A Reporter Goes Undercover to Expose the Debt-Collection Industry

America consists of two kinds of people--those who have heard from debt collectors and those who probably will hear from debt collectors.

In a nation of easy credit, most Americans are just a few late payments away from entering the murky netherworld of collection companies, outfits with names like NCO, Mann Bracken, LVNV, and Asset Acceptance. Never heard of those? If you have a credit card, you probably will someday.

When collection phone calls start coming--often accompanied by unlawful threats, misrepresentations, and other forms of deceit--most Americans have no idea what they are getting into. I know because I used to be one of those clueless Americans.

I had to educate myself about the sharks that swim in the churning, poorly regulated waters of the debt-collection business. But you won't have to do that if you make author Fred Williams your friend.

Williams, probably the foremost debt-collection journalist in the country, has written a book that is indispensable for consumers who want to be prepared when the collection calls start coming. It's called
Fight Back Against Unfair Debt Collection Practices: Know Your Rights and Protect Yourself From Threats, Lies, and Intimidation (FT Press, 2011).

That's an unwieldy title, and it doesn't do Williams' book justice. The FT in FT Press stands for Financial Times, and the publisher is an imprint of Pearson Prentice Hall. The book apparently was marketed as a specialty book, in the personal finance genre.

Fight Back is about as close as you will find to a "one-stop shop" for information about dealing with debt collectors--and as such, it is a personal-finance book. But it's much more than that. Williams, a former reporter for The Buffalo News, went underground to work for three months at a debt-collection agency in 2008. That experience produced an articled titled "Confessions of a Debt Collector," at Kiplinger.

Fight Back is the book-length account of Williams' time as a debt collector. He now lives in Virginia and comes across as a true reporter, a guy who deals in solid information. He has a no-frills, behind-the-scenes style that conjures up a non-fiction version of John Grisham. You get the sense that this is a writer who has been there, who knows his subject intimately. Fight Back, at its best, reads like a Grisham novel--except that the bad guys are managers in a debt-collection agency, not partners in a law firm.

The law, however, plays a leading role in Fight Back. Specifically, it's a single law, called the Fair Debt Collection Practices Act (FDCPA). It's supposed to govern the actions of debt collectors and keep them from behaving in an abusive fashion. Williams shows, through 194 crisply written pages, that the FDCPA is pathetically weak and does almost nothing to protect consumers.

That's why consumers have to be prepared to protect themselves. And Fight Back is filled with practical suggestions for doing just that.

How badly is the FDCPA failing? Consider this from Williams:

Debt collectors caused more than 300,000 complaints to the Federal Trade Commission in the past five years, more than any other industry that the agency regulates. The rate of complaints is exploding, having more than tripled since 2003. The number-one complaint is that collectors are demanding money that people do not even owe, even grabbing it from their bank accounts. As the industry casts its net wider and wider--making an estimated one billion contacts with consumers per year--a growing number of people say they are being shaken down by telephone bullies.

My wife and I know what that is like. I've written extensively about our battles with debt collectors and their disregard for federal law and the rights of consumers. We even have tape-recorded evidence of collectors from the Birmingham firm Ingram & Associates repeatedly violating the FDCPA while trying to collect a debt I allegedly owed to American Express. The local firm, headed by a lawyer named Angie Ingram, was hired to collect the debt by a large Pennsylvania outfit called NCO. Multiple parties in our federal lawsuit admitted this, but we have recordings of Ingram representatives repeatedly saying they had been hired by American Express to sue me--that Angie Ingram was American Express' lawyer. This is both a grotesque violation of the FDCPA--which prohibits any false or deceiving statements to alleged debtors--and it also represents fraud under Alabama state law.

Fred Williams

Has our tape-recorded evidence, which is indisputable, been helpful in our lawsuit against Ingram and NCO? Not exactly. Much more is coming soon on our case and the lengths to which federal judges (and lawyers who defend the industry) will go to keep the high-dollar, debt-collection express rolling. But for now, we will focus on the broad picture--and Fred Williams shows clearly that it isn't pretty. About his three months as a collector, Williams writes:

As it turned out, the job tested more than the ability of a legally compliant collector to remain employed. On a day-to-day level, the job also tested my standards for reasonable and humane conduct. Living by the golden rule is not entirely congruent with the task of browbeating strangers who have fallen on hard times--especially ones whose lives have become a tragedy.

What's the environment like at a typical collection outfit?

Call centers are like factories used to be in this Rust Belt area--places where practically anyone can show up and get a job. But these jobs are easier to get than they are to keep. Of the four female trainees present at the start, one fails to return after the midmorning break, marking the first of what will be many abrupt exits from our group.

Williams isn't writing about a problem that affects only those on the fringes of American society; it affects us all:

The average home has three open credit-card accounts. Nearly half of all Americans carry a balance on their cards, with the average household's balance being over $7,000.

That means millions of Americans are just one job loss, health problem, or lawsuit away from a financial upheaval--and the debt-collection calls that come with it.

One of our goals is to help educate consumers about issues that many are likely to face someday. We will return to Fight Back, and Fred Williams, for assistance.

Here is an interview with Williams on CNBC: