Debt and Its Discontents: The Depressing World of Collections Part Two

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.

Mixed Messages: High Turnover is bad, but it’s Music To the Collection Agency Owner’s Ears

Collection agencies are filled with a variety of people from different backgrounds like any other occupation.  Many are decent and hard-working.  Despite the popular conception that only the hateful and unpleasant seek employment as a debt collector, there are many in the industry who are honorable and kind.  They are capable of eking out a fair living under difficult circumstances in a local economy of dwindling opportunity.

Unfortunately, losers are over-represented in the collections world.  Drug addicts, ex-cons, drop-outs, wash-outs and the mentally ill populate the lower ranks of the typical collection agency in great numbers.  They generally don’t last long, but they are always present because the high turnover at any agency assures a new crop of losers will be coming through the door each week.  Some of your savvier losers stick around because there really is little difference between a street hustle and a phone hustle.  Think of Tobias “Bags O’ Money” Boyland, the enterprising ex-con who operated a constellation of crooked agencies in Buffalo after  13 years in prison.  He has since returned to prison after a firearms conviction that began with an investigation of his shady agencies.

Although lower management decries high turnover as a waste of time and money, it is actually saving them in the long-run and likely functions exactly as planned.   High turnover depresses wages in the middle and upper brackets of the workforce.  If you can find an army of $9.00 an hour employees every week to nip the heels of the middling $14 to $17 an hour employees it will keep the overall wage scale low. It also keeps your mid-level employees productive and fighting for viability in an ever-changing environment.   Who has time to talk unions when your survival is at stake daily?

Illegal Collection Practices:  Damned if you do, damned if you don’t

Almost every collection agency in Buffalo violates the Fair Debt Collection Practices Act regularly and, mostly, with impunity.  Most of the violations are minor, some major.  The law is a weak consumer protection with very little enforcement.  Although most Buffalo agencies have cleaned up their act in the last three years, collectors still use non-existent legal threats as leverage to persuade debtors to pay.  They also contact third parties to relay messages to debtors, a well-used play to generate call backs.  It is widely understood in the business, with the existing commission structure and debtors who are resistant to standard overtures for payment, that the only way to generate income and protect your job is to wield false threats as leverage.  To a certain extent, this is true.  The law requires debt collectors to behave as customer service agents and, as the result of hundreds of lawsuits, agencies now use call scripts that are almost obsequious in tone.  Debtors will hang up on you if you begin the call with, “federal law requires that I inform you that this is an attempt to collect a debt—“

Beneath the surface of compliance and cooperation, the typical collection agency has a set of rules that are not written down anywhere, the most important of which is “don’t get caught.” The shadow world of informal rules, in most cases, has the unofficial sanction of management and agency owners.  This system is the engine that generates the most profit for the agencies and collectors well-connected enough to be involved.   Your monthly all-star bill collectors are usually people involved with the shadow system.

The typical agency is assured some profit by following the law.  Only a very tiny percentage of debtors pay their bill after receiving a call or two and a letter, but enough to generate a modest profit for the business.  Also, there are collectors at every agency who offer very flexible monthly payment arrangements to debtors so to build bonus money up gradually. That brings in steady revenue as well.   As smart as that strategy sounds, management generally hates these collectors and are sometimes openly hostile to them.  They want the whole bill in one payment.  These collectors are taking the dreaded long view, gradually building a “payer base” so they don’t have to start from zero each month.  But it’s not enough and it will never be enough for management and agency owners.  That’s why agencies create a climate where the collector is tacitly encouraged to use illegal threats to collect debts.  If you don’t generate a minimum amount of money in three months, you are fired.  If you generate a little bit of money, it’s not worth the stress and aggravation.  So it’s go big or go home, a mindset that managers encourage enthusiastically.

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About Matt Stoller

From 2011-2012, Matt was a fellow at the Roosevelt Institute. He contributed to Politico, Alternet, Salon, The Nation and Reuters, focusing on the intersection of foreclosures, the financial system, and political corruption. In 2012, he starred in “Brand X with Russell Brand” on the FX network, and was a writer and consultant for the show. He has also produced for MSNBC’s The Dylan Ratigan Show. From 2009-2010, he worked as Senior Policy Advisor for Congressman Alan Grayson. You can follow him on Twitter at @matthewstoller.


  1. Brooklin Bridge

    There seems to be quite a disconnect between the environment described at collection agencies (and their unstated policies) and the opening statement that agencies attract all kinds of workers including “honorable and kind.”

    Other than the odd exception, such as the author, I would imagine child prostitution rings attracting “staff” from the children of the 1% sooner than honorable and kind people going to work in the atmosphere described.

  2. kevinearick

    welcome to the machine…new empire same as the old.

    the imperial leaders argue over who will supervise the work while all those individuals capable of repairing the hole when it was small, who were denied access by the mob awaiting consensus from above, build lifeboats out of whatever material is available. upon sight of the lifeboats on the horizon, the leaders order cannon fire and the mob dutifully obeys out of habit, at which point the leaders resume deliberation, out of habit. the hole grows bigger at an accelerating rate and the mob starts throwing itself overboard.

  3. craazyman

    They Were Usually Pretty Nice to Me.

    Con Ed gave me every opportunity to pay my bill. The callers were well mannered and not derisive at all. They even put me on a payment plan, which involved a trivial payment each month, as long as I paid the main bill too.

    It was fair, in fact it was generous. But I was too lazy to pay them anything. There was always something else to do instead, like lay around or read or go hit a bar someplace and try to pick up women. For some reason, writing and mailing a check seemed a ridiculous distraction, like cleaning the bathroom. Finally, they cut the power off. It was pretty easy to get it back on, but it involved physically going to a payment location with a certified check. I couldn’t blame them. They cut me a lot of slack.

    The state tax bureau was a little rougher. They had me on a plan for back taxes and I didn’t stick to it. I didn’t really ignore them. I was just to lazy and distracted to keep track of what I owed. It just went away, in my mind.

    Finally one day the phone rang and it was two guys from the state finance office. They wanted me to pay that day! I think I had a few thousand dollars in the bank and I think I was on unemployment at the time. They seemed nervous, more even than me, like they were about to commit an act of violence upon me. They asked about my monthly expenses and a few other questions, and then they hung up. I was hopeful that would solve it for me.

    The next day my checking account had a zero balance.

    There were credit card payments too. Usually some voice on the phone, pleasant and professional. I’d always pay something, just to avoid a crisis.

    Fortunately, I had people I could turn to. I was lucky.

    It’s funny, there’s a point in your life when the future is an abstraction and the present moment is an infinity. If your dreams and delusions are vibrant enough, it can be an idyllic form of freedom.

    I still miss it, every day.

    1. Yves Smith

      Hah, my limited experience could not have been more different.

      Once, in the early 1990s, I got a notice from Citibank saying New York City was about to take $10,000 from my corporate account for taxes due and this was double what they said I owed (this was all in the “heads up” note from Citi).

      I panicked and checked my filings and payments. I pretty quickly determined they hadn’t credited my 4Q payment, which was a bit over $5,000, even though I had the cancelled check. Mind you, I had not received a single notice that they thought I still owed them.

      I called the NYC tax office, explained the situation, and asked for a number so I could fax copies of both sided of the cancelled check to show that they had indeed received the payment. The agent said something like “Lady, I don’t care. I’m like the cops. You can’t stop me. I’m going to take your money and you are going to have to fight me to get it back.” I was close to tears after the conversation and I don’t cry easily.

      I called my accountant, who called and got a supervisor and told him that the agent’s behavior was completely out of line. That fixed it.

      To this day, I wonder what happened. Was the agent a random asshole or a random misogynistic asshole?

  4. mcgee

    I do not understand the point of this series. Giving a description of the work environment does lead to empathy for the employees but so what, crappy jobs abound in our service economy.

    A “how to deal with debt collectors” series would be more welcome in dealing with the debt collection industry. Can the insider give pointers on how to shut down or sue illegal debt collection procedures? Can he give a script for those being pursued for bad debt? Can he give a rundown on what a debt collector doesn’t want an informed debtor to ask when contacted?

    Understanding your rights as a debtor would be more valuable than understanding the boiler room setting of debt collection agencies.

    1. F. Beard

      Well, one of the problems with our evil money system is that it forces people to behave like ass-holes during the bust. Surely that is damaging to them?

      Btw, Steve Keen’s universal bailout would also put debt collectors out of work and allow them to do something else.

    2. Yves Smith

      In case you missed it, and it seems you have, Sahr spends most of his time describing the economics and management practices of these firms.

    3. Jane Doe

      The article was a clear discussion of systemic corruption, which makes sense you wouldn’t understand because most people do not.

      The point is that it is easy to blame the individual collector until you realize that as the article said “there are rules” and there are the real rules. You get fired if you don’t follow the real rules. That’s a systemic that’s ripe for systemic corruption.

      In 2009 or 2010 (I can not find the article) a criminologist spoke of the problem with Wall Street. He said that the problem was that you could get rid of all the individual bad faith actors and the system would remain corrupt because you have done nothing to address the system that requires corruption in order to flourish.

      The point above how nice people are (or at least some) is to underscore the point that it doesn’t matter how nice they are. They are in a corrupt system. If they act based on that corruption, they will be replaced with someone who will.

      It turns the idea of “personal moral responsibility” as Americans delude themselves into believing on its head.

      Can it exist in a system like the one the author describes?

      How can it?

    4. Michael

      I would be happy to contribute said article(s) about managing ones way through collections. It would be better as a series. How would I go about proposing such to NC?

      I tried to post a link earlier today that shows people arent the only ones that can fight debt collectors. A burger chain out of TX – Whataburger – is suing NCO, one of the largest debt collection agencies in the country, for harrassing corporate headquarters about employee debts.

    5. Patrick

      As Yves and Jane Doe noted, the story illustrates the workings of a typical collection agency, its basic economics, practices and the systemic corruption therein. I offer my experiences here to add perspective to the larger, more important topics related to the economy that are covered on this blog daily. Naked Capitalism provides a unique macro picture not found anywhere else through many well-informed micro and macro stories. I’m happy to contribute news from my beat. It was not my intent to seek empathy for bill collectors at large. I do, however, feel obliged to tell a truth about bill collectors that differs from the dominant stereotype. That truth was gained through experience and observation.
      As far as navigating the world of collections from the receiving end; You need only look at the comment thread from my first installment, where someone posted a great letter template to send to creditors that ensures your basic rights as a consumer are protected. There are many, many resources available to assist consumers in this situation. I do not feel this blog is the most appropriate forum for that sort of advice. At least not from me. But in the spirit of service to my fellow man I will offer this: If the caller id displays an 800 or unknown number don’t answer. No head, no headache. Thanks for reading.

    6. JTFaraday

      I disagree. I love reports from the back office.

      Meanwhile, until the “real estate market” recovers, there’s always higher education. As a plus, a thin veneer of respectability:

      “I took it seriously,” he says. “I felt the job of admissions adviser could be positive.” He even had health insurance, which, for an actor, he says, was “cool.” Some of the ill-prepared students he was asked to enroll concerned him, but “in your head, you’re going, ‘Pay my bills or worry about this guy?'”

      OTOH, if we all get MBAs, we could openly shake down other loser employees for the big bucks. If we want to exercise the most impactful** option, that’s probably it.

      ** Yes, this appears to be a word now.

  5. Jimmy

    Paul Simon – The Afterlife – “You got to fill out a form first And then you wait in the line You got to fill out a form first And then you wait in the line”.
    I see this as an example of the perverse idea, that no matter how many “labor saving” devices are invented and no matter how efficient the “system” is, the working class must be made to do something even if it is not beneficial. Even if it’s harmful to others, even if they set their morals aside in order to survive. To a great extent it’s running on a hamster-wheel for enough food to survive. No 40 acres and a mule anymore. For most folks, you play the game, or you can hold up a cardboard sign “will work for food” and sleep under a bridge (if you can fine one)

    1. JTFaraday

      In a sufficiently toxic society, having “a job” at all suffices to make you a criminal and an enemy of the people.

      No point in concluding debt collectors are special in this regard.

  6. Bridget

    This article would be better entitled “Why Not to Major in Print Journalism at Buffalo State”.

  7. will

    This sentence is horrible –
    “Unfortunately, losers are over-represented in the collections world. Drug addicts, ex-cons, drop-outs, wash-outs and the mentally ill populate the lower ranks of the typical collection agency in great numbers.”

    What makes these people “Losers?” Mentally Ill people are “Losers”?!?
    Maybe these people are desperate for work and ill trained & have trouble keeping jobs, maybe some of them fit some definition of “Loser” but to casually lump together drug addicts with ex cons with mentally ill ?

    Really, really tone-deaf.

    1. craazyman

      yeah I could be 3 out of 5, depending on the definitions.

      can you be voluntarily mentally ill?

      I think so. But it requires poise.

      I think somebody could be a debt collector and be almost a saint. If they had a gentle soul and generous spirit, it could be a gentle wake up call, the way a mother would wake up a child to get dressed and ready for school.

      1. Otter

        Addicts are “mentally ill”. Convicts are overwhelmingly “mentally ill” (or victims of corrupt police, court, social control systems). “drop-out” and “wash-out” are merely colourful terms for people unprepared or unable or unwilling to “make it” in our winner take all society. The “mentally ill” are frequently unable (unless deeply psychopathic) and too often unprepared to make it.

        You are allowing your guilty attitudes toward “losers” dissonate with your equally guilty political correctness toward “mentally ill”.

        Drug addicts, ex-cons, drop-outs, wash-outs and the mentally ill

  8. mad as hell.

    If you want to continue this story then look into the law firms that these collection agencies hire when they don’t get their money.
    If you look there you will then find yourself into the real dark hole of the ass.

    1. Patrick

      mad as hell,
      A lot of collection law firms here in Buffalo are nothing more than collection agencies masquerading as such. A lawyer with a poor reputation will rent out his law license to a collection firm and allow them to use his/her legal letterhead. It gives the collection agency a false air of authority that translates into money at the expense consumers who may not know the difference.

  9. Mcmike

    This could be about the staff at a concentration camp death factory… A jumble of sociopaths, losers, and nice family folks just trying to get by. These institutions depend on the nice folks willingness to hold their noses, and for everyone else to not look to closely behind the gates.

    It raises an essential conundrum of a debt system, how much rights do a creditor have over the life of the debtor? Do paper debts avail ownership over the human body?

    We are not that far from a cycle of debtor prisons and even indentured slaves. Gonna make Dickens look tame.

    1. JTFaraday

      It’s going to be called the Federal minimum wage job guarantee, and on the surface it is going to be very respectable. (After all, everyone wants to work for Goldman Sachs, right?)

  10. Bam_Man

    One of the most depressing aspects of this whole business is that (incredibly) it is a big contributor to GDP. I often wonder how much of our GDP is composed of one set of people lending money to people who cannot possibly re-pay it and then another set of people attempting to collect payment? Quite an economy we have.

  11. William Cole Hector

    Here’s an idea. Don’t live above your means! Put down the $300 iphone, with the $120 per month data plan and PAY YOUR BILLS! If you are an honest person, with a REAL problem explain it in detail and offer what you can pay or FILE BANKRUPTCY and start over trying to live within your means!

    You can’t hate on debt collectors. Cops deal with crackheads and crooks every day, and every now and then they have to slam them on the ground and tase them. Does the crook complain? No, they had it coming. Get the analogy? Quit whining and crying and talking about law suits, you still need to get a job. You’ll never make money suing a debt collector. Do you want to go to court and show what a debtor you are, and on top of it trying to capitolize on collectors calling you? You want to talk about scum..look at yourselves a little closer.

    All that being said, collectors for certain types of debt are scummier than others. Don’t make broad generalizations about the group as a whole. Last time I checked I knew several collectors sitting in 5 by 5 cubicles making 100k plus per year. People will never get what really goes on, why, and most importantly that IT STARTS WITH PEOPLE NOT MANAGING THEIR OWN FINANCES.

    That is all.

  12. F. Beard

    Here’s an idea. Don’t live above your means! William Cole Hector

    U B dumb.

    When a government enforced/backed counterfeiting cartel is lending, the choice is borrow or be priced out of the market by those who do borrow. Our banking system is such a cartel. Therefore:

    U B dumb.

    1. William Cole Hector

      Ahh now we are hearing some responsibility placed in the proper places ie. THE BANKING SYSTEM. Don’t forget advertising, marketing, media, and so on. All perpetuating a broken and destructive system. At least someone is acknowledging that it’s THEIR FAULT that debt collectors MUST exist.

      Thanks. PS, I ain’t ain’t dumb :)

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