When Karyn Howard’s father passed away in 2008, she was convinced that it would be one of the hardest things she’d ever have to deal with. Little did she know that a call from Bank of America a few days later was about to make the ordeal much, much worse.
“It was the absolute worst phone call of my life,” she says. “The bank knew that there was a death and that he had no estate. The debt collector started screaming at me, saying she would call me every day until I paid the debt. And then over and over again, each time I told her to stop calling me, she kept screaming in a ‘Friday the 13th’ kind of voice: ‘Every day, every day, every day!’ I burst into tears and sobbed in front of a client.”
Karyn’s father owed money on a pickup truck he had purchased a few years prior. When he passed, Bank of America repossessed it. However, the truck’s value wasn’t enough to clear the balance in Karyn’s father’s name, so the bank sent debt collectors after his survivors.
“Apparently, they read his obituary, found my grandmother and called her. My grandmother sang like a canary, happy to have someone to talk to, and she gave them all kinds of information, including how to find me.”
A collection agency working on behalf of Bank of America began calling Karyn continuously, both at home and at the vineyard where she worked as an events coordinator. Over the course of two months, the collector belittled Karyn, threatened her with lawsuits and insulted her late father. Though she begged the representative to stop, the calls only got more persistent. Finally, Karyn was forced to seek legal help. Her attorney had to send two letters threatening to sue for harassment before the calls stopped for good.
“Every phone call that that woman made was, in fact, illegal,” says Ms. Howard. “I don’t have hatred for many people, but I do truly believe that there is a special place in hell for that woman and for anyone who works for those companies.”
Dying in Debt
The story of Karyn Howard’s father is just one of many penned by the banking industry in recent years. As retirement savings shrink and Social Security vanishes, more and more elderly Americans have been forced to rack up debt that they’ll take with them to their graves. A recent survey by CESI Debt Solutions discovered that nearly 40% of retirees have accumulated credit card debt that they know they can’t pay off. Additionally, a study by the University of Michigan has revealed that people aged 55 and older now account for 20% of all the bankruptcies in the United States, which is 8% more than that group accounted for last year.
However, rather than making an attempt to dissuade people from dying while in a state of debt, some financial advisors are actually encouraging it. Since your debts can’t be passed on to your heirs as long as the debts are in your name alone, many retirees are looking at their credit cards as a way to live out their remaining years in comfort on the creditor’s dime. “Financial institutions haven’t been perceived as the friendliest and many people blame them for the recession,” says Neil Ellington, CESI executive vice president. “They think, ‘Hey, I’m not going to pay back these guys who ripped off America.”
Lenders, as you might guess, aren’t keen on the elderly and the terminally ill turning their unsecured loans into a liability. As corporate banks have repeatedly shown, profit margins are the alpha and omega of the industry. So, in order to recoup what losses they can, they turn to debt collectors. According to the ACA, the leading lobby of the banking industry, the entire collection process is really just a service to ensure that the elderly continue to receive lines of credit. However, a brief look into the practices of these collection agencies reveals something far more sinister at play.
An Industry of Terror
Despite the banking industry’s glowing testimony, collection agencies are little more than white-collar thugs for hire. As Tony Lloyd, a former manager for debt collector DCM Services LLC of Minneapolis told the Wall Street Journal, “The big selling point is that these collectors offer banks a cushion that shields them from actually having to do the gritty work of going after dead people’s families.” Their recovery strategies typically involve using condolences to coax money out of a grieving widow or anyone else that seems vulnerable.
Carole Brady Fleet, grief counselor and author of “Widows Wear Stilettos,” knows the process all too well. She began receiving calls from collectors less than a month after her husband died. After expressing sympathy that her husband had passed, they told her that she was responsible for all of the debts in his name – including ones he had accumulated years before the marriage. They asked if she had any life insurance or other assets she could use to pay off his balances. When she said she didn’t, they threatened to sue. “These are people who were trying to take advantage of someone who was at their most vulnerable in every physical and emotional sense,” she says. “They were counting on that vulnerability to resolve their debt crisis, which is deplorable.”
When their underhanded seduction techniques fail, collection agencies often resort to threats that go above and beyond their powers as defined by the Fair Debt Collection Practices Act. Making derogatory phone calls – a nonstop barrage of them – is their favorite tactic, but they’ve also been known to “inform” their target’s friends and co-workers about the debt. If the victim isn’t humiliated into paying, the collectors will threaten wage garnishment or home liens. According to Fleet, some agencies even send letters on legal letterhead to trick the mourning survivors into believing they’re being sued.
Worst of all, the incidents are far from isolated. According to court documents, Nordstrom, Citigroup, Wells Fargo & Co., J.P. Morgan Chase and Discover Financial Services have all been identified as clients of firms that collect dead people’s debts. While many corporate spokesmen swear that their banks never pursue debt from family members who aren’t obligated to pay it, the growing number of pending lawsuits against debt collection agencies and the banks they represent suggests otherwise.
Business is Booming
Collecting debt from the dead, as an industry, is growing. When you consider that many collection agencies stand to make 40-50% of their gathered debt in commission, it only makes sense. DCM Services LLC of Golden Valley, one of the largest collection agencies in the country, was one of many companies to expand their workforce last year. In their interviews, they tell prospective employees that they can expect two free breakfasts a week, flexible work hours, access to an exercise room, 15-minute massages at their desks and a $1,000 bonus after six months. All they ask in exchange is that these new executives collect at least $60,000 a month from a contact list that includes the family members of deceased debtors.
Another collection agency, CFS II, recently announced its intentions to expand nationwide. In a press release, the company praises the economic downturn for creating 10,000 new jobs in an industry that preys upon people whose lives were ruined by it.
And these companies are doing more than just expanding. They’re also developing new schemes to make themselves that much more believable. These days, collection agencies know that the odds of fleecing a widow for the full amount of her husband’s debt are low, so they come out of the gate offering a “compromise.” Instead of covering his full balance, she can either give up his life insurance policy or pay $25 a month and then hand over their next tax return. After that, the collection agencies are willing to forget the whole thing ever happened.
How to Solve the Crisis
The government’s efforts to curb deceptive and illegal debt collection practices have been self-defeating so far. Though the FTC has slapped million-dollar civic fines on a few egregiously unscrupulous collection agencies, they’ve yet to issue any sort of regulation preventing the harassment of mourning family members. In fact, this past summer the FTC declined to impose an amendment to the Fair Debt Collection Practices Act that would prevent collectors from contacting the family members of deceased debtors for at least 45 days.
Fleet, who has turned counseling debt-hounded widows into a career, says that it’s up to the family members of the deceased to assert their rights. Since collectors are not legally allowed to harass you, it only takes a certified letter threatening a lawsuit to get the vultures to stop circling. “Many times, banks and collection agencies count on the fact that you are too distressed to fight or argue,” she says. “The last thing banks expect is an angry missive that asserts your rights and threatens to report them to both the Federal Trade Commission and to the media.”
Debt collectors cross the line so frequently that it’s actually possible to turn the harassment into a financial gain, as Craig Cunningham did. He went $100,000 into the red when the sub-prime mortgage industry collapsed and took his investments with it. Now he makes his living baiting debt collectors and suing them for the infractions. He keeps his debt alive to ensure that the collection agencies continue to call. Every time they threaten to put a lien on his house or call him outside the hours established by the FDCPA, he records it and submits the evidence and an accompanying lawsuit filing to a judge. Cunningham has collected more than $20,000 in settlements so far without ever enlisting the help of a lawyer.
While Cunningham’s strategy is by no means common, it provides a glimmer of hope. The banking industry’s habit of illegally harassing the family members of deceased debtors has barely been touched by the media, and it’s been largely ignored by the government. For every Linda Long in the headlines, there are thousands of widows who fall for a collection agency’s tricks and give up money that they desperately need to keep themselves out of debt. The banking industry is in total denial. It won’t admit that its hounding is only perpetuating the problem, and it will continue to operate in blissful ignorance of the havoc it wreaks until someone speaks up.
It’s time for America to stand up for itself. Anyone with a credit card in their name should be pushing for legislative reform to stop this illegal practice before it goes viral. At the very minimum, the “cool down” period that the FTC shrugged off should be imposed. In every state, not just some of them, collection agencies should be forced to inform the families of the deceased, before they ask them for contributions, that they aren’t legally obligated to pay a debt. A verbal request to cease and desist should constitute a legal kill switch on collector calls.
These aren’t meager requests. These are rights that the government is denying every American. The banking industry’s agenda is apparently more important, and until we speak up and demand a change, things will only get worse.