debt collector
Posted by: Howard Dvorkin, CPA
Date of post: March 26, 2018

I’m fine with the professional ones. I despise the unethical ones.

Are debt collectors evil people or a necessary evil? I’ll choose the latter. Debt collectors are just doing their jobs. Of course, some do it too enthusiastically — and even illegally.

I’ve written before about shady debt collectors who imply you could go to jail for not paying them what you owe. You can’t. As has reported before, “You can’t go to jail for unpaid consumer debts.”

Debt collectors also can’t call your boss or bug your neighbors. If they do, they’re breaking the law — specifically, the Fair Debt Collection Practices Act, or FDCPA. You can actually sue debt collectors who try these tactics. Then you can collect from them.

Of course, not all debt collectors employ these practices. While there’s little research on the topic, I’d guess most don’t. They simply do their jobs, which is trying to recoup money that was lent to people who aren’t paying it back.

That’s also the position of ACA International, an organization that represents “credit and collection professionals.” Recently, ACA wanted to know how much money is being collected by the “third-party debt collection industry.” These are outside debt collectors that creditors hire to get money back for them.

(Imagine you run a credit card company, and some customers aren’t paying their monthly bills. You freeze their accounts, but they refuse to answer your phone calls. You might decide to hire a firm that specializes in debt collection. Even though you have to pay them, at least you’re getting back some of your money.)

ACA’s research was amazing. In 2016, “the third-party debt collection industry returned $67.6 billion to creditors, ranging from financial institutions to small businesses in local communities.”

That’s a staggering statistic. To put it in perspective, you could buy every NFL football team for that sum — and every Major League Baseball team.

ACA says that’s actually good for the economy:

  • “Third-party collection agencies directly employed 129,262 people.”
  • “Third-party collection agencies and their employees paid $852 million in federal taxes, and $677 million in state and local taxes.”
  • “Third-party debt collection efforts represent $579 in savings on average per household by keeping the costs of goods and services lower.”

Of course, ACA has a big motive to tout debt collectors’ benefits to society. Still, if their results are even half true, that’s significant.

More importantly, it’s easy to demonize professions based on horrific stories from a criminal few. Debt collectors who obey the law and behave professionally deserve respect. After all, they’re simply trying to collect money that is truly owed.

Thankfully, if you find yourself getting calls from debt collectors, you have options. For instance, if you can’t pay your credit card bills, there’s a debt management program, which can reduce your credit card payments by up to 30 to 50 percent while also freezing any penalties you’re assessed.

There’s also debt settlement, where you pay less than you owe. Even bankruptcy might be an option. Of course, when we’re talking about getting out of debt, every option has its pros and cons. That’s why I urge you to make a phone call before you answer another from a debt collector.

If you need debt help, a certified credit counselor working a nonprofit credit counseling agency is your best bet. You’ll receive a free debt analysis. Here’s how to find one who can help you make a debt collector lonely.