Debt Collection: Trick-or-Treat?

I bet I know what you’re thinking—trick. Tell someone you work for a collection agency and their reaction can pretty much be summed up with one word—yikes! That’s because ours is an industry that is typically thought of negatively. There are a few other professions I can think of off the top of my head that are met with a similar reaction. How many bad jokes can you think of involving car salesmen, IRS agents, lawyers, or cable TV providers?

Do you know why? In part, I believe that in each of these cases, society has let the actions of a few taint the way they feel about an entire industry. It’s just another case of the light shining the brightest on a few bad actors. It ruins it for the rest of us! Kind of sad.

As much as it pains me to admit, I know there are some collection agencies out there behaving dishonestly and treating consumers disrespectfully. But I think that only accounts for part of the reason the collection industry is not liked. Let’s face it, when money—sometimes a lot of it—is involved emotions can run high and sometimes you just want to shoot the messenger.

Good or bad, the fact is, the U.S. economy revolves around consumption. When low-cost money is available to consumers they spend, and when they spend it propels the economy. Those who provide the credit, goods and services do so expecting to be repaid. And when they don’t, that’s when we come in.

Have you ever stopped to think about what happens to businesses that don’t get paid? Bad debt can create serious financial problems for any business.

I’m sure you’ve heard the old saying There’s no such thing as a free lunch. We have a similar one that goes around our office. There is no such thing as an unpaid bill. They both are a takeoff of the economic theory that whatever goods and services are provided, they must be paid for by someone. In the case of the “free lunch” it’s true that bars in Milwaukee and other cities around the country used to advertise “free lunches” to get patrons into their establishments during the noon hour. And while they did not charge for the lunches—make no mistake—the consumed food was paid for with the profits made from the many beers and other alcoholic beverages customers bought to wash-down their lunches. And in the case of the “unpaid bill” believe me it will be paid for—in the form of increased prices, layoffs, tax increases, business closures, and unavailable services or goods.

Here’s a staggering and sobering statistic. According the Federal Reserve, the total amount of consumer debt in the U.S. exceeds $15.5 trillion!

In 2016, ACA International; the Association of Credit and Collection Professionals, hired global advisory firm, Ernst & Young, to conduct a study of third-party debt collectors. Their survey reported recoveries of $67.6 billion in 2016 alone. This recovered consumer debt had a significant positive effect on the nation’s economic health. Check out the results below:

Providing America Jobs
– Direct Collections Jobs: 129,262
– Direct Payroll: $5 B

Paying Taxes
– Direct State / Local Taxes: $677 M
– Direct Federal Taxes: $852 M

Giving Back
– Charitable Contributions: $17.8 M
– Employee Volunteer Hours: 521,700

Even with those few bad apples, a huge majority of this bad debt was collected by ethical debt collectors who treat consumers with the dignity and respect everyone deserves. There are many reasons why people do not pay their bills and reputable third-party collection agencies like A. Alliance can work through issues to find amicable solutions for both creditors and consumers.

If you find yourself in a situation where you have a debt you are having difficulty paying, there are resources out there to help.  For example, Ask Doctor Debt at www.askdoctordebt.org. is a free—literally free—website that can answer questions regarding debt collection and the laws that are there to protect you. Right now, they are in the process of updating their site so it will be bigger with more comprehensive information on a wide range of topics pertaining the credit and collections.  I can’t wait to see it when it’s done.

So…debt collection, trick-or-treat? I hope you’ll rethink your answer.

Best wishes for a safe and happy Halloween!

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years.

Image provided by: Derren Brown – wikimedia

 

Are Americans Arrested and Jailed for Owing Money?

I want to be very clear here. The answer is an unequivocal resounding NO!

A couple of months ago, the ACLU came out with a report which asserted,   “….Thousands are arrested and jailed each year because they owe money.”

Oh, please! I am pushing the BS button on this one. “There is not one consumer in this country that was put in jail for the failure to pay a debt. Our court system simply does not work that way.”  You don’t have to take my word for it.  The above statement is a direct quote from the National Creditors Bar Association’s response to the ACLU report.

The ACLU’s assertion that thousands of consumers are arrested and jailed each year because they owe money is displayed prominently in the first paragraph of their 97 page report. Later they actually get to the truth by writing, and I quote, “Laws in states and federal rules of civil and bankruptcy procedure expressly authorize debtors to be arrested and incarcerated for contempt of court.”  Wait, what? It’s not because they owe a debt, but because they were in contempt of court? BIG DIFFERENCE!

In the National Creditors Bar Association’s response, they said, “The ACLU’s report was not only factually inaccurate but was conveniently lacking in relevant truisms in an attempt to sensationalize unfortunate circumstances for individuals who fail to comply with court orders.” Yada, yada, yada…”Members of the NCBA as well as attorneys across this country know that in order for a court to send someone to jail in a civil matter, as opposed to a criminal matter, a complete and utter disregard for a court’s order must have occurred. Judges use this power sparingly otherwise the penalty for contempt would become superfluous.

Litigation is the path of last resort for a creditor.  The process is expensive and time consuming and results in a judgment only and not necessarily the payment of the debt. However, what the ACLU fails to recognize is that the courthouse can be the safest place for consumers if consumers chose to avail themselves of the ability to participate in the system. In court, a judge can supervise the conduct of an attorney and also ensure that the consumer, especially a self-represented consumer, has the required access to the protections the court can provide.”

Do you know what’s funny, ironic even, about the ACLU’s assertion that if you don’t pay your debt you will go to jail? If I said it I would be breaking the law!  That’s right, the Fair Debt Collection Practices Act (FDCPA) that was approved way back in 1977 explicitly prohibits debt collectors from making any threat that the nonpayment of a debt can result in arrest or jail.  Why? Because it is not true!

Each quarter our sister company, United Credit Service, Inc., puts out a newsletter. The 2018 1st quarter newsletter (vol. 6 issue 1) that went out in March was entitled: Fake News or News facts. Can you tell the difference? In it we discussed urban myths and false news stories, and how they pertain to us in the collection industry. As stated in the newsletter, some urban myths and false news stories are told to be entertaining, others are cautionary tales and still others are meant to control a narrative. Which category do you think the ACLU’s report falls into?

I think the NCBA said it best, ”The ACLU’s lack of understanding of the legal debt collection process including its failure to acknowledge federal and state laws which govern debt collection activity, court rules of procedure and the regulations imposed both at the state and federal level result in a report that lacked fundamental credibility, but more importantly hampers the ability of legitimate debt collectors to communicate with consumers to fairly and efficiently resolve their financial obligations.”

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 12 years.

image provided by: CC: Pierre Lecourt

 

Another Record for Household Debt: No Comic Relief Here!

Over the last few weeks my friend and colleague Lisa Brammer and I have been writing about the need to improve our financial literacy. Taken as a whole we consumers are ‘woefully inadequate’ in terms of our understanding of basic financial instruments and ways to manage our personal finances, let alone how our economy works and what drives it. 

Much of our writing has been in relation to Financial Literacy Month, which concluded this past April.  Many financial institutions, as well as Federal and State Governments, used this month to promote greater understanding of critical financial concepts and provide basic tools that are available to the public to help put their financial lives in order.

That is no small task, however, and given the state of household debt it is like turning an aircraft carrier on a dime: it just does not happen quickly.

Yet, as the old saying goes, a long journey starts with a single step.  And sometimes that single step is the hardest to take.  But take it we must or at some point face some pretty dire consequences.

More in a moment on another unique educational tool the Federal Reserve of New York makes available to the public.

But first, to underscore the need for personal financial house cleaning, the New York Fed just released its report on first quarter household debt. 

No surprise: we set yet another record for debt accumulation.  Among the findings from the Fed (read the report here).

  • Total household debt now stands at an unbelievable $13.67 trillion.  All one can say is wow!
  • Debt increased by $124 billion during the quarter.
  • This is the 19th consecutive quarter that household debt has increased.
  • Total household debt increased during this stretch by nearly $1 trillion ($993 billion).
  • Mortgage balances rose by $120 billion while originations declined to the lowest level since the 3rd quarter of 2014.
  • Student loan debt increased by another $29 billion to $1.49 trillion.
  • New auto loans grew to $139 billion.
  • Credit card balances fell slightly to $848 billion.
  • Notes the New York Fed: “As of March 31, 4.6% of outstanding debt was in some stage of delinquency. Of the $623 billion of debt that is delinquent, $417 billion is seriously delinquent (at least 90 days late or “severely derogatory”).”

Clearly, we have our work cut out for us and greater focus needs to be put on financial education before this trend ends in disaster.

In an earlier blog I referenced a site run by the U.S. Government called “MyMoney.Gov” (www.mymoney.gov). Its focus is on basic financial literacy and education, and also provides basic financial management tools to help consumers put their affairs in order. 

To my surprise, however, another tool has been made available by the New York Federal Reserve to educate young people in the hopes that earlier understanding will lead to mature financial decisions in adulthood.

The tool? 

Comic books.

Yes, comic books.  And before you laugh and wonder about another crazy government project there is method to this madness, and comic books have been used by the Federal Reserve for years (since the 1950’s) as aids for teachers and other educators to enhance learning.

According to the New York Fed’s web site: “The New York Fed’s Educational Comic Book Series teaches students about basic economic principles and the Federal Reserve’s role in the financial system.  Created for students at the middle school, high school, and introductory college levels, the series can help stimulate their curiosity and raise their awareness of careers in economics and finance.”

No Batman and Robin here however.  Here we encounter (on the planet “Novus”) “Mr. Murt,” “Flora” and “Q-seven, a blue cube from the planet Alpha-Numerica” among other characters.  Admittedly the comics don’t exactly have dynamic, action packed titles. Here you will find “The Story of Monetary Policy” and “The Story of the Federal Reserve System.”

Yet the intention is very good and the content easy to understand which makes understanding the fundamentals of how our overall economy works a little less wonky and a lot more every day.  If you are an educator, or even someone just trying to understand what the Fed does, or what monetary policy is, check them out at https://www.newyorkfed.org/outreach-and-education/comic-books .

The fact is it will take an abundance of tools and an early start to drastically improve our financial literacy.  However, it is crucial that this start now.  Even if taken in small steps these efforts will help educate consumers on managing their burgeoning debt before the effects become catastrophic.

A. Alliance is here to help.  We supply a key component in the economic chain to ensure our client’s recover their debts and keep their businesses operating smoothly in good times and in bad.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years.

image provided by: Alpha Stock Images – http://alphastockimages.com/