More Shiny [But Not Happy] People

[David A. Szwak]

Wow, I thought lawyers were popular....

=====================================

Debt Collectors: The Good, the Bad...
Debt collectors are good for you--and the economy!
http://blog.washingtonpost.com/thecheck ... the_b.html

I bet you didn't know that. Neither did I until I read the latest study from ACA International, the association that represents debt collectors. Normally I would throw such a study away, discounting it as self-serving dribble. But the study's findings are so intriguing I had to share them. And of course, I'd love to hear your thoughts on them:

According to the study done for ACA by PricewaterhouseCoopersLLP:

* The number of employees in the third-party debt collection industry has grown from 70,000 in 1990 to 150,000 in 2005.

* The industry payroll reached nearly $5 billion in 2005. Including business and personal purchases by collection agency owners and workers, the industry directly and indirectly supported a total of 426,700 American jobs with a payroll totaling $15 billion in 2005.

* In 2005, the collection industry returned $39.3 billion to businesses that extended consumers credit. That meant that debt collectors saved the average American household $351 because businesses would have otherwise had to raise their prices to cover bad debt.

Put another way--as ACA's CEO Gary Rippentrop said in a press release: "The annual savings is the average household equivalent of 19 bags of groceries, 155 gallons of gas or more than four months of electric bills." The $39 billion "returned to the U.S. economy was equal to three percent of all U.S. corporate pre-tax profits," Rippentrop added. "Many companies might even end up in the red or in bankruptcy without the assistance of debt collection services."

The study also found that one of the fastest growing users of third-party debt collectors is the government (local, state and federal). In its 2005 fiscal year, the federal government referred $13.7 billion in delinquent receivables to private collection agencies, resulting in collections of $603.1 million, up from $351.3 million in 2000.

Clearly, the debt collector as bad guy is an outdated myth, ACA says.

However, that's not quite the same picture as that painted by the Federal Trade Commission or
New York Attorney General Eliot Spitzer.

Last week, the FTC reached a settlement with a Texas collection agency that allegedly used lies and threats to collect debts. Whitewing Financial Group agreed to pay a $150,000 judgment and refrain from illegal practices when collecting debts. The FTC had accused Whitewing of buying and attempting to sell very old debts, many so old they were no longer legally collectible or even eligible to be placed on a person's credit report. Many of the debts had been discharged in bankruptcy, the FTC said.

The settlement came as debt-collection complaints continue to pour into the FTC. In 2005, nearly one-fifth of all the complaints the FTC received (66,627 of them) involved debt collectors--more than any other industry. That's up from 58,698 in 2004, when debt-collection complaints accounted for 17 percent of all complaints filed with the FTC. With the ACA numbers reflecting the sharp growth in the number of debt collectors, it's no wonder that the FTC has been bombarded with complaints.

And for those of you who think the FTC numbers are low, consider what the agency told Congress in its annual report: "The commission believes that the number of consumers who complain to the agency represents a relatively small percentage of the total number of consumers who actually encounter problems with debt collectors."

Meanwhile, late last month, New York's Spitzer charged a national debt collection company -- JBC & Associates, its successor companies, JBC Legal Group and Boyajian Law Offices and their operator, Jack Boyajian of New
Jersey -- with numerous illegal and abusive practices. Several other states have sued the same collection agency in the past few years.

In the New York lawsuit, Spitzer charged the group with the following:

* Falsely threatening to file lawsuits in cases where New York's six-year statute of limitations for bounced checks has expired.

* Trying to collect more than allowed under state law.

* Harassing consumers by calling them late at night and at work and improperly contacting neighbors, relatives and employers about the debtors.

New York said more than 200 people had filed camplaints against JBC and Boyajian since January 2003. Boyajian's office did not respond to my query.

By Caroline Mayer | July 12, 2006; 7:00 AM ET | Category: Credit Issues
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Sure, call the whole industry evil since some (ok, maybe many) of the participants break the law. You know, I feel the same way about (insert ethnic group here) since some (ok, maybe many) of the members of said group break the law.

To those complaining about debt collectors. If you can't repay the debt, don't borrow the money.

Posted by: Non debtor | July 12, 2006 08:01 AM

To Non debtor: Which ethnic group were you referring to when you said "some (ok, maybe many) of the members of said group break the law"? I know of no ethnic group in which the majority of the population breaks the law to participate in group practices. Comparing debt collectors (a professional choice) to ethnic groups (a biological predisposition) is highly charged and very much unfair. As is claiming "if you can't repay the debt, don't borrow the money" without knowing people's circumstances. Many times people can repay the debt when they borrow the money. Then circumstances change, one thing leads to another and they end up in trouble. But no one should be allowed to break the law or instill fear or terror into someone simply to collect these debts - especially ones that are so old.

Posted by: Non-judgmental | July 12, 2006 08:51 AM

Well, Another way to look at this is why are people being extended credit? Certainly circumstances change etc, but it seems as though debit, it's collection, and incredible intrest rates from credit-providers all work together to creat said credit and debit crisis.

Posted by: not debit free | July 12, 2006 08:53 AM

"Whitewing Financial Group agreed to pay a $150,000 judgment and refrain from illegal practices when collecting debts."

That's great. I'm going to rob a bank and when caught I'll agree to give back some spare change and I'll promise to refrain from robbing more banks.

Posted by: Washington | July 12, 2006 08:55 AM

When I stop getting five credit card offers a day in the mail, I'll maybe start having some sympathy for the lending institutions. Otherwise, if you push your lending services on the weak and marginally competent, you deserve all the misery you get, so far as I'm concerned.

Posted by: Gene in Dunn Loring | July 12, 2006 09:56 AM

Isn't it disingenuous to say consumers "get back" the equivalent of 155 gallons of gas from debt collection? That's assuming all that money goes to reducing the costs at the companies for whom debt is recovered. More likely, that money is sucked away as profits for those companies (especially banks, which have done awfully well in the recent past).

This study is more evidence of the re-distribution of wealth away from the poor and middle-class to the rich. Collection agencies just add muscle to the legal but unethical process of stripping lower classes of any wealth they might be able to accumulate.

Posted by: Susan | July 12, 2006 10:31 AM

So on a more productive note, how do we find out what collection practices are legal in our state, and whom should be contacted when illegal attempts at collection occur? I live in VA, but would be interested in MD as well.


Posted by: ljb | July 12, 2006 10:59 AM

To Susan: Your comment "stripping lower classes of any wealth they might be able to accumulate" goes to the underlying principle that guides debt collection. The goods and services that tagets of collection calls are accumulating are not paid for in full. They agreed to pay for these things, but then, for whatever reason, did not.

Posted by: Patrick | July 12, 2006 11:08 AM

how does one go about becoming a debt collector?

Posted by: RitaMae | July 12, 2006 11:46 AM

Federal law actually covers this:
http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm

Any additional laws on collection practices for each state are usually posted on either the State Attorney General's site, or whatever agency handles Consumer Affairs/Consumer Protection.

Very glad to see NY taking action against JBC & Boyajian -- they recently hassled my husband over a debt that couldn't possibly be his, based solely on the fact that he had the same name as the debtor. They called several times a day, and it took six weeks and multiple letters to make them go away. I'd advise anyone improperly contacted by them to be VERY careful about providing any further personal information. No way do I believe that debt collectors help the process or save me money -- the credit issuers are way too agressive in granting credit to risky individuals & businesses, and then they expect the rest of us to pay for it...ugh.

Posted by: PVT | July 12, 2006 12:00 PM

1. Blaming the marketing of credit cards on one's mismanagement of personal finances is tantamount to blaming car salesmen for auto accidents. The inability for most people to take personal responsibility for their actions is embarassing.

2. Collections is not a redistribution of wealth from the poor to the rich. It's a functional necessity of lending that has been around as long as rope. If you lent someone money and they didn't repay you, would you just let it go?

3. Collections habitually 'forgives' a lot of debt balance during the collection process, which equates to an undeclared form of social welfare (I did a research paper on this). Don't believe me? Ask the IRS - they would love to tax the amounts forgiven by collectors in the course of their work!

4. There are some bad people in that business, but to generalize that they are all thugs and crooks is an ignorant and factless generalization. While I believe some (or many) complaints may be valid, there is also an element of scum on the other side.




Posted by: DMS | July 12, 2006 12:22 PM

To Susan re: "Collection agencies just add muscle to the legal but unethical process of stripping lower classes of any wealth they might be able to accumulate."

I'm sorry but I just had to state how completely moronic this statement is. If your hypothetical consumer had accumulated any wealth, then why not simply pay the bill? The use and implication of words like 'take' and 'stripping lower classes' implies the removal of something that doesn't rightfully belong to the one that does the taking (the creditor or agency for the creditor), which is wrong, misguided and stupid.

Posted by: DMS | July 12, 2006 12:28 PM

Please send my check for $351 immediately. Because, so far, all I've seen is prices keep going up.

Posted by: Rob | July 12, 2006 12:33 PM

Being one of those consumers who was once able to pay off the debt I had accumulated; it bothers me that people make such over simplist statements about debt. I was down sized ouit of my job and the only other job I could find was at less than half of my previous salary. It was a choice between place to live and credit card. I said all of that to say this, everyone in debt is not there due tro fiscal irresponsibility. Some of us were placed there by an ever changing economy and job market instability.

Posted by: Getting out of debt... | July 12, 2006 12:42 PM

Good point - I wasn't suggesting blame, just responsibility. While I am sympathetic, you sound responsible and like you are trying to change your situation. What I object to is the belief that the act of collecting debt should be characterized as bad/fraudulent/theft and so forth - it's a contract. We have all had tight times, but it is a contract and we should feel the moral obligation to fulfill it. But that's just me.

Posted by: DMS | July 12, 2006 12:51 PM

Non-judgmental, where did I say collectors should "be allowed to break the law or instill fear or terror into someone simply to collect these debts"? All I'm saying is don't curse the profession since there are SOME bad apples. Just like you shouldn't curse an ethnic group because there are SOME bad apples.

And please show me an article/story/proof that "a majority of the population breaks the law to participate in group practices" when it comes to debt collection.

Posted by: Non debtor | July 12, 2006 12:57 PM

Savings? Check out footnote 3 of the study. Bad debt writeoffs in 2005 were $141 billion.

Translation - companies make poor decisions of who to lend to (sending about a TRILLION credit card soliciations per year). So while we "save" $351, we still get stuck with a poor-corporate-decision-making "TAX" of $1,038!

Posted by: Miss the Big Picture | July 12, 2006 12:59 PM

I used to work as a skip tracer for Hechts. It was my job to hunt down the debtors, but not to actually make contact -- the debt collecters did that. I used to shake my head at the way some of these folks talked to people on the phone. They were abusive and rude and that behavior was actually encouraged. I don't think they crossed the line of breaking the law, but how effective is it to harangue people about old debts? And these same debt collectors were soon out of work when Hechts moved that operation out of the area.

Posted by: skeptic | July 12, 2006 01:01 PM

It's hardly surprising that the debt-collection industry receives a lot of complaints, given the confrontational nature of the business and the embarrassment and anger likely felt by the defaulting debtor. Presumably, though, a high percentage of those complaints are likely to be baseless charges filed by irritated debtors simply out of spite.

Posted by: Tom T. | July 12, 2006 01:02 PM

I do not understand why people are up in arms about this. I have not seen where anyone is claiming that every single debt collector or debt collection service is bad. However, this study is advocating more industry responsibility, and I do not see where that is a bad thing. Companies have entire departments devoted simply to continuously calling debtors about their past debts, and they have the money, the time and the resources to know the best way to ensure they receive their debts (whether these ways are ethical/legal). Consumers do not have any of these at their disposal, and they need advocates. They (we) also do not need to be jumped on by people who have made different choices in life.
(And to Non debtor, I didn't say you said collectors should be allowed to break the law. At that point I was trying to make a new point. Not everything was a quote from your post. I would not have replied to you at all - I consider your self-importance a waste of time - except that as the first posting of the day you set the tone for this discussion and I felt the need to try to change that.)

Posted by: Non-judgmental | July 12, 2006 01:36 PM

Having seen both sides of the process, the posters who say that there are good and bad on one side are correct for both sides.

A reality show along the line of "Cops" would help open the eyes of those who believe that all debt collecors are vultures.

Also, can't the IRS tax what is compromised, if the creditor submits an IRS-1099 to the IRS reporting what is compromised as income? From an accounting perspective what a person owes but does not pay, accrues financial benefit to them, and therefore could be considered income.

Posted by: Duh! | July 12, 2006 01:38 PM

To Miss the big Picture:

There's no tax whatsoever. Your premise is faulty. Loans are created through marketing & financial instruments called securitizations. Portfolios are evaluated at a high level and expect a certain amount of loss. If creditors were only to lend money to sure-bet borrowers, there would be a sudden reduction in the amount of credit available to people who need it most. The fact that credit is widely available has its upside as well. The availablility of personal and corporate credit drives our economy and permits us to manage growth as well as many other services. The few percent of charge-offs are more than offset in the transaction-based fees earned by the lenders (in credit cards). The 'tax' you contemplate is ridiculous.

Posted by: DMS | July 12, 2006 01:48 PM

To Duh: You are absolutely correct, and the IRS wants a piece of that action, although it's a tad greedier than the act of collecting itself and hard to ascertain in the collection of a balance. In other words, if you bought $1000 in goods/services and your balance accrued (fees & interest) to $1500 before charging off, and then settled for $1000, is this an income-taxable event? While it technically is, it's a bit distasteful since the IRS itself is settling balances owed on past taxes and the compromise of those amounts owed do not create a new taxable event... just a thought.

Posted by: DMS | July 12, 2006 01:53 PM

What is interesting to me is that nobody is talking about the potential risk to consumers private financial information (i.e. identity theft) as the debt collection industry grows. In many instances, these companies are provided with consumers personal financial information including their social security numbers without any ensuring adequate security measures are in place.

Posted by: Interested | July 12, 2006 01:56 PM

There is no faulty premise. Bad debt is a cost. It must be offset - the "TAX" merely comes in the form of higher interest rates and fees paid by everyone else.

Loss will always occur, but since the 1970s the balance has been tipped to be more liberal in extending credit (big surprise that 2005 was the 1st year since the Great Depression we had a negative national savings rate).

It's not a question of choosing only "sure-bet lenders." That's a straw man. Borrowers occupy a wide spectrum of risk. If the industry was more selective at the high-risk end, consumers would not have to make up for it through higher fees and rates.

Posted by: Miss the Big Picture | July 12, 2006 02:16 PM

Interested - Security is a topic unto itself. You'd almost rather not know how much information is available to the creditor industry.

And, much of the information is from public sources. It is amazing how the providers stitch so much together for one person, and then can link it to other individuals through that person.

The security of the databases of these information providers should be high on the radar screens of legislators concerned about identity theft.

Big Brother is here, most people don't realize that he exists more so in the private sector than in the government (although they're working on that).

Posted by: Duh! | July 12, 2006 02:23 PM

I just want to know where they're buying their gas? $351 sure as heck isn't buying me 155 gallons of gas!

Posted by: Matt | July 12, 2006 04:21 PM

If debt is good for the economy, crack is GREAT for the economy. The illicit drug turns people into addicts. Addicts are bad..more addicts are good. Good because the more you have, the better your economy is. With crack heads running all over, you need more police to arrest them, more lawyers to free them, more case workers to help them, more clinics to cure them, more nurses to oversee them, etc, etc, etc, etc. More drugs=better economy. On that note, I'm off to buy baking soda in bulk.

Posted by: lovely | July 12, 2006 04:52 PM

What a load of crap. War is good for our economy too. The ACA should be tried for false advertising.

To all folks like Non-Debtor, may your "peers" show mercy on you, or your family, in the event you ever end up on the wrong side of a collectors call. Of course you won't, because your responsible. And responsible people NEVER make mistakes, or have misfortune.

Bad debt is the cost of doing business. PLUS they get to write it off. If your in the money business, and you get taken by a, oh gosh, debtor, shame on you.

I guarantee you there are millions more consumers who were taken by the very clients you represent.

I have always had this thought, of starting a collection agency, that only collects debts from collection agencies, and their employees.

(Oh, and the predatory tow truck drivers who hunt apartment complexes in the dark of night, with flashlights, looking for marks. Alas that is a different battle.)

Posted by: | July 12, 2006 04:56 PM

Lovely,

Debt, used by responsible people and corporations, is a good and proper tool. It built our nation because good debt went into infrastructure.. and that applies to a national scope as well as a corporate or individual one. Debt allows people to start companies, creates markets and enhances/provides liquidity. Imagine you were in tough times and had to sell a car or other large asset to make ends meet. How much of the potential market to buy this hypothetical item would not exist because they had no access to capital? Look, I understand the emotional repsonse to debt and its demonization, but it came about with a purpose and, I guarantee you that the creditor wasn't being demonized when the money was spent. Rather the opposite in fact, the creditor, like him or not, was there to provide a service. Furthermore, the 'service' of providing credit is so commoditized in our country that it is also relatively cheap/very competitive anymore. Personally, it has allowed me to make many purchases 'same as cash' for furniture, etc. So let's just relax the attitude here and be realistic. As I said, the emotion is understood but you have to stand back from the problems and look at things for what they are in an economic sense - which is to say that debt/credit/capital is a tool of enablement that is provided in a market economy to borrowers that are presumed are (1) responsible enough to pay it back (2) spend it wisely. Anyway, best of luck :)

Posted by: DMS | July 12, 2006 05:17 PM

Duh - you are absolutely right about the growth of databases in our country, but the decision to lend or not lend would be MUCH more arduous and invasive if that data were not available to an underwriter faced with the decision to provide you credit. That's not invasive at all! Also, you confuse identity theft with these databases. Many of the security breaches in the past couple years had little to do with the computers themselves, but rather it was human error and access policies, which are always being shored up. I have seen computer data exchange get very tight the past three years. You are right that identity theft is a concern, but without the networks to identify spend activity on a card or other uses of one's identity, you'd never know it until much much later, if ever. So there is good and bad with progress... trying to be reasonable about this.

Posted by: DMS | July 12, 2006 05:24 PM

"Whitewing Financial Group agreed to pay a $150,000 judgment and refrain from illegal practices when collecting debts." But read further into the FTC's press release! " All but $30,000 of the $150,000 judgment has been suspended based on the defendants' inability to pay." Excuse me!? The FTC allowed the debt collector to pay LESS THAN THEY WERE FINED because the debt collector apparently CANNOT AFFORD THE FINES FOR ALL THE VIOLATIONS THEY COMMITTED???? That defies common sense and common decency. If the agency won't comply with the law and "can't afford" the consequences, they should be SHUT DOWN. The End.

Posted by: AZBizWoman | July 12, 2006 05:34 PM

A: re IRS. Why don't they tax all of us on the $351 the debt collectors save for us.
B: Am I the only reader old enough to note the similarity of the ACA ceo's name, Rippintrop, to the infamous Ribbentrop of WWII.

Posted by: Jack | July 12, 2006 07:01 PM

As a debt negotiation coach who teaches consumers how to deal with their debt problems, I can honestly say that I see both sides of this issue. Unlike many "experts" who slam the entire collection industry, I don't see the industry as a single evil entity out to abuse the consumer. There are good collectors and bad collectors. That said, it's clear that abuses are rife in this industry, and I hear stories of FDCPA violations on a daily basis. The complaint flow to the FTC is the merest tip of the iceberg of what's actually going on out there. The problem has gotten worse over the past few years as the debt-purchasing industry has taken root and become an $80 billion market segment. Collection attempts on "zombie debt" (past the legal statute of limitations) is a regular occurrence, as is refusal to provide verification of claimed balances, phone calls to neighbors and relatives, and a host of other tactics that cross the line of fair play. It's simply too big an issue though to come down 100% on one side or the other. Listen to debt collectors chatting in an industry forum, and all debtors are "deadbeats." Sit on my side of the fence all day, and talk to person after person who has an on-time payment history of 10-15-20 years, only to fall behind due to job loss, medical bills, or other legitimate hardship, and you'll start to wonder where are all these "deadbeats." So there is truth to both sides. The collection industry provides a necessary and essential service to our business-driven economy. But the tactics and techniques used by many in the industry are abusive at best and illegal at worst.

Posted by: Charles J Phelan | July 12, 2006 08:13 PM

First, while it is true that some may get over-enthusiastic in the preformance of their duties, the far majority of debt collectors abide by the law. As a debt collection executive, I would fire anyone I caught deliberatley breaking the law on-the-spot. I would do so not only because it is wrong to break the law, but because I don't need to risk a law suit, our licenses, and other penalties over collecting a $500 debt.

Second, when you conisder the millons of collection calls placed weekly, the number of complaints is actually extremely small.

Third, remember that not all complaints are legitimate. We recently had a complaint fied against us with an attorney general in a southern state. The debtor had done a tremendous amount of work to show that we had no business calling her (which in fact we did) and to try to build a case against us. However, she had failed to do the one thing that would have immediatley cleared up the situation. She had failed to return any of our phone calls.

The comment made earlier about ethnic groups does apply to this industry. Just like some people stupidly assume that all members of an ethnic group are evil because of a few bad apples, some people stupidly assume the debt collection industry is corrupt because of a few bad apples.

Posted by: Carlos Flores | July 13, 2006 05:52 AM

I was employed in the debt collection industry for 35 years and am proud to say so. In the course of my employment I went up through the ranks from collector to top management. The company I worked for specialized in the collection of medical debts, a very PR sensitive type of business. You may ask if I saw abuses, the answer of course is yes but when we found a collector who worked the "fringe area" between proper and questionable they were more than likely terminated without further chance of trouble. We could not take the chance and subject our client base to that problem. When I retired, the agency was one of the largest if not the largest medical only collection agencies in the midwest. It would not have gotten there by using questionable collection practices.
The collection business is vital to the ecomony of the United States and those who make light of the dollars returned simply cannot see the big picture.


Posted by: Wally | July 13, 2006 11:28 AM

To: Wally

Every thing that you have said was absolutely the truth, as we worked
together in the "COLLECTION INDUSTRY" for
23 years together. I like this site will be
looking into it also.

Posted by: marijo | July 13, 2006 01:05 PM

It is my contention that debt collectors are America's most wanted criminals.

Here is my reasoning.

Collection agencies employ 150,000 people in America today. That probably don't include the little Mom & Pop collection agencies all over America.

Debt collectors break our consumer protection laws millions of times daily. They may be small violations but violations none the less.

Most reasonable people would agree that if someone breaks a law they are criminals, convicted or not. Breaking the law is a criminal act even if it is only a misdemeanor. The law is the law and all must live within the law. No one is above the law.

Debt collectors hide their identities and their contact information from consumers, thereby forcing hundreds of people including law enforcement agencies to hunt for them for a variety of reasons.

That easily makes debt collectors America's most wanted criminals.

Posted by: Bill Bauer | July 13, 2006 03:30 PM

To Bill bauer:

You write very well. It's too bad you have no idea what you are talking about!


Posted by: Wally | July 13, 2006 06:26 PM

To Bill Bauer

I was in COLLECTIONS for 23 Years at a very
large medical collection agency and you Mr.
Bauer are way "off the mark". The criminals
are the people who deliberately hide their info from creditors so as mot to have to pay bills they are the "CIMINALS". You should get more information before you comment.

Posted by: Marijo | July 13, 2006 07:23 PM

"I do not understand why people are up in arms about this."

Because they're trolls who love to harumph simplistic mottos like "Don't like it? Pay your bills!" and "How dare you criticize, that's like being prejudiced against [insert ethnic group]." Of course any intelligent person can see through these silly responses but I suppose it makes them feel better.

Posted by: FC, Va. | July 17, 2006 12:51 PM

the buffalo news last week ran an excellent series on the topic of debt collectors titled "merchants of debt":
http://www.buffalonews.com/cityregion/m ... ofdebt.asp

also, this week the boston globe is running a similar series "debtors' hell", that is worth a look: http://www.boston.com/news/specials/debt/

Posted by: loganer | July 31, 2006 04:10 PM

Here's a quote from that Boston.com article that illustrates the nature of the the whole collection industry:

"''The creditors are all repeat players. They know exactly how the game works,'' said Elizabeth Warren, a Harvard Law School professor who studies consumer debt. ''We're watching a fight between two players, one a skilled repeat gladiator, and one who's thrown into the ring for the first time and gets clubbed over the head before they even get a sense of what the rules are.''

My goodness. Those Harvard Law must not know a thing about all those saintly debt collectors.

Posted by: garcia | August 23, 2006 09:26 PM

As a relatively recent employee in the collection industry - I get to see many types of situations, from good people in bad situations not due to anything of their own making, to people who made bad decisions, to people operating under multiple social security numbers and names who give debtors a bad name.

One thing I've seen over and over in a relatively short time are people who have put themselves on the line for a purchase in their name for a friend or relative who is supposed to make the payments, but who can't get credit themselves. Then when we call asking what the situation is, they want us to call said friend or relative and collect from THEM.

We can't. Oh sure, with proper authorization we can TALK to them, but their name is nowhere on the contract, so we cannot legally do more than ask them to voluntarily pay on the account. Mr or Mrs Nice Guy who so trustingly put your name on their purchase? This leaves you in the hot seat.

Before you sign for ANYONE as primary (actually a straw purchase and not legal) or cosigner - ask yourself VERY carefully why the person you're putting your assets on the line for can't get credit themselves! If they have a history of bad credit - be prepared, just because they're your friend or relative does not mean they will stick with paying THIS bill, especially when they have to prioritize! Unless you truly don't have a problem paying this bill in their place - don't sign on that dotted line!!! I can't stress that enough - I'd say as many as 20% of the clients I speak to are in this position!!!

Other things that fall under bad decisions - people who have the item financed (car, cell phone, etc) lost, stolen, totalled, problems with it not working - and think that because they have an issue with the vendor/provider, they don't need to pay the financial institution who is the lender. Two separate entities, folks. You have a contract with the vendor for the item, and need to pursue them for refunds or other compensation - it doesn't involve the bank who lent the money. If this means you bought a lemon from Jim's Car Shack, you need to keep your paperwork, keep paying the loan, and take Jim's to court if they're uncooperative... Jim's already GOT their money from the bank you borrowed from, you're only hurting your credit by involving the lender. Jim's got paid, you're not hurting them one BIT.

And if you feel you're being pressured by a salesman for something you can't afford and they're trying to add to your credit application to make you eligible for higher payments than you wanted - learn the word NO. Look past the shiny and ahead to the obligation you're signing for. Once again, once they get the money from the lending company - they don't CARE if you can really afford it, they've BEEN paid.

No, it doesn't solve everything - but it would have kept a lot of the people I talk to out of situations they're trying to find ways out of. Be smart and be educated, and don't be afraid to walk away from something to think or get more information first - it's worth not having the headache to deal with later!!! Jim's Car Shack will still want to sell you that car NEXT week, honest!!!

Posted by: on another note | September 13, 2006 09:33 AM