Guest Blog: Let's Drive a Stake through the Heart(lessness) of Old Debt

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Let’s Drive a Stake through the Heart(lessness) of Old Debt

In a recent, article in a credit-collections industry publication, the author pulled back the curtain on one of this industry’s dark activities – the “living hell” that consumers go through year after year when their debt is sold to any number of third parties over what is a never-ending life span.

Although the article frames the debtor as someone who is “trying to hide from former liabilities,” the article does acknowledge that this debt may well have traveled from one agency or debt buyer to another…almost endlessly.  The article further suggests that, for a growing industry of debt-collection and debt-buying companies, those unpaid bills constitute a significant business opportunity both today and in the future.

If this is so, a great number of professional bill collectors themselves are, and will be, facing what some might consider a moral crisis when they are required to enforce collection on this type of account – they will be operating in the “Night of the Living Debt.”

The choices to be made by these collectors – and their employers – will determine the future of this industry and how it is viewed by every American.

As I outlined in a recent blog, “Apply the Golden Rule – or the Rule of Gold?  The Creditor and Bill Collector’s Dilemma,” decisions up to this point are driven almost entirely by profit.  But, at what point are these profits simply not worth the cost wreaked on beleagured and hounded debtors?

As the article describes it, “the longer the process (moving from agency to buyer to agency) continues, the more the debt can become unrecognizable as it is purchased and passed from one collection agency or debt buyer to the next.”

The most recent FTC rulings have been targeted at those agencies trying to collect these accounts that are out-of-statute or by using abusive techniques.  However, nothing in FDCPA prevents any collector or buyer from making contact.  And, if the debtor is somehow motivated to pay, well – what is so wrong with that?

Lots.

Heaven forbid that the debtor manages to make a payment – as this can be reported to credit bureaus and posted as a delinquency – enabling the statute of limitations to begin anew and the cycle to begin again…and again…

So, is it “all’s fair,” or is there morality involved?

To the Industry’s credit, ACA International’s newly installed President, Martin Sher, is setting out to improve the image of the debt collection industry.  To this end, he is soliciting all the members of the trade group to sign “The Collector’s Pledge” – a vow to treat debtors with dignity and respect which is patterned after his own company’s (AmSher Receivables Mgmt) “Birmingham Pledge.”

Martin and his brother, David, wrote this last year as a way to improve practices in the debt-collection industry.  Well intentioned and sincere, it reads:

• I believe every person has worth as an individual.
• I believe every person should be treated with dignity and respect.
• I will make it my personal responsibility to help consumers find ways to pay their just debts.
• I will be professional and ethical.  I commit to honoring this pledge.

This from the author of two books, one titled “How to Squeeze Blood from a Turnip.”

So, what is missing that the industry needs to adopt? – my modest suggestions…

First, we need to get rid of this Night of the Living Debt! scenario.  Why in the world should a commercial enterprise get a 100% write-off against their revenue and lower their taxes via bad debt, and then derive an income (and ongoing revenge) by selling this debt off for pennies on the dollar?

Consider the banks that we have bailed out to the tune of billions of dollars…now thanklessly and callously selling off the debt that they perpetrated on the uneducated and abused consumer.  They have taken advantage of the pubic three times – the original debt, the write-off, and the debt sale!  Every single dollar written off by banks should be exactly that – written off! and then forgiven.

Have they no shame or heart?  Ah, but let me not imagine human status to a corporation – no matter what the Supreme Court has to say.

Secondly, it is appropriate that the newly-instituted “code of the collector” be balanced by an equally thoughtful code on the part of that collector’s employer. It should include the right of an individual collector to decline to call or contact any account that, in whatever fashion, this collector finds to be morally objectionable.

Wow.  This could mean refusing to collect “payday loans,” or a bill padded with usurius interest, or debt which falls past the statue of limitations.

Perhaps, even debt being collected on a family or individual in such severe financial and/or medical straits (and providing proof) that it is clearly seen as being nothing more than legalized emotional battery.

The code should also include a promise by the employer to provide ongoing education for the employee in relationship management skills and advanced mediation tactics…and ethics.

Poll your employees – I am sure they could come up with some real doozies for the agency to adopt.

Oh yes – I have other suggestions…so, stay tuned to future blogs.

In the meantime, re-think your old, tired approaches and ask yourself how else you might more creatively deal with outstanding debt and whether or not the price to pay for chasing old, poorly documented and out-of-statute debt is worth the cost.

This more heart-centered business approach may well surprise you with a benefited organization that will produce greater and more profitable collections, less turnover along with increased morale, and even a grateful public.

Now, that is the sort of press our industry needs.

Jerry Ashton is a 30-year-plus entrepreneur in, and veteran of, the field of accounts receivable controls, credit, collections and customer service.

Jerry founded and was President of CFO Advisors, Inc., which enjoyed a 15-year-run as a respected and effective go-to firm engaged by companies wanting CFO’s unique approach to receivables management. CFO Advisors gathered in a variety of clients ranging in size from Fortune 50 to SME’s. Its staff, both off and on-site, helped manage receivables of over a quarter-billion dollars annually. One specialized 12-month project generated $1,000,000 in revenue for the company and millions in otherwise lost revenue in distressed A/R for the client.

Jerry occasionally chairs national and International conferences in his field (the most recent being last summer’s London meeting of the IQPC – International Quality and Productivity Council), consults for interesting clients who want to “get the money and keep the customer,” is a good friend, mate, father and grandfather, and currently working on a book to help people survive the “Great Recession,” Written Off – America and Americans.

For more information about Jerry visit http://writtenoffamerica.com.