Saturday, June 16, 2012

The Dark Side of America

His name was Peter Labruno.(A suedonym) His voice echoed South Philly. He made it clear that it would not be a problem if the subject creditor's identity was compromised. He went on to tell me that his company received fifty dollars per credit report from their "clients." He was referring to the debtors' credit reports.

Peter worked for a collection agency. The professional description is a "debt organization service." He emphasized that he "had no issue with his associates selling "clients" credit reports "out the back door."

In this case the ready buyer for this wealth of private information was AmericaQuest, a subprime lender. When I asked Peter if it might create a compliance problem, he assured me that "most of the guys working here have felonies on their record. It's not a big deal."

That wasn't reassuring! But, it was pretty typical!

The debt recovery industry is completely out of control. Neither, Mitt Romney, the expected Republican nominee, or the incumbant president has had much to say about it. Maybe it's time both parties took a fresh look at it. There may be reasons for the reluctance.

When someone proposed the idea of a "S.A.F.E. like" industry test for debt recovery most political leaders sat on their hands. Maybe they thought that we were "overreacting?" Perhaps they also knew that key contributors to their campaigns might be impacted. True, there have been overtures such as the Fair Debt Recovery Act. But the questions regarding (a) where the collectors sat, (b) the ethics used by these collectors and (c) the actual recovery in relation to the original debt were disregarded.

We need to put this obscure industry under the microscope. Have you had a call from "Jerry from New Dehli" or "John from Taiwan?" If you don't have any "dings" on your bureau, perhaps not. Consider yourself lucky if your don't!

The fastest growing crime in America is identity theft. The debt recovery industry has little if any regulation. Most of it has been outsourced to Asia, the "home of the master computer hacker."The problem is awareness. Only those who have missed a payment or have suffered through some mistake have entered into this private hell. It's called, "pay up, owe it or not, or we'll ruin your credit!"

This is simply the "ugliest part of America." It is the conclusion that "we will ruin your life, because your credit often reflects your character. We will harass you unmercifully if you don't pay...whether you owe it or not! Doesnt't matter if it's $50 or $50,000."

Todays global landscape includes a new breed of debt recovery specialists. They are tough, unscrupulous and take no prisoners. In the logic of debt collectors, the "Golden rule" is for losers and idiots. What's important is making those who owe pay. And if they don't? Haunt them until they see the light and pay up! Period!

Have we reached this point? Afraid that we have! What's next? The most common solution is bankrupcy. This has become an accepted "tool." Twenty years ago, it was scorned, considered a last ditch option for the hopelessly indebted. Today, it is actually encouraged. Knowing that the alternative is "Jerry from New Dehli" and a distinction of being a person lacking in "moral turpitude," the debtor acquiesces.

The question becomes, "is recovering what are generally nickels and dimes worth it?"

After all, the original creditor is lucky to receive "tens cents on a dollar" from debt recovery companies! In the case of a $1500 credit card debt, that equates to $150. Okay! $150 is better than nothing! But what if the debt is half that? Or one-third that? Now we're talking about $50 to $75. And the amounts continue to grow smaller.

Hospitals commonly turn over delinquent accounts owing $30 to collection agencies! I guess they need the three dollars! Unfortunately, these "nickels and dimes" can force a borrow into less desirable credit terms on a major purchase, such as a home or car loan. Good riddance? Serves the "deadbeat" right for not paying! BUT, what if they don't actually owe this money? Amazingly, this is often the case!

Problem identified. Now for a solution!

Let's start by banning all offshore help. It's time for "Jerry from New Delhi" and "John from Tawwan" to say "adieu." A legislative ban of these delightful entities will help! We need to make it clear that this job is "verboten" to all help outside our borders! For those who don't believe it, a $10,000 fine per occurance will await them!

Then, for those inside the borders, a "100 question exam, following an F.B.I. record check," to make sure that there has been no "funny business" in the applicants' past MUST BE IMPLEMENTED. The exam will he rigorous. It will rival the S.A.F.E. exam in difficulty for the taker.

Any collection under $500 will be disallowed for reporting! In other words, if the collection is less than $500, it cannot be reported to the bureaus. If it is, the perpetrator will face a $5,000 fine and a twelve month incarseration in a correctional facility. Nine dollar an hour clerks in accounting departments will not be spared.

Why would we be so willing to give these "deadbeats" a break? Two reasons:

(a) The company might receive 10% of the balance. Selling a $500 collection to a collection agency for $50 isn't going to make one rich. But it can seriously hurt the recipient! Is it really worth it! Has anyone heard of the Golden rule? Or, have we turned it all over to computers?

(b) The second reason is pretty obvious! We want to build a middle class, not destroy it. Simple credit dings can be the difference in elevating a lifestyle or not. True, the original creditor has the right to recover his fifty bucks. But the effort to recover the fifty dollars is now imbeded in the system. A better option would be to encourage companies to keep the debts in-house and work out repayment terms with their borrowers.

The end result will yield more positives than negatives. Such as more borrowers with better credit scores. Not to mention fewer bankruptcies! It's time to "stop tripping over a dollar to make a dime."

In short, protecting middle class interests is more important that making $50. We must look past this "he owed it, or they said that he owed it! Let him pay or make him pay!" It's important for credit reports to be cherished, and protected. We need to give all of our middle class borrowers the benefit of the doubt!

The debt recovery industry is the "dark side of America." We need to get it under control. REALLY under control. It should be as regulated as Securities or Mortages. If anything, more so.

It's time for political leaders to stop running from this issue. They need to deal with it. It's the unspoken nightmare of the middle class. It MUST be addressed.


We must get past these dogmatic vocalists who think that "if they owe it, they owe it. No quarter. To hell with them! May 'em pay." This point of view may give gratification to a few. But is it condusive to bettering the country?

For those who don't care, think about this: "What if it were you?" Don't say it couldn't be. Never say never!

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