The Wall Street Journal had an outstanding story this weekend on so called death-debt collectors—an industry that makes money by pressuring newly widowed spouses or other surviving family members to pay debts they don’t legally owe.
Jessica Silver-Greenberg reports that big banks outsource debts of dead customers to companies that use psychological techniques to push grieving family members to give them money they don’t owe.
These companies are reputation laundries for banks, which can put the screws to their grieving customers without having their names attached to it. The Journal reports that these firms charge a premium for the service: Twice what other debt-collection sectors charge.
The WSJ leads with a woman whose husband died her with no assets and $17,000 in credit card debt. She was bombarded with ten calls a day by a Nebraska outfit called West Asset Management, whose tapes of the calls give the Journal a vivid anecdote made more so by the Journal’s interactive graphic, which includes the audio of two calls that came out in a lawsuit.
In the first call, the representative sneaks the Big Fat Honking Fact that “as a family member you are not personally responsible to pay this debt” in the disclosure boilerplate that he makes sound as unimportant as possible. It’s hardly surprising that, as the Journal writes, “those words barely register with grieving relatives.”
In part that’s because the banks, through their proxies, are psychologically manipulating grieving family members to give banks money they don’t owe. The Journal has documents that show how one firm, Delaware’s Phillips & Cohen, does this. It tries to pin a “moral obligation” on the deceased’s relatives to pay money they don’t owe because the dead person would want his bills paid:
We get a lot of money this way….Don’t become discouraged.
The Phillips & Cohen memo tells its employees to “Start Soft — Go Hard,” how to react to “crying as a defense” (threaten that you will continue to hound them with calls), to employ good cop/bad cop, and “don’t take No for an answer if there are assets.” Also: “plant seeds of doubt,” “be intentionally vague,” and information on the five stages of grief. Tucked in there, believe it or not, is the Golden Rule.
But the money lies in harassing people grieving about their loved ones, to the point that they’ll pay to make it go away:
“Each call brought up fresh memories of my husband’s death,” Patricia Smith, 56, says about the calls she started getting last year about $1,787.04 in credit-card debt owed by her late husband, Arthur.The debt-collection calls and letters kept coming and wore her down, says Mrs. Smith, who lives in Jackson, Miss. She agreed to scrounge together $50 a month “just to make the calls stop.”
This is predatory, plain and simple. Why is it legal to pressure someone to pay bills they don’t owe?
It’s bad enough when these debt collectors go by the books. At least sometimes, of course, they don’t:
Some people claim they are misled into believing they are required by law to pay the debts of dead relatives. Jody Randazzo, a 37-year-old teacher in Farmington Hills, Mich., says DCM Services employees threatened to seize her late father’s Florida home after his 2009 death unless she paid $6,000 he owed on a Citigroup credit card.
The Journal puts all this in good context with information on the exploding debt levels of older Americans and reports that the Federal Trade Commission issued industry-approved guidelines this summer that are weaker than the ones in place before, despite evidence that some callers are misleading family members about whether they owe money.
This is one of those stories that should result in serious change. It’s excellent work by the Journal.
I was under the impression that the decedent's debts were to be paid off through the estate and, if the heirs did not do that, they were liable for those debts. Is that not true? Just curious.
#1 Posted by Miss Informed?, CJR on Mon 5 Dec 2011 at 08:43 PM
No, the heirs don't owe the money owed by a decedent, and yes these bill collection agencies are scum..
But Ryan, as usual, utterly misrepresents the truth.
These collection companies aren't generally agents of the original account holders. The banks sell the accounts to collection companies and the banks don't have any control over the collectors after that. Your local utilities, hospitals and doctors' offices do the same thing with their delinquent accounts. Very often, these delinquent accounts are sold to a series of increasingly aggressive collectors and the original account owner has no idea where the account goes or if it is ever paid.
When Ryan writes "[i]n part that’s because the banks, through their proxies, are psychologically manipulating grieving family members to give banks money they don’t owe" he's just not being honest. PERIOD. I've got 50 bucks that says he won't be able to point to three instances of a "Wall Street" bank (or any bank, anywhere in the Universe) authorizing or even tacitly condoning this kind of slimy collection effort.
Just another typical anti-corporate screed by our resident "Advocate of Government-Endorsed Redistribution of Wealth" (who can no longer be called a "commie" under Pravda's... er, I mean CJR's new comment censorship policy).
Somebody bad does a bad thing somewhere to screw somebody out of money, and Ryan has the turbines spinning up on his Chittum 5000 Black Helicopters, in Full Whisper Mode, trying to convince his readers that a "Vast Wall Street Conspiracy" lies behind the scenes, driving the misdeeds.
It's just silly, irresponsible (non)journalism.
#2 Posted by padikiller, CJR on Mon 5 Dec 2011 at 09:53 PM
Please read the story before commenting, Padikiller:
"Typically, death-debt collectors get paid based on the amount of money they recoup for the lenders, say lawyers for debt-collection firms."
#3 Posted by Ryan Chittum, CJR on Tue 6 Dec 2011 at 01:33 AM
Dear padikiller,
I was intrigued by your response. If a bank or other organization sells its dubious claim to a debt collection company, with foreknowledge of what the company is likely to do if it can't collect the debt (harass those who do not owe), should that bank not be held to account?
Regards,
#4 Posted by Nathan Todd, CJR on Tue 6 Dec 2011 at 01:45 AM
also, what Nathan said
#5 Posted by Ryan Chittum, CJR on Tue 6 Dec 2011 at 01:49 AM
I think what Padikiller is suggesting is that there should be a law and/or regulation which prevents the sale of accounts owned by deceased individuals.
Ps. I love the new word count doohickey.
#6 Posted by Thimbles, CJR on Tue 6 Dec 2011 at 02:04 AM
While padikiller cloaks it in troll lingo, you can't deny the fact that the big banks aren't browbeating widows. They are selling their receivables to collections agencies, which is what a vast number of companies across a variety of industries do. I don't see the article excoriating those other actors. I don't see Nathan calling for all those other actors to be held to account.
Ryan, you do yourself a disservice by so myopically focusing on attributing all the world's evil to the banks. There's enough real wrongdoing; you don't need to sacrifice your credibility in a cathartic effort to pile on the ills.
Finally, while obviously these tactics are deplorable, the knee-jerk "there should be a law," response is inadequate, if you think about it for say, a minute. The now-deceased debtors were probably (okay, definitely) alive when they incurred their debts, so it's not unlikely that they were alive when the receivables were sold.
I don't know how to solve this problem, but stroking our bank-hate fetish is not the answer. Feel-good, accomplish-nothing legislation is probably not going to do the trick either.
#7 Posted by Steve Rowley, CJR on Tue 6 Dec 2011 at 07:37 AM
Two years ago I was handling the estate of an uncle who died after a long illness. For the convenience of only writing one check he put all of his expenses on his Citicorp credit card, paid a little over the monthly minimum and when he died the balance was over $17,000. In the normal delay of the funeral, naming me as executor, filing probate etc., the credit card account went unpaid for two months and by a computer somewhere was declared in default. The account was sold by another computer to a "law firm" in Wilmington, Del., which called me as the executor three times a day asking when they could expect payment of the $17,000 plus and accrued interest. While perfectly willing and able to pay the bill, things were still in flux and I did not have the authority to do this. Then I discovered an interesting thing. Calling Citicorp to make sure the account was closed and no computer hacker in Kiev was charging things to my late uncle, I was told that he had a $10,000 credit life insurance policy thru a Citicorp subsidiary that had been paid and the outstanding balance was only about $7,000. The Wilmington "law firm" apparently assumed I didn't know this, and when I called them on it noting the fact I work within easy walking distance of consumer protection office of the Federal Trade Commission they quickly backed off and even settled the debt for about $5,500. I was later told by someone at the FTC that they had probably bought the debt from Citicorp for $3,500 (half the true value of my uncle's account) so they still made money on it..., the weasels.
#8 Posted by Winston Wood, CJR on Tue 6 Dec 2011 at 09:39 AM
Ryan dodges and weaves: ""Typically, death-debt collectors get paid based on the amount of money they recoup for the lenders, say lawyers for debt-collection firms."
padikiller tolls the Reality Bell: So do stockbrokers and real estate brokers, Ryan. This doesn't mean that by listing your house with a broker, you're responsible if the broker lies to prospective buyers. Your contention that the banks are "psychologically manipulating grieving family members" is not only false nonsense, but also just the latest example of your typical yellow journalism - a concoction deliberately rendered to propagate your anti-capitalist worldview. You should be ashamed of this crap.
Nathan Todd wrote: "If a bank or other organization sells its dubious claim to a debt collection company, with foreknowledge of what the company is likely to do if it can't collect the debt (harass those who do not owe), should that bank not be held to account?"
padikiller responds: Definitely. No question about it. But as I wrote, it isn't happening (or at least there isn't any evidence of it). Ryan is just doing what he always does... Namely jumping to ridiculous conclusions and presenting his latest scatterbrained "Wall Street" conspiracy theory as fact. You show me an example where a bank even tacitly condoned this kind of slimy collection activity, and I'll file the federal complaint myself. But, of course, Ryan can't do this.
Thimbles wrote: "I think what Padikiller is suggesting is that there should be a law and/or regulation which prevents the sale of accounts owned by deceased individuals.
padikiller responds: There is already a law that prevents this kind of collection actvity - the Fair Debt Collection Practices Act - and there are a host of other state law protections as well. The collectors who are engaging in this behavior should be prosecuted to the fullest extent of the law.
As an aside.. I am hearing through colleagues who deal with collections of a new and even slimier collection scam - one where bill collectors set up shop from offshore to elude jurisdiction and spoof Caller ID numbers - calling elderly debtors pretending to be law enforcement officers on the way to arrest them or to seize their houses or cars.
#9 Posted by padikiller, CJR on Tue 6 Dec 2011 at 09:44 AM
"padi responds: There is already a law that prevents this kind of collection actvity - the Fair Debt Collection Practices Act - and there are a host of other state law protections as well. The collectors who are engaging in this behavior should be prosecuted to the fullest extent of the law."
Then it sounds to me that by selling an uncollectable default account, they are aware that, at the time of sale, they are forcing someone to breach the law in order the recoup their investment.
Now it's just a question of whether the agents are knowledgeable of that status at the point of sale or not. If so, then the bank has sold something that is worthless in value unless there is a breach in law and the torture is sufficient to compell the family to pay up. The bank and agent know this at the time of transaction and it should be at least an embarrassment to the banks (I know, modern banks feeling embarrassment? Might as well expect checks from a dead man, oh wait).
If not, then it's fraud that forces a breach of law.
I don't see how an honest institution can sell an account that cannot be collected upon legally without being an accessory to a crime and without bearing any responsibility for the family's resultant anguish.
#10 Posted by Thimbles, CJR on Tue 6 Dec 2011 at 10:29 AM
Thimbles spins up the Chittum 5000 Black Helicopters: "Then it sounds to me that by selling an uncollectable default account, they are aware that..."
padikiller responds: Utter and unjustified speculation.
And it's not just "banks" that sell delinquent accounts.
It's your local gas station. Your dentist. Your electric company. Cell phone carriers. Pediatricians. Florists. Etc.
This is a story about filthy, dirty bill collectors... Not about "banks", as Ryan wishes it were.
Thimbles continues: "I don't see how an honest institution can sell an account that cannot be collected upon legally without being an accessory to a crime and without bearing any responsibility for the family's resultant anguish."
padikiller wonders: Why not?
You sell your used car on consignment at a lot. The salesman (without your knowledge or consent) packs the transmission with sawdust, rolls back the odometer and pours stop leak in the brake system.
An unwitting family buys the car and is killed in the resulting accident.
You blame the seller? Of course not.
Precisely the same logic applies to the holders of delinquent accounts - UNLESS you can show collusion (which I seriously doubt anyone can).
#11 Posted by padikiller, CJR on Tue 6 Dec 2011 at 10:45 AM
Yeah, Padi? The only way your hypothetical works is if the bank is not aware of the illegal status of the default account. Do they know the guy is dead at point of sale? Then what they are selling is not the equivalent of a used car, it's crystal meth.
Now when someone sells crystal meth to a dealing agency, by your rules you can claim that the producer of crystal meth had no idea that his product was going to be used in illegal transactions by filthy vendors. Therefore he bears no responsibility for supplying the product.
I'm not sure I buy that. Hopefully the consumer protection agency will put these crooks out of that side of the business, which is something I think we both agree upon, and then these default accounts, which should not be collected upon, will have no buyers.
#12 Posted by Thimbles, CJR on Tue 6 Dec 2011 at 11:05 AM
Just another point, in response to Thimbles:
The fact that a debtor dies does not mean that the debt cannot legally be collected. The debtor's estate is liable and if the estate has assets, then the creditor has a claim that may be enforced.
There is nothing wrong with selling the delinquent account of a deceased customer. There IS something wrong with fraudulently attempting to collect this debt from non-liable heirs.
#13 Posted by padikiller, CJR on Tue 6 Dec 2011 at 11:19 AM
Again, Padi is the laptog of the corporists - who are try to pull the gold fillings out of corpses.
#14 Posted by sergio, CJR on Tue 6 Dec 2011 at 03:21 PM
Winston: what happened to you is typical.
Others: The article is unclear on whether the companies depicted are working on behalf of the banks or are "debt buyers"--the more typical arrangement The WSJ should have included a sentence reading something like, "This company is a contract debt collector, working for a commission on the debts recovered, rather than a buyer that owns the debt in question, as is the more common arrangement."
That said, the debt buying/collection industry goes to great lengths to conceal just who owns the claimed debt, what entity is collecting, and the relationships (often less than arms-length) between collection agencies, collections law firms, debt buyers and, yes, the original lenders. The amount of fraud in collections practices is substantial, and has only recently been discovered by federal and state regulators, who have begun to clamp down a bit.
Ryan's point is well supported by the available evidence.
#15 Posted by Edward Ericson Jr., CJR on Tue 6 Dec 2011 at 03:27 PM
For God's sake, CJR, when will you ban the time-wasting, lying trolls who clutter up your pages on a daily basis? Tell these idiots to go grind their scurrilous axes somewhere else. It is a huge distraction and annoyance to honest readers, and lowers the value of reading CJR online. Let these fools get their own blogs for their misinformation campaigns.
/rant
#16 Posted by Brian O'Connor, CJR on Tue 6 Dec 2011 at 03:30 PM
If you guys can show me just one case where any bank, anywhere in the Universe, sold an account to a bill collector with the knowledge that the collector would dun the heirs of a decedent... I'll apologize here on the spot.
But to claim, without basis, that the "banks" are deliberately... nay, maliciously, "psychologically manipulating grieving family members" is just yellow journalism. There is simply no evidence of such misconduct.
The collectors are scumbags, no doubt. But the creditors who sell the accounts aren't to blame.
PERIOD.
#17 Posted by padikiller, CJR on Tue 6 Dec 2011 at 04:55 PM
How to reverse boycott debt collectors.
When a debt collector/debt collection/debt buyer company can repeatedly call with the intent of getting money their customers can repeatedly answer or call back with the intent of not giving them any. They need people to pay with as little talk as possible. They don't want to talk with people who know they are never going to pay. Be all talk and no pay. Answer when convenient. Call back. Give no information. Verify nothing. Ask as many questions as you can. Answer none.
Don't ignore/block/report them. It doesn't work. These folks want you to ignore them for as long as you can stand to or until you give them something valuable like money or information. Ignoring them is being their good customer. Sending a cease and desist is giving information. It lets them know you are still alive and remain their good customer. Preparing to initiate unlikely individual legal battles is being their good customer.
Be their bad customer. Make them talk to you fruitlessly for as long as they can stand to or until they stop selecting you as their customer. These companies cannot spend seconds much less minutes on the phone with every person who will never send them a dime. But they don't know who that is. You do. That knowledge is power. Every second you can keep their staff on the phone will render their business less profitable giving them a reason to never call you again.
Calling will not reset your SOL. Making a partial payment will.
One person who does this likes to ask general questions they should but usually won't answer, "May I have the name and address of your agent for service of process?" Calmly and slowly ask them to spell every word in the address. Read it back for verification. Control the pace. If they are rushing then politely ask them to slowly repeat. "Are you a corporation and if so in which state are you incorporated?" Repeat your questions when you don't get direct answers. When they won't answer a question ask, "Would you like to comply with the business and professions codes of your state?" That is usually the point when they hang up on me but if they say they want to comply then begin your questions again.
Repeat while you have the spare time. These folks have many victims and few operators. If everyone calls back but pays nothing the mass auto-dialer business model becomes unprofitable. Don't aid and comfort the enemy by ignoring them. Call! Have a nice long slow friendly chat! Make them hang up first.
Press 2 for Spanish.
There are certainly enough victims to take down this company so ignoring/blocking seems downright Orwellian to me. Really? We're just going to passively submit and go with a block list or however we manage ignoring an endless stream of unwanted phone calls day after day? No! Unite or remain conquered. Answer/return every call - become well practiced at keeping these folks on the phone - or count yourself not amongst the free.
#18 Posted by RBDC, CJR on Fri 13 Jan 2012 at 09:36 AM
Thanks for the article, great job.What an unfair game...To use psychological techniques to push grieving family members to pay off the debts they do not owe.The worst thing is that there's no common advice how to avoid such a situation and not to become a victim of debt collectors.I would say that it's woth to be more careful about dealing with the banks, because debt collection agencies get this debts of dead people from banks.It's hard to imagine the reaction of people do not even deal with the banks and use the service provided by cash advance companies when someone calls them and say that they should pay debts they do not legally owe.I think there should more more articles like this one and as many people as possible should get to know about this problem.
#19 Posted by Nick Adams, CJR on Thu 31 May 2012 at 05:03 AM