Debt Collectors as Good Guys?

Access Receivables Management has adopted a shocking approach to debt collection: “Nice People Collect More.” According to their recent press release, the steps they’ve taken – including training and testing for all employees and certifying managers as credit counselors – has delivered results. The debt collection agency claims to have had zero complaints and increased collections since the program was fully implemented last fall.

The centerpiece of their approach is an awards program for their debt collectors that values customer service. In an interview with Access Receivables President Tom Gillespie, industry publication InsideArm asked for an explanation of the program. Gillespie outlined three criteria: production, training and certifications, and testimonials from consumers. The company’s press release said that, compared with the company’s historic averages, it demonstrated a 40 percent increase in payments with the new program. While the company does commercial debt collection, it also collects educational debt. In that arena, it saw payments increase 71 percent.

A quick glance at the Better Business Bureau’s report on the company shows that they’ve earn an A-, a stark contrast to many debt collection agencies. It remains to be seen whether this kinder, gentler approach to debt collection will catch on…but one can hope.

Who is Pulling the Strings at Accretive Health?

A few days ago, we discussed the report in the New York Times that revealed the shenanigans of Accretive Health (NYSE: AH), a collection agency that collects on medical debts. A debt collection industry publication, InsideARM, published a story reminding that us that the Chairman, J. Michael Cline, was involved in some other fishy business a few years ago. Accretive Health’s predecessor, Accretive LLC, invested in the National Arbitration Forum in 2006. Cline apparently believed that there was big money to be made in arbitrating debt collection matters. The National Arbitration Forum got into hot water when a class action suit alleged that, although it presented itself as independent and neutral, debt collection agencies and debt collection law firms were putting their proverbial thumbs on the scale. As a result, the National Arbitration Foundation got out of debt collection-related activities, and places like Mann Bracken and Axiant shuttered their doors.

How Low Can a Collection Attorney Go?

Thanks to Scott Smith for brining this to our attention. We’ve all heard the phrase, “You can’t squeeze blood from a turnip.” It turns out that at least one commercial debt collection legal firm wants to try. Cook Collection Attorneys, located in San Francisco, has the registered domain SqueezeBloodFromTurnip.com, which redirects to the law firm’s site. Enough said.

Minnesota AG Investigates Medical Bill Debt Collector

Credit Check 1The New York Times reports that Minnesota Attorney General Lori Swanson is investigating Accretive Health (NYSE: AH), a debt collection agency that collects medical debts. The Times article describes shocking debt collection practices, such as posing as hospital employees and demanding past due payments from patients waiting to been seen in emergency rooms. The article cited documents indicating that “Employees were told to stall patients entering the emergency room until they had agreed to pay a previous balance.”

The Attorney General noted that corralling patients seeking emergency care is a violation of the Emergency Medical Treatment and Active Labor Act, and that providing debt collectors with health information is a violation of the Health Insurance Portability and Accountability Act. While Attorney General Swanson is focused on activities taking place in Minnesota, Accretive Health is active in hospitals around the country. She is working with other state and federal regulators to coordinate a response to the company’s practices.

The Attorney General’s six-volume compliance review of the hospital’s management contracts with Accretive Health can be downloaded here: http://www.ag.state.mn.us/

Obama Stumps for Lower Student Loan Interest Rates

According to a report in the Washington Post, President Barack Obama is touring college campuses in an attempt to drum up support for a Congressional extension of lower interest rates for Stafford student loans. If Congress doesn’t act prior to July 1, Stafford student loan rates will double, to 6.8 percent. It’s estimated that this will tack on about $1,000 to the average student’s debt.

Student loan debt collection has been making headlines recently; one result is that the Department of Education is reexamining how third party debt collectors are utilized and remunerated.

President Obama promoted the Stafford student loan interest extension in an amusing appearance on “Late Night with Jimmy Fallon”:

West Virginia Attorney General Sues Seven Debt Collection Agencies

West Virginia Attorney General Darrell McGraw is vigilant when it comes to debt collection practices. His office recently announced that it filed suit against seven debt collection agencies that are unlicensed in West Virginia after the agencies refused to comply with subpoenas for records of their collection activities. According to a press release issued by McGraw’s office, the AG received complaints that the debt collection agencies “engaged in a wide range of abusive and unlawful debt collection practices, including repeated harassing phone calls, impersonating law enforcement and judicial officers, making false threats that nonpayment will result in arrest or criminal prosecution, and collecting nonexistent debts or debts that have already been paid.”

The debt collection agencies being sued are County Filing Services; Portfolio Investment Financial; Investment Management and Recoveries; Rosenthal, Stein and Associates; Vision Credit Solutions; National Capital Management; and Dorsey Thornton & Associates. Several individuals related to these companies are also named in the suits.

Federal Trade Commission Issues Privacy Report

Federal Trade Commission issued a report calling on businesses to shore up their practices relating to consumer privacy and give consumers greater control over their personal information. It also called upon Congress to enact privacy-related legislation. The full report can be downloaded from http://www.ftc.gov/opa/2012/03/privacyframework.shtm, but the centerpiece of the report is advocating for the implementation of Do Not Track systems that honor consumers’ wishes when it comes to tracing their steps across the Web.

For additional information on understanding how your information can be tracked, visit http://onguardonline.gov/topics/be-smart-online, a joint website by the U.S. Department of State, the Internal Revenue Service, and the Federal Trade Commission. The FTC has also created a short video that describes the type of information that may be collected and shared as you go about your day. While it doesn’t offer any solutions, it is illustrative and may encourage consumers to tiptoe through the digital world:

Lemberg & Associates Mentioned in Sacramento Bee Debt Collection Article

Lemberg & Associates Of-Counsel Tammy Hussin was quoted in the Sacramento Bee over the weekend. The article, written by Marjie Lundstromand, discussed the uptick in lawsuits against debt collection agencies by California consumers. Hussin noted that the poor economy means people have less money with which to pay their debts, which results in more aggressive debt collection tactics.

The article reported the increase in debt collection-related complaints to the Federal Trade Commission, as well as enforcement actions taken against rogue California-based debt collection agencies. Unsurprisingly, representatives of the debt collection industry portrayed themselves as victims of consumer attorneys, unclear laws, and consumers who file multiple lawsuits. But the article also sheds light on California’s debt collection statute, the Rosenthal Act, as well as the downright nasty practices engaged in by some debt collectors.

CFPB Launches College Financial Aid Tool

The Consumer Financial Protection Bureau has launched a beta version of its Financial Aid Comparison Shopper (http://www.consumerfinance.gov/payingforcollege), an online tool that seeks to present a uniform and realistic picture of the loans a potential student would have to take out when going to a particular college. The CFPB currently has 7,500 schools in its database, and visitors can do a side-by-side comparison of vocational schools, community, state, and private colleges. It takes into account average grant and scholarship offers, the anticipated debt level at graduation, and estimated monthly student loan payments after graduation. It’s a good first step in developing a tool to help students and their parents navigate the maze of financial aid packages offered by colleges. The CFPB is working with the Department of Education to develop a standardized form for colleges to use in presenting financial aid packages.

The Implications of Out-of-Control Student Loan Debt

Over the past two weeks, the percolating discussion of student loan debt has heated up to a boil. Bloomberg lit a fire under the issue, with an article on unsavory debt collection practices relating to student loans and the financial incentives for debt collectors to collect a minimum payment rather than rework the loan. The Department of Education is rewriting some of the rules, but in the meantime those with student loans continue to suffer. Barron’s recent cover story, written by Jonathan Laing, is an excellent analysis of who exactly owes student loan debt and what it might mean to the larger economy.

Laing includes some startling numbers in the article. He notes that the Consumer Financial Protection Bureau disputed the Federal Reserve Bank of New York’s estimate of $870 billion in student loan debt, instead saying that student loan debt topped $1 trillion (with a T). In addition, he reports that those who graduated college in 2010 had an average of $25,250 in student loan debt, but that those who attend medical school or law school can rack up hundreds of thousands of dollars in loans. Those who are in their mid-30s to late 40s are borrowing in record numbers, presumably to go to school in order to gain a competitive edge in the job market. And, more parents than ever are taking out student loans to help their kids.

One might think that most people who have student loans in default have graduated in the past few years, given that the economic tailspin has made it difficult for graduates to obtain employment. Interestingly, Laing notes that those borrowers between 30 and 39 years of age owe an average of $28,500, and those between 40 and 49 years of age owe an average of $26,000.

But one of the most troubling insights was regarding the predatory practices of some for-profit schools, which advertise to those hoping to go back to school in order to increase their earning potential. Instead, Laing reports that those students wind up with $33,000 in student loan debt. Although they account for only about 10 percent of students, they make up almost half of all defaulted student loans.

It’s a fascinating article that takes a big-picture look at defaulted student loans, and is definitely worth reading.

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StopCollector Blog Authors

Sergei Lemberg

Sergei Lemberg is the principal at Lemberg & Associates, a law firm that defends consumer rights in the areas of fair debt collection law, fair credit law, lemon law, among others. He is regularly labeled by the debt collection industry as one of the “most active consumer attorneys” in the U.S.

Sally Smith

Sally Smith is the former editor-in-chief of several consumer magazines, and has written extensively on issues relating to finance, public policy, and other topics of interest to consumers.

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