When the Debt Collector Comes Calling

Darlene Glenn remembers crying so hard that she couldn't breathe. It was less than a week before Christmas and the 40-year-old Alabama schoolteacher had just recently returned home after a hospital stay when she received a phone call from a credit card debt collector. The man on the phone, she says, threatened to send the police to her house if she didn't pay off her outstanding credit card bill.

"I hung up the phone thinking the sheriff was going to come knocking on my door," Darlene says. "I was bawling on the floor, thinking 'Oh my gosh, how embarrassing.'"

Darlene, who works with mentally disabled teenagers, and her husband, Thomas, 40, a Baptist minister, had run into financial trouble after each had undergone emergency surgeries within the span of four months in 2001.

The couple, who have three boys and live in a modest house in Gadsden, Ala., say they could not keep up with all of their bills on a annual salary of less than $50,000.
"We are not fancy people," says Darlene. "We were not trying to live above our means. We were just trying to get by."

The Glenns say they had made payment arrangements with other creditors and had returned their leased Ford van to the dealership. But collectors hired by a credit card company wouldn't stop calling.

"We were trying to be reputable and pay everyone back," says Darlene. "It's embarrassing. Humiliating. You lay down at night feeling like a horrible person, when in fact, circumstances overtake people every day."

With consumer debt and personal bankruptcy soaring over the last decade, the Glenns are just one example of a growing number of Americans struggling to stay on top of their credit card bills. Nearly one out of every two families holds some amount of credit card debt.

Further, the amount of money lent by credit card companies has skyrocketed over the past two decades. According to the Federal Reserve, the total amount of outstanding revolving consumer credit, which is primarily credit card debt, reached $743 billion this year, nearly nine times the amount recorded 20 years ago.
As card issuers hand out more money, collecting on outstanding balances has become even more critical to the financial health of the credit card business.
"This [collection] industry has evolved from a red-headed stepchild into a necessity," says Mike Ginsburg, CEO of Kaulkin Ginsburg, an advisory firm to the debt collection industry.

Credit card debt collection has not only become essential, it has become very profitable. The most recent data indicates credit card debt collectors generated $1.2 billion in revenue, according to a report issued by Kaulkin Ginsberg. And that figure is likely to grow as consumer debt is expected to rise, analysts say.
Some economists say lower-income families like the Glenns are more likely to struggle with payments, as consumers become more comfortable using credit cards to pay for essential needs such as food or medical bills.

"From a collection point of view, the problems are really with the low-income people," says Allen Grommet, senior economist with the Cambridge Consumer Credit Index, part of the Debt Relief Clearinghouse, a Massachusetts-based consumer credit advisory group.

"They are mainly responsible for the growing number of delinquencies, defaults and bankruptcies," he says.
Debt collectors have become more sophisticated in their approach. New tools make it easier to monitor telephone and mail contacts with consumers and track down debtors.

The typical collector makes an average of 20 phone calls an hour, reaching six debtors with at least two promises of payment, according to ACA International, the largest association of credit and collection professionals.

The Glenns say they received at least 20 phone calls from a credit card debt collector within the span of a few days. "You're going to continue to get these calls," said a collector in a phone conversation recorded by Thomas Glenn. "Pay your bills and you won't get these calls," the collector demanded.

Some consumer advocates say that collectors are increasingly turning to abusive and illegal tactics to get reluctant debtors to pay.
"I see people all the time who are frightened, scared and get threatened with things that they don't realize that [collection] companies don't have the power to do," says Steve Tripoli, consumer advocate for the National Consumer Law Center, a non-profit consumer law advocacy group in Boston, Mass.

Frustrated by the constant calls, the Glenns say they ended up hiring an attorney to get the credit card debt collector off their backs. This was after the collection agency made threats to Darlene's boss and placed several calls to Thomas' church, says Darlene.

Collection industry officials say it is in a debt collector's best interest to obey the law and most collectors do not resort to such abusive behavior. Rozanne Andersen, general counsel and senior vice president of ACA International, says her organization "absolutely denounces those bad practices." She says collectors who resort to intimidation and threats are the rare exception rather than the rule. "The association would like nothing more than to curtail that activity because it ultimately hurts the entire profession," she says.