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The New Grim Reapers: Debt Collectors

by Asinus Asinum Fricat Sat May 24th, 2008 at 08:22:45 PM EST

If you have started this year buried in debt after enthusiastically embracing those pre and post-Christmas sales, Valentine Day, and Easter shopping sprees, think twice when you hear the doorbell! And leave the answering machine on, just in case. It could be a debt collector. And a mean one, threatening legal action.

Credit card debt has grown astronomically in the last 25 years to over $900 billion and is rapidly approaching the trillion mark, and that may have happened already. About half of Americans carry credit card debt: The families average $8,000 to 9,000; the individuals average $10,000 to $12,000, upwards to 50,000 and above.

Much of this trillion is due to borrowing on credit cards, bank loans and some people use their credit cards to pay off the monthly mortgage. And as consumer borrowing increases, so does the amount of people encountering financial difficulty in paying back what they owe. I know it too well, having finally paid off my two credit cards (via a credit union loan), I now only use the business one when I really have to. The news is just as bad in the UK (180 billion plus), Australia (50 billion) and Ireland (30 to 40 billion, perhaps even more as data is scant here). A few weeks ago UK Independent features an article on credit card debt. It makes sobering reading.

More and more Americans are becoming delinquent and are subsequently passed from the original lender to a debt collection agency. To collect due debts most collection agencies will use these three tactics: letters, telephone calls, litigation. Typically, debt collection agencies will begin the collection process by sending a series of notification letters, often allowing the debtor to enter into negotiations to repay the debt.

Trawling the "Internets" it seems that Bank of America Corp. has the highest delinquency volume, with overdue accounts valued at $5 billion. Bank of America defaults in October were almost 200 percent higher than in October 2006. Capital One, American Express Co., Discover Financial Services Co. and those containing "branded" cards from Wal-Mart Stores Inc., Home Depot Inc., Lowe's Companies Inc., Target Corp. and Circuit City Stores Inc. -- also reported striking increases in year-over-year delinquency and default rates for October. Most banks and other financial institutions holding credit card debt on their own books also reported double-digit increases in delinquencies.

This almost hidden line in one of the largest debt collector in the US has prompted me to write this diary:

"The debtor's ignorance is the best weapon we'll have in collections."

When you're facing a mountain of credit card debt, the stress can be overwhelming at times. Repeated collection calls, daily harassment, rude bill collectors, and seriously nasty letters all add to an already intense situation, and if you don't know your rights, it's the road to Hell.

There are some ways to mitigate this road to Hell. First, it's important not to succumb to scams such as companies promising to wipe out 100% of debts, for a small fee. Yeah, right, always remember the adage: there's no such thing as a free lunch! The smart thing to do is to agree to an amount to be repaid within a reasonable (and affordable) time frame. If you can't, one way to ease the burden is to look for government grants. This link here is filled with facts for consumers. And check out a life out of debts and you might sleep better at nights!

The following YouTube vid is worth watching as a cautionary tale (I can't seem to be able to post pics or videos but here's the source).

<object width="425" height="355"><param name="movie" value="http://www.youtube.com/v/ct3OsJacTSs&rel=1"></param><param name="wmode" value="transparent"></param><embed src="http://www.youtube.com/v/ct3OsJacTSs&rel=1" type="application/x-shockwave-flash" wmode="transparent" width="425" height="355"></embed></object>

And a little trivia for you: the song from Men at Work, "Who Can it Be Now", was written at a time when they weren't famous and were afraid to answer the door for fear of the dreaded debt collector! I know this because I knew them when I was in OZ.

<object width="425" height="355"><param name="movie" value="http://www.youtube.com/v/MOuEYSJCFqE&rel=1"></param><param name="wmode" value="transparent"></param><embed src="http://www.youtube.com/v/MOuEYSJCFqE&rel=1" type="application/x-shockwave-flash" wmode="transparent" width="425" height="355"></embed></object>

In Australia,GE (General Electric) Money has been hit last week by ASIC for their debt collection practices :
 They were calling and harassing up to 100 times per month and up to 10 times a day (even at night), they were also calling employers, neighbors and relatives !!!
by fredouil (fredouil@gmailgmailgmail.com) on Sun May 25th, 2008 at 05:28:37 AM EST
Their executives probably think that these customers should be treated the same as US customers--after the bankruptcy law "reform" enacted just in time for this financial fiasco.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun May 25th, 2008 at 10:36:04 PM EST
[ Parent ]
I paid off all my credit card debt this time last year. Best thing I ever did.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Mon May 26th, 2008 at 11:14:42 AM EST
Point one: while I know it is fashionable to assume that those in the US in great trouble with their debt loads have gotten to where they are by consuming unwisely and/or otherwise making individual choices (like too rich a home, too big a car or whatnot) the fact of the matter is most people who end up in trouble do so because of one of three reasons:

  1. Catastrophic illness of themself or a loved one;
  2. Loss of spouse (either by death or divorce/separation)
  3. Loss of job.

These three factors accounted for roughly four of five bankruptcies in the US prior to bankruptcy "reform"; since Democrats and Republicans came together to make it far more difficult, unlike for the wealthy (via their businesses), for middle-income Americans to discharge their debts, the credit crisis becomes the logical proxy for what in the past simply was classified as "personal bankruptcy".

Point two: You will never succesfully cast a progressive frame on this issue when you lead your argument with a reference to debt due to "shopping sprees". That's a right-wing frame you are employing, best to not even go there. (It's an inaccurate one to boot.)

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Mon May 26th, 2008 at 12:54:24 PM EST

I agree with your analysis of reasons for cc debt and can confirm it from my own personal history.  Dental problems and car trouble were the biggest sources of increases, but vacations added their share when my son was 8-13.  I only finally got rid of cc debt with a 2003 re-fi.  Fortunately I sold the house in L.A. in Nov. 2005 and moved to Arkansas, free of cc debt.

However unfortunate the "spending spree" remark may seem the bulk of the diary is useful advise.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 27th, 2008 at 01:21:57 AM EST
[ Parent ]
That was when the conditions were relatively good. With a special stress - medical, job, divorce, they end up suddenly with no access to one more shot of refi and credit and then, it breaks.

But now, I think we're going to start and see more bankruptcies rooted in overconsumption in the run-of-the-mill middle class. It's gonna be ugly.

by Francois in Paris on Tue May 27th, 2008 at 02:58:46 AM EST
[ Parent ]
Oh I have no doubt we will be hearing about these middle-class big spender exceptions to the general rule about financial hardship in America. Fact is, that is the way the neo-liberal yellow press will talk about such things, so as to show, with quite a broad brush, that none of the borrowers deserve help. They've done this time and again and there's no reason to believe this time will be any different.

Given current trends in health insurance in America today, in addition to the coming wave of unemployment and the impact this will have on family stability, I find it hard to believe, though, that middle-class profiligacy will be anything more than the seriously minoritarian exception to the rule it always has been viz. financial distress in America.

My larger point is that playing into this rightwing rhetorical frame is severely counterproductive. Unless, of course, you're not playing on the same side.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue May 27th, 2008 at 12:33:05 PM EST
[ Parent ]
The facts are never offensive and you are so hurried at defending your position, you forget to consider them and their implication.

What's going to happen is that the unusual hardship - loss of jobs, specifically - is going to become very usual and that's where widespread pre-existing over-leveraging is going to hurt. And that's where the newspeakly named "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" is going to hurt double-plus good with its special favors to the CC sharks.

You are going to see a big change in bankruptcy typology. Not just the big accidents anymore - hospital bills and no coverage - but the average Joe who got sucked up in the wealth on credit con. The focus is going to shift from the "hapless victim" to the neighbor or the friend "being denied the American Dream". It's new and it's going to have important political and social implications.

I don't think pointing that out is playing in the rightwing rhetorical frame. I my mind, it's very clear. It takes two to play the idiot debt game : the debtor and the lender, and if the debtor can't pay, fuck the lender. It shouldn't have loaned the money in the first place.

Oh I have no doubt we will be hearing about these middle-class big spender exceptions to the general rule about financial hardship in America.

No and that's the point. These "middle-class big spenders" won't be some other guy, unknown, everyone can scorn safely from a distance, or some victim of life you can pity but no, it's never going to happen to me. The "middle-class big spender" will be the rule and it's going to be you, whoever is sitting in front of the TV being served that discourse*, your sister, your father, your colleague at the office, your friend. It won't fly. People don't like to get the finger wagged at them.

(* Assuming that discourse is served for very long. I'm dubious. I don't think the lenders will be so stupid as to continue to openly confront and piss-off 2/3 of the country. They'll rather concentrate on restructuring and "helping" and do all they can to bleed a little more fluid from the stone for a few more years. Being aloof is not doing any good to the mortgage industry right now. I think the rest will learn.)

by Francois in Paris on Tue May 27th, 2008 at 03:09:51 PM EST
[ Parent ]
If in fact it is 2/3 of the population which will find fingers wagged intheir general direction, I agree wholeheartedly with your analysis, noting at the same time that much social regression in the US is predicated on small and powerless minorities of the populace (the sick, the poor, the battered, children, et c.) getting the shaft, and not large swathes of the white middle class (which would certainly be the case of we got to 2/3rds...)

If the pain hits the white middle class, then maybe we will see some movement. But, this being America we are talking about, we may not like the result.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue May 27th, 2008 at 04:15:05 PM EST
[ Parent ]
Yeah, it may come with a flag and a cross.
by Francois in Paris on Tue May 27th, 2008 at 05:44:39 PM EST
[ Parent ]
Thank you for lumping me with the right wingers. Perhaps you could read the diary again before making such assertions. I shall restrict my pieces to US sites from now on.
by Asinus Asinum Fricat (patric.juillet@gmail.com) on Fri May 30th, 2008 at 05:59:55 PM EST
[ Parent ]

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