By Russ Wiles
The Arizona Republic
July 25, 2004
When multiple sclerosis left Annette McGinnis unable to work, the Tucson, Ariz., woman relied on credit cards to make ends meet until her disability kicked in.
"I had five or six cards, and I maxed them all out," she said.
Before long, McGinnis was falling behind on minimum payments for debts topping $10,000. Collection agents took on her accounts.
"I was getting three or four calls a day, sometimes from the same company, and these people were often nasty and rude," the former nurse said. "I'd just sob after some of those phone conversations."
McGinnis isn't alone. With millions of consumers burdened by mounting credit-card debt, bank loans, unpaid medical bills and more, collectors are busier than ever.
Nationally, more than 6,500 companies pursued $135 billion worth of delinquent consumer IOUs placed for collection in 2000, up from $73 billion a decade earlier.
The typical collector attempts 33 phone calls an hour in hopes of recovering money from past-due accounts, says ACA International, a Minneapolis-based trade group. Only about 11 percent of the debt is recovered.
Fueled by Americans' love affair with borrowing, the collection business has become a growth industry, with employment projected to swell by 35 percent over the next six years, according to the Bureau of Labor Statistics.
Past-due accounts tend to increase during periods of rising unemployment and slow economic growth. Consumer debt problems can reverberate, causing businesses to fall behind in their payments, perpetuating a vicious cycle.
"If businesses can't collect, they lay off people, and it becomes a domino effect," said Char Cody, owner of Select Recovery, a Scottsdale, Ariz., collection company that focuses on commercial accounts.
Federal and state laws provide important consumer safeguards. In particular, the federal Fair Debt Collection Practices Act bars collectors from using threats of violence, obscene language and other egregious behavior. These rules don't stop harassment, as McGinnis' case showed, and they certainly won't wipe clean the slate on legitimate debts.
But they can help avoid some of the worst intimidation.
If you're contacted by a collection agency, consumer advocates say the first step is not to ignore the notification. If you fail to acknowledge a notice or phone call, a collector can place a demerit in your credit files after 30 days.
You can stop further contact by requesting this in a letter to the collection agency, although it's possible another agency will step up.
Many collectors work on commission, a situation that can encourage aggressive tactics. Also, some agencies buy bad debts from merchants, banks and other businesses for pennies on the dollar, creating huge motivations to collect as much as possible.
"It's a highly incentivized business," said Rudy Cavazos, a spokesman for Consumer Credit Counseling Services Southwest, a unit of Money Management International that helps people handle creditor relations.
In cases of repeated phone calls, it's wise to document the contact, Cavazos said. The log should include the name of the caller and company, the date, time and other pertinent facts. If push comes to shove, an attorney can use this information to force a collector to back off. It can also help when complaining to the Federal Trade Commission or state regulators.
McGinnis sought help from CCCSS, which worked out a debt-repayment plan with creditors and got the collection calls to stop.
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