For Bill Collectors, the Recession Means More--and Tougher--Work : Debt: Added pressure or stretched-out payments may be needed. And debtors these days include more middle-income consumers along with the customary deadbeats.
As she dialed the telephone and asked for Robert, she hoped this call would be different.
“Hello, this is Mrs. Pierce,” she said soberly, identifying herself as a bill collector. “I’m calling in regard to the $14,000 owed on these credit cards.”
It was a quick conversation: “Contact my attorney. I’m filing for bankruptcy,” Robert said and abruptly hung up.
Mrs. Pierce, whose real name is Cora Smith, wasn’t surprised. Responses such as Robert’s have happened countless times before and are occurring more often in these days of economic uncertainty, said Smith, who works at United States Credit Bureau Inc. in Los Angeles and whose alias is a remnant of collections’ early days.
No longer are collectors merely pursuing deadbeats who have no intention of paying their bills. A growing percentage of collection accounts are those of middle- and upper-middle-income consumers, who found credit easy to get in the 1980s.
Many of today’s debtors have run into unforeseen expenses or have had to face an unexpected cash-flow crisis, often caused by the loss of a job during the current recession, analysts said.
The number of accounts that collectors are handling has swelled, with the greatest jumps in the last two years, industry observers say. But agents say it is tougher for them to collect on debts as more personal bankruptcies are filed--creating more work and less reward.
The collection industry is one of the more reliable economic barometers. Smith and other collectors say that, from their perspective, the nation’s economic climate is dismal with no sign of improvement in the near future.
In 1990, collectors nationwide tried to collect $66.5 billion from debtors. The number of first-time debtors could soar in the first few months of 1992, when bills from holiday buying come due, said Les Kirschbaum, president of Mid-Continent Agencies Inc., a national collection agency based in Glenview, Ill.
“We’re seeing a ton of business this year,” said Kirschbaum, who estimates that his agency is now handling 20% more accounts than last year. “Collections usually go up about 30% after Christmas.”
At Smith’s company, agents have witnessed similar growth in the number of accounts handled. The agency, which represents MasterCard, Bank of America, First Interstate, UCLA, Toyota and Nissan, has seen consumer willingness to pay promptly fade over the years.
Smith--whose desk displays a placard saying, “I consider the day a total loss unless I receive hell from someone!”--has been in collections for 11 years and has seen changes in the attitude and makeup of debtors.
Years ago, “when the account came to us, we would make initial contact and we’d negotiate with them to pay the account balance in full,” she said. “Now, we’ve had to change our tactics a lot and try to offer cash-out settlements or maybe take a longer payment schedule. Eleven years ago, we would basically split (a debtor’s account) in two payments. Now, with the economy the way it is, we’ve had to take the monthly payments.”
As it becomes more difficult to collect debts, collection agencies “tend to put a little more pressure on consumers than creditors would because they want to get paid as quickly as possible,” said Don Badders, president of the National Foundation for Consumer Credit, which arranges ways for consumers to re-establish good credit lines to avoid collection agents.
“They usually call more often and write more letters so they don’t have to hand the account over to an attorney,” he said. “But most of them have pretty much cleaned up their act from a few years ago because of the tighter laws.”
Before the Fair Debt Collection Practice Act was enacted in 1978, collection agencies would “pull out all the stops to collect,” Badders said. The act was established to regulate collectors more closely and eliminate the use of intimidation, threats and foul language.
Mel Shaw, president of United States Credit Bureau and Smith’s boss, said the collection industry is an extension of the creditors and that his line of work has been unfairly portrayed.
“Somebody’s got to do it. It doesn’t mean we’re bad guys,” Shaw said in a crusty voice as he puffed on a Marlboro.
“You can always find the abuse in collections,” he said. “There’s abuse in every field. Nobody likes bankers, everybody hates attorneys, and I would hope that people would look at a collector a little higher than they would look at their local attorney. Collectors are professionals; we’re just part of the credit industry.”
Other agents say that although today’s consumers are more knowledgeable about earning their incomes and negotiating business deals, many lack the skills for managing their money.
“I think today’s debtor has matured,” said John Lindley, owner of the Collection Agency in Huntington Beach, who has been in the industry for about 30 years. “But if an individual is having trouble paying one bill, then he’s having difficulty paying many bills. Many of the people now having financial problems don’t have the skill required to manage money properly.”
More Collections
The amound of money collection agencies in the U.S. collect has steadily grown in past years, peaking in 1989.
