Megan McArdle writes about a new breed of debt collectors:

The last decade or so has given rise to a new version of an old phenomenon: the bottom feeding debt buyer. It’s often thought of as being linked to the bad economy, and perhaps it is, a little bit–businesses in trouble are probably more willing to look to their old collections as a source of revenue. But it’s also a result of increasing improvements in computer technology. It’s easier to aggregate very small amounts–say, hundreds of unpaid co-pays from a doctor’s office. Those debts can be unloaded at pennies on the dollar to firms which then use the interwebs to find their victims debtors and dun them for cash.

Often these firms don’t bother with the abusive high-pressure tactics that are used for large sums–the hourly wage on collecting $29.99 just isn’t a good use of resources. But that’s small comfort, because instead, they file blizzards of lawsuits against people who they can’t find, resulting in default judgements against someone who may not owe the money, or may not realize they owe. And those hundreds of aggregated small debts hit the credit reports of people who probably didn’t intend to skip out on a $15.87 termination fee when they canceled some utility, but now can’t get a car loan because there’s a black mark on their credit.

We’ve been getting calls lately from a debt collector. To be more precise, Clancy has. She doesn’t answer the phone when she doesn’t recognize the number, but I answered once when I was working on her phone. There wasn’t even a live voice on the other side of the line. Just a recording saying something to the effect of “The law requires us to notify you that we are a debt collector. Please stay on the line for the next available representative.”

I did not stay on the line. My thinking at the time was that there was no way that it was legitimately a debt collector calling for Clancy because she almost never gave out that number to anybody. She almost never gets calls on it from anyone that isn’t family or her work. How would they have that number? Neither when I picked up nor when we let it go to voicemail did they ever identify who they were trying to collect the debt from. Or for, which is also important because we’re pretty sure we don’t owe anybody money (except for her student loans) Most likely, I reasoned, it was someone that had a wrong number.

Then I thought of a possibility where it might not be a wrong number. It would be possible, for instance, that she put her cell phone down as a backup number and that they tried calling our line in either Estacado or Cascadia and since that was disconnected, they reverted to using her cell. When I gave Clancy her new phone, I took over her old one. Next time I will stay on the line just to confirm that they’re looking for someone else. And, of course, they haven’t called since. We’ve been holding on to that phone number just so that I can take the dang calls that wouldn’t stop coming before but haven’t come in a month. So apparently I am going to have to call them about a debt we don’t think we have from parties unknown.

Several years ago I got some mail about some money I allegedly owed what it looked like was the phone company. I called the number and dealt with a young woman that was incapable of doing anything but reading from a script. Any time I asked so much as who the debt was owed to she would read the part of the script accusing me of being unwilling to pay and outlining the repercussions of failing to pay. At some point during the conversation, I noticed that my name wasn’t even on the letter. So I asked who owed the money. She actually had the gumption to claim that was confidential information and that she couldn’t tell me and that if I refused to pay the money the repercussions would be…

I finally asked to speak to her supervisor, who was less stingy with the information. Though he was not willing to tell me who I owed the debt to or who I was supposed to be, he was willing to tell me what the debt was for. Apparently, someone was willing to pay $80 for a dress catalog. That was all I needed to know in order to know that the debt was absolutely not mine. As he explained the repercussions of what would happen if I did not pay the debt, I hung up.

More from McArdle.


Category: Market

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6 Responses to Accounts Unreceived

  1. Kirk says:

    I think they call it “debt tagging.” And here’s a clue they’re scammers: if they’re not willing to pay the postage to send you an actual bill, then the debt is most undoubtedly bogus.

    The magazine “Scientific American” pulled some bullshit with me once. After sending away for, and receiving, two free issues, I got numerous threatening letters that I owed them for 18 issues. They threatened to contact debt collectors, and even threatened my credit score. If it had been the magazines “Barely Legal” or “High Times,” I could see using such tactics to increase circulation: both demos for those magazines undoubtedly contain paranoiacs who’ll do anything to avoid attention.

    But “Scientific American.” WTF?

  2. stone says:

    What do they mean by “bottom-feeding?” Trying to collect unpaid debts from poorer consumers, rather than rich people or big businesses?

    This just seems to be an unsupported shaming term.

    Every phone number I’ve ever had, I’ve had wrong numbers. Debt collectors sometimes. Other times, just random people. I’ve never had someone refuse to leave me alone when I explain I’m not Tawanna or whoever.

    People change numbers and addresses a lot nowadays.

  3. stone says:

    I don’t see how they file “blizzards of lawsuits” for tiny amounts. Filing fees for a limited-jurisdiction lawsuit (under 15k, I think) are something like $80. And you also have to pay to serve them with process. That’s a lot to invest if you don’t think you’ll get anything back on a default judgment. A judgment is no help against someone with no assets.

    Small-claims suits aren’t a good tool, because businesses are limited in how many they can file.

  4. stone says:

    “If it had been the magazines “Barely Legal” or “High Times,” I could see using such tactics to increase circulation: both demos for those magazines undoubtedly contain paranoiacs who’ll do anything to avoid attention.

    But “Scientific American.” WTF?”

    Kirk, I’ll bet the average SA reader cares a lot more about his credit score than does the average High Times reader.

  5. trumwill says:

    I think the term “bottom-feeder” is for those that collect small, often old debts with limited information and then try to collect on them figuring that they’ll get someone to pay (even if they don’t have to).

    I have to claim ignorance on the lawsuits. Here’s the article McArdle links to.

  6. chic noir says:

    They use software that tracks you according to the address and phone number you had when you opened the account.

    i once had some bill collectors call me 2-3 times from India for an alleged 9 dollar debt.

    I was like dude, the 3 phone calls totaled more than the debt. what a waste.

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