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.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.