make sure there are no unintended consequences,” the association’s president, Robert G. Markoff, said.

I think there are a couple of things to keep in mind with these new practices. First, whether a debt collector smiles and tries to appear helpful, his or her job is still the same. To be the squeaky wheel that you feel compelled to pay regardless of your more important obligations. His or her job is to push you and prod you into either paying the creditor some money or to put the creditor in a better position by getting you to make promises. Second, regardless of his or her demeanor, if you cannot afford to pay your creditors, as is the case with many people on the cusp of bankruptcy, no amount of niceness is going to make this possible. Besides, I would suspect that when you finally get around to telling the collector that you cannot pay anything, that good attitude will change very quickly.