This series is by Patrick Sahr, a Naked Capitalism reader and a former debt collector. Sahr is a graduate of Buffalo State College’s Print Journalism Program.
[Matt here]: This series is running because it’s important to understand the culture of debt collectors, who are increasingly a form of policing in our society. One in seven Americans is currently being pursued by a debt collector.
Debtors: From Credit Enthusiasts to Cleaned Out in Seven Years
Debtors are different today than they were in 2004. In 2004, debtors were generally, in conversation, wildly arrogant and optimistic. Many were wise enough to know that paying a “charge-off” sometimes adversely affects a credit score and others bragged about securing additional lines of credit despite having others in default. The type of debtor you speak with is contingent on the product you are collecting. The recently charged-off sub-prime portfolio, in 04, was filled with arrogant knuckleheads who bought the bank’s program of wealth transfer hook, line and sinker ignoring their modest wages and assets. They leveraged everything they owned to the max just like the banks. The defaulted amex black card portfolio contained penny-ante corporate villains and upper-middle class people at the beginning of an unpleasant journey, a titanic professional and financial storm. Letting go of your credit cards is the recommended first step when you batton down the hatches in preparation for that storm.
In 2011, the tone was much different. People answered the phone, happy to tell you that haven’t got it so the bank is not going to get it. They weren’t happy. They were just happy to have a simple solution to the unpaid credit card problem: No money, so it’s not getting paid. If only the solutions to food and rent problems were as simple. People weren’t delusional about paying next week or next month anymore, they simply didn’t have it and weren’t going to have it in a month, two months or more. Almost every single consumer credit report had a foreclosure on it with about five defaulted lines. Most were bankruptcy candidates. The fifteen contacts you made in a day dwindled to five. As the banks imposed their own program of austerity on the middle and working classes, access to credit and real wealth plunged in the United States. The banks were not throwing any lifelines out and high unemployment created an enormous new class of debtors who are responsible but broke.
The Economy Changed Collections, But the Industry Remains the Same
Agencies now enforce federal and state regulations with more fervor, although selectively, so the rampant violations are confined to only a handful of collectors. Overall, collectors are not earning as much in commission as they once did, the result of better compliance and a nationwide reduction in wealth. One Buffalo agency pink-slipped roughly 100 collectors in the early months of the Recession in 2009. The large agencies remain open for business and continue the revolving-door hiring practice and collections as a whole seems to grow. The last three years has brought many smaller, payday loan collection agencies to Buffalo. These offices usually employ fewer collectors and require less start-up money, so they are ubiquitous in Buffalo. The payday loan collection racket is where “Bags O’ Money” cut his teeth between prison stints. Another growing tangent in the collections industry is student loan paper. Many recent and not-so recent college graduates grapple with frozen wages and scant employment prospects, often unsuccessfully, causing their federal and private student loans to fall into default. This has produced a minor uptick in the collections industry as agencies vie for the contract to collect these debts also.
The collection agency continues to thrive in Buffalo, employing thousands of people, the sons and daughters of the previous generation who generally enjoyed steady, gainful, union-protected employment even into the eighties and early nineties. The local economy that sprouted up in the absence of manufacturing is non-union and low-paying. The call center environment in general is one where employees have a tenuous connection with their employer at best. Management doesn’t engage their workforce at all, instead believing that social Darwinism will remove the riff-raff and the survivors will take on the workload. The typical tin-horn manager in these operations is crude, stupid and intoxicated on the minor priveleges their authority provides. They work 55 or 60 hours a week, so they are miserable and that misery is usually transferred downward. The call center and the collection agency may be the model for the new American economy. It raises some questions about how we are to sustain our way of life with these kinds of industries as the mainstays of the working-class.