Some people take internships or do Peace Corps or medical school when they leave college. I collected the debts of dead people — at times, I even tried to convince relatives of the deceased to pay debts they didn't legally owe.
Even in the (by today's standards) booming economy of 2005, the only job I could find after three months of searching was at a deceased collection firm. But thanks to new rules, particularly from the Consumer Financial Protection Bureau, my old job today is greatly changed (and, some would say, more ethical) from how it was almost a decade ago.
The debt collector's script
Every morning when I got to my desk, I logged onto an autodialer and recited The Script. As I remember it now, the script started more or less like this:
I'm looking for whoever might be handling the affairs of the late Edna Jones. Would that be you?
The script had four goals: 1) be as warm and friendly as possible, while also 2) figuring out who in the family was handling the affairs of a decedent (legalese for a dead person), 3) seeing if there's an estate we could collect from, and 4) if not, seeing if the family was willing to pay the credit card balances decedents had left.
By the time we were calling, we had already sent a letter to the family explaining that we were attempting to collect on the $5,692 balance on Grandpa or Grandma So-and-so's Visa (though the family hadn't always received it yet).
Are you the executor of her estate? Does she have an estate? Did you file probate papers? Do you have an attorney?
Of course, if there was an attorney, we were legally bound to speak to that person, and if the deceased person had an estate, it was where we went for payment. We always followed these rules to the letter. But if neither an attorney nor an estate existed, we still sought payment:
How is the family planning on resolving this debt?
One former colleague says she remembers hearing collectors being far more aggressive than that: for example, asking families if they still used things purchased with the credit cards in question, and if so, whether the callers didn't therefore feel obligated to pay the debts.
In most cases like this, the family is not liable for the debts, something we informed them of — that is, if they asked. But if a family without an estate or attorney called in to pay a debt voluntarily, it wasn't my job to clear up the confusion.
Origins of an unpleasant job
The practice of collecting on debts of the dead — and, really, collecting debts in general — has changed since I quit that job eight years ago, say some in the industry. This is in part a result of increased regulation and increased scrutiny on the deceased collection industry, largely from the Consumer Financial Protection Bureau.
State laws vary on how the payment of a decedent's debts works, but creditors and debt collectors generally have the right to collect on those debts if the decedent's estate has the assets to cover them. State laws also specify an order in which creditors have to be paid. Mortgages and auto loans, for example, tend to have priority over credit cards.
So if there's not enough money in the estate to pay the debts, a creditor may simply have to eat the loss — or go looking for voluntary payment. And many banks and credit card companies will outsource the unpleasant work of collecting on deceased accounts to other firms.
Regulators are cleaning up the industry
When I set out to write my exposé of an industry I used to work in, I ran into a complication — a new tougher attitude from regulators is seeing some success in changing how collections firms do business. In addition, deceased debt collection firms are tight-lipped about their work. My former employer declined to talk, and others either declined to talk or did not respond to inquiries.
According to one longtime worker in the industry, practices have changed. At his firm, callers now state clearly that the family members are usually not personally responsible for decedents' debts, whereas once they did not. While the initial letters the firm used to send families about accounts listed account information like balance totals, he says the new letters are more vague, to prevent the firm from sending privileged information to the wrong person. And he says in general, calls have taken a turn towards "information gathering" on estates and probate, rather than focusing on recovering money.
Why? In large part, it's thanks to the CFPB, he says, and another attorney agrees.
"The biggest change to everything has been the CFPB," says Patrick Driver, of Lapin Law Offices, a firm that represents clients fighting collection firms. "That's where we look to all of our standards and regulations."
While the main law governing collections (the Fair Debt Collection Practices Act of 1977) hasn't changed in recent years, the regulatory landscape has.
The CFPB has greater powers under that law. In 2012, it established supervisory authority over debt collectors whose annual receipts exceed $10 million. And it is in the process of gathering information to examine a variety of aspects of debt collecting — how collectors get information on their contacts, for example, as well as whether they inform customers of their legal rights. The ultimate goal is to write rules governing the industry, something no federal agency had done before.
"That authority never existed in any agency before. Nobody had that — the FTC didn't have the power to go and order industry-wide questions about what kind of data they had." says Mary Spector, a professor at Southern Methodist University's Dedman School of Law. "There was no 'You need to be doing a better job of this.'"
The CFPB has already started taking action against collectors, filing suit against Georgia firm Frederick J. Hanna and Associates, which the agency in a press release referred to as a "debt collection lawsuit mill." The agency also said it might sue law firms that act as debt collectors instead of legal advisors, as the Wall Street Journal noted in a piece from earlier this month. And it also handles complaints — federal agencies received 200,000 related to debt collection in 2013, according to the CFPB's 2014 report to Congress on the FDCPA.
The FTC weighs in
It's not just the CFPB. The FTC, which has enforcement authority over collection activities, took aim at deceased debt collectors in particular in a July 2011 policy statement. In that document, the FTC issued a policy statement that allowed debt collectors to contact people beyond a decedent's spouse or personal representative in order to collect a debt. And while that pleased debt collectors, it also sent a clear message.
"What it also says is, 'We're watching you,'" says Manny Newburger, a partner at Barron and Newburger in Austin, Texas, and an adjunct professor teaching consumer protection law at the University of Texas-Austin.
Increased regulation, says our unnamed collector, led his firm to change its ways. But he adds that bad press has increased the pressure on her firm and her firm's clients to be much more careful. Articles in places like the New York Times and Wall Street Journal cast the industry in an unflattering light.
With that in mind, collectors have also caught onto another trend, says Newburger: "compassionate collecting."
"It has become progressively the kindest and gentlest form of debt collection I think you'll find," he says.
Compassionate collection means training collectors to be extra empathetic toward the families they are calling. Sometimes, it means giving collectors a sort of grief counseling course. The web site for Delaware-based firm Phillips Cohen, for example, says its collectors go through training in the stages of grief and also that the firm employs "sensitivity screening" on accounts such as those involving deceased military members.
It's a nice gesture, but it's of course not necessarily just to be nice.
Newburger puts it bluntly: "No one wants to be accused of beating up on widows and orphans." With both increased media scrutiny and regulatory scrutiny, neither collection firms nor the businesses they represent want to be associated with unsavory tactics. In addition, the super-sensitive approach can have the added bonus of making customers less likely to complain about a debt collector.
And the super-sensitive approach can itself become a technique for getting more money without customers raising flags.
Of course, no matter how much a new regulatory environment might pressure collectors to change, consumer advocates say there's a long way to go. The National Consumer Law Center has argued that deceased debt collectors should not pursue claims beyond the probate process. And indeed, though regulation may be tougher now, debt collection as a whole remains the largest source of complaints the CFPB sees on a monthly basis, the agency reported earlier this year.
A growth industry
Alongside the changes in the deceased debt industry, there is reason to think it will only grow. As the Wall Street Journal has noted, debt among Americans ages 65 to 74 has ballooned. And as baby boomers get older and older, more and more of that debt is set to end up in the hands of deceased collectors.
One trade group representative explains that the debt collection industry in general serves an important purpose.
"The reality is debt collectors are an absolutely vital process of our credit-based economy," says Robert Foehl, vice president and general counsel of ACA International, an industry trade group. "So debt-collectors collect a lot of money that's justly owed. And to the extent that that money does not get collected or less of it gets collected, the people who grant credit will be less likely to grant as much credit."
That's true — the things a person bought with their credit card before they died continue to exist after they pass, and so does the debt. Then again, that's hard to remember when your close relative has died and a debt collector comes calling.