UPDATE 10-24-11. When I first posted this piece, my intent was to feature and support the author, Gary Rivlin, in getting out the word about how Wall Street has financed its stepchildren on Main Street…and that these offspring are just as greedy as their parents.
With the Advent of Occupy Wall Street, it became quite evident that others had already noticed this – if their hand-scribbled signs were any clue. Interestingly, that same creeping and unhappy realization that something is amiss is coming about for people in the collections industry – you know, the third-party bill collectors who chase after all the bad debt. Even though the article was directed to this industry, anyone in debt will find it to be educational.
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Once again, my people, the collections industry, are caught in their age-old quandary – do they Follow the Golden Rule, or the Rule of Gold.
That this decision is made almost daily (and that the temptation of “going for the gold” rules seems to be the default choice) was brought into sharp relief in a recent WGRNradio.com interview I conducted with author Gary Rivlin in which we discussed his revealing and hard-hitting book, “Broke, USA – From Pawnshops to Poverty, Inc. – How the Working Poor Became Big Business.” (Find the Recorded Segment at this site under the tab “Radio Show.”)
This book, “with the potential to stimulate outrage – and political reform” as one reviewer described it, served as the inspiration for me to devote my show and this blog to this author, his book, and this particular callous – and even criminal – treatment of sub-prime borrowers in the U.S.
Some of you reading this blog may legitimately question my including the bill collector – no matter your personal feelings about the work they do – in this scenario. After all, they don’t run pawnshops and lend money to people who are “in between paydays.”
FACT: in one way or another, too many in the collections and bad-debt-purchasing field are complicit in furthering and sustaining the damage being done by predatory lenders. Whether it be that of actually collecting on such debt, or simply turning a blind eye on those activities in order to secure otherwise “legitimate” collections business, they are enablers at best and conspirators at worse.
The working poor are big business in this country.
No less than seven publicly-traded companies are in the payday lending business and six are in the check cashing business—or seven if you include Wal-Mart, which started cashing checks for a fee a few years back.
How a payday loan of $100 works:
- Consumer with an ID and proof of employment writes a check for $100
Consumer gets $85
- In two to four weeks, the lender cashes your check
- APR is 459 percent and you paid $15 to use $85
- Sadly, Social Security recipients comprise one-quarter of all these borrowers
Rent-to-own, pawnshops, subprime auto lenders—that’s just a few of the other multibillion dollar players that make up what Gary Rivlin dubs “Poverty, Inc.” These businesses manage to stay sooooo under the radar, despite their size and the millions of people they call customers.
But, they are a group as “venal as the most heartless hedge fund manager,” Gary states in his book (and this interview – go here: ) which details the “systematic, widespread economic abuse of the poor by supposedly respectable corporations.”
I may sound like an odd champion of this cause, or even viewed as an industry “turncoat.” After all, I cut my teeth in the collections industry, ran multi-state sales forces selling account recovery services to help businesses extract monies owed by “deadbeats,” and eventually created a successful Staff Outsourcing and Consulting firm that chased after (quite successfully) millions and millions of dollars. Unpaid loans of any sort, have always been a profitable source of business for me.
But, I only worked with clients who generated a clean receivable for reputable and honorable services and goods delivered to a customer who had – for whatever reason – chosen not to pay in a timely fashion.
Never would I have elected to chase down victims of mortgage fraud and overselling, payday loans, monies owed pawnbrokers or loan sharks, or credit card issuers.
Perhaps motivated by the excesses which have been exacerbated by the Great Recession, it is my purpose to expose the abusive practices in my industry, the bottom-feeding debt purchasers that violate federal and state statutes, and the rapacious lenders and businesses for whom they collect.
Today’s lending and collecting predators have no compunction against putting people at risk and then driving them over the line with their aggressive collection tactics. This is being proven true on a daily basis, and which is why this industry must draw a line in the sand and say:
Agencies would do well to take a close look at their clients…and the portfolios they provide to be collected on. The argument that there is nothing wrong with making money on the working poor sounds fair enough, until you realize that these businesses – and we include Wall Street and Big Banks – generally make more money dealing with the “single mom working as waitress” than more prosperous customers. They are easy to victimize, and they are too poor to mount a counter-attack.
This industry needs a gut-check. Are they willing partners in extortion, or savvy businesspeople who work hard to earn a legitimate profit on debt, regardless of its origin?
For all too many of them, I think we know the answerComment:
Gene Kelley says:
Your article about the working poor being overcharged every step of
the way was excellent. It cannot be debated, and anyone who denies it
has all of their bills paid and their eyes firmly closed.
The biggest problem I have seen with the whole mess is that so many
people involved are one dimensional in their attitudes and skills. The
process is very fluid and changing, a strange financial game in which
people get trapped because they never knew the rules from the outset.
One has to be able to play offense as well as defense. Michael Jordan
would have been useless if he was not a great defender.
It has always struck me when I went to collection industry conferences
that the people there had a very tribal mentality. This is a simple
obvious thought, but I’m just a dumb lawyer working in the sticks, and
my clients, debtors and collectors, are not in very good shape these
days. The industry needs to be re-examined because an orderly
collection process is absolutely essential to any recovery, which has
not even started as far as I can see.
Anyone who wants to collect should work with debtors first. Keep up
the challenging work.