There are many people who see debt as a useful tool. They say, “Generally, speaking I agree that it’s a bad idea to run up a bunch of debt but as long as I pay if off each month it isn’t so bad. In fact if I do that I’m beating them at their own game if I get some perks for using the card.”
And then there is the argument that some debt is really good debt.
What most people fail to include in their calculation is risk. Debt always adds risk to our life, even when we think it is “manageable debt”.
I read 3 articles in just the last week that address 3 completely different scenarios, but each point out the danger of debt.
An example related to medical debt
One of the largest medical debt collectors has come under fire for its practices in Minnesota and some other states. Some hospitals have acquired their services and placed Accretive employees in their emergency rooms as “financial counselors”. These financial counselors greet patients who are checking in at the emergency room to collect sensitive medical and financial information. If it is determined the patient has previous unpaid medical bills with the hospital, they use high pressure tactics up to the point of threatening to withhold treatment of their current medical issue if these previous bills are not paid on the spot.
An example related to student loans
In the Health Care and Education Reconciliation Act of 2010 Congress shifted the government away from the backing of loans by private lenders. This has resulted in a migration of many of these loans to non-profit service providers. This migration process though has been a bumpy one. Some have seen their payments unexpectedly go up due to this resulting in a real torpedo to their budgets, while others have seen their payments go down, which might seem to be good except that it potentially puts the borrowers on the hook for considerably more in interest down the road.
An example from a debt collection agency
This last one relates the story of a West Virginia woman who started receiving calls from debt collectors regarding a debt and threatening they would take action to take her home if she didn’t pay. Problem is, it’s against Federal law for a debt collector to make threats they are unable to carry out. And more importantly in this case, it wasn’t even the lady’s debt! She immediately sent them a cease and desist letter via certified mail requesting that they no longer contact her about a debt that wasn’t hers. 23 minutes after post office records show the letter was received she started getting mysterious hang up calls from a number whose caller id indicated it was a local county government office. She called the number back but they had no record of making such calls. A couple of days later she received another call from someone who used extremely threatening and vulgar language with her and threatening sexual assault if she did not pay her bills. She contacted local law enforcement officials who traced the call back to a debt collector in Los Angeles who was using a spoofing technique to make the calls seem to come from local officials.
She sued the company and has been awarded a judgment of over 10 million dollars but will likely never collect anything. The debt collectors’ office has been shut down. It was a subsidiary of another holding company. This is a typical practice of unscrupulous collectors. When things get too hot because of the illegal activities they are participating in, they simply close up shop and pop up later somewhere else.
2 Things I am Not saying
First let me make one thing perfectly clear. If you have a legitimate debt and have the means to repay it you should do so. Psalms 37 tells us the wicked borrow and do not repay. However, if you have found yourself in a difficult circumstance financially, you should not be subjected to the verbal abuse and illegal activities that are perpetrated by some collectors.
Secondly, I am not in any way saying all debt collectors are crooked. There are many honest debt collectors that perform a useful service to society. I am not talking about these collectors. The problem is there is a substantial and growing percentage of debt collection agencies that do break federal law with the collection practices on a daily basis. These are the collectors I have a problem with.
So what is the moral of the story.
The bottom line is if you are living a debt free lifestyle these are issues you don’t have to deal with. (Or as in the case of the West Virginia lady you might actually win a large judgment due to their false and illegal practices.) These stories are not uncommon. I did not go looking for these stories, they just popped up in the course of the natural news feeds I read each week.
By playing games, trying to “beat the system”, and earn a couple bucks here or there in perks, you are playing with snakes. If you play with snakes long enough you are likely to get bit.
And lastly, from a personal standpoint, when I hear about some of these stories from gross incompetence to in the worst cases a blatant disregard for federal law, I ask myself, “Are these companies that I really want to continue to do business with?” For me the answer to that question is no. I’m not going to play those games anymore.
What experiences have you had with debt collection agencies?