The Color of Debt: How Collection Suits Squeeze Black Neighborhoods | Hacker News Reader

The Color of Debt: How Collection Suits Squeeze Black Neighborhoods

propublica.org

70 pointsohjeez50 comments

I don't have a problem with debt collection per-se, you should pay for what you consume, if you can (and if you can't and it's a life necessity such as water or another utility, or a hospitalization or such then society should pick up the bill).

What I do have a problem with is that the debt collectors regularly tack on charges (quite often illegally so) that are a large multiple of the original amount. This then puts the person in debt much further into debt still. Intimidation tactics, legal threats (which never materialize) and so on, not a trick in the book stays unused.

I've seen this with a close friend, original debt 45 euros (phone bill overrun, bill did not arrive due to a move). This then spiraled out of control until the total amount was in excess of a thousand Euros at which point I got involved and managed to get rid of almost all of it except for the original 45 euros + some token fee. Now if not for the fact that I was perfectly happy to go to court (by paying for the legal fees) and made this very clear to the counterparty (KPN, NL former monopolist telco) and their attack dogs it would have probably been going still. Very annoying how they prey on the weak. And of course, those with a good income never have these problems so for them it's not an issue.

Greater awareness of nefarious, unequal contracts is required. Often you agree to such terms in the small print. This applies to work contracts, car hire contracts, etc. Even if you pay for insurance monthly (in the UK) you're agreeing to a credit agreement most of the time.

What really gets me is that this never goes both ways.

If you fail to pay, you get hit with penalties and fees and interest and it spirals out of control with great speed.

If they overcharge you, then you'll usually get your money back eventually, and with no extra anything.

You want to charge me a ton for missing a bill? Fine, but only if I get to charge you a ton for, say, charging me an ETF I don't actually owe.

That's so true. The power asymmetry is incredible.

The mood affiliation of this article is pretty shocking. Is racism at work in debt collection? Are debt collectors disproportionately ignoring bad debts owed by white people? Why would they do that - white supremacy is somehow overriding profit motive?

This is a very odd question for the article to ignore. Another obvious question: why can't some greedy person go collect these debts and get rich? Is this a business opportunity?

The article also chooses lots of odd base rates:

"Most of MSD’s customers are white, but the suits were largely filed against residents of black communities..." - Isn't the relevant comparison to the number of delinquent customers in the aforementioned regions?

"...even accounting for income, the rate of judgments was twice as high in mostly black neighborhoods as it was in mostly white ones." Why are they accounting for income, rather than accounting for the amount of bad debt?

I don't quite understand what this article is attempting to claim. Can someone clarify it for me?

Welcome to the bizzaro world of disparate impact politics. Equality under the law is the new oppression. Have you been under a rock the past couple years?

"In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread."

-- Anatole France, Le Lys Rouge (1894)

You've turned a racial issue into an economic one. That's quite a moving of goalposts.

"This is a very odd question for the article to ignore."

It didn't ignore that question. It said that blacks have much lower net worth than whites, so they have fewer resources to draw on to pay bills than whites.

"why can't some greedy person go collect these debts and get rich?"

Because the debtors have little money to collect. You can't squeeze water from a rock. However, the article does point out that many of the plaintiffs have purchased the debt and are now collecting it, which would seem to qualify as the "greedy person" looking for the "business opportunity" that you mention.

"I don't quite understand what this article is attempting to claim. Can someone clarify it for me?"

The thesis is stated right in the headline and sub-headline.

Your first paragraph suggests that blacks are more delinquent than whites. Is that your intent? Or do you mean something else?

Your second paragraph makes no sense. Do black people but not white people have money to pay debts? That would seem to contradict your first paragraph. Remember, I was asking (predicated on the idea that there is some unfairness) why people would collect debts owed by blacks but not whites.

If the headline is the sole thesis, that's fine. I guess I thought the article was hinting at some kind of unfairness, rather than merely the fair application of debt collection processes being applied to disproportionately delinquent black people.

Imagine poor white people and poor black people have similar levels of debt.

Now imagine the poor black people are subjected to vastly more police stops and prosecution and fines (even though crime levels are similar). Those poor black people now have to pay money to courts or go to jail, which means they can't service the other debt, which means their debts are sold off to aggressive debt collectors.

If black people did commit crimes at a higher rate than whites, this might contradict your narrative...

You also seem to be postulating a large amount of undetected and unprosecuted criminality among all populations. Why do you believe this is the case?

The companies buy debts for pennies on the dollar and then try to recover what they can from debtors.

So if the debt can be "bought" for pennies per dollar, why can't it be settled for this amount by the unfortunate people at the end of the bludgeoning stick?

You know what would be fun? A site that lets people get together and buy these debts and then instead of hounding the debtors, forgives the debts and then sends a nice card informing the debtor that they are now forgiven this debt with the names of all of the people who kicked in to wipe it out.

Such a program already exists: http://rollingjubilee.org/

'did' exist. They aren't taking donations anymore. Bummer.

> So if the debt can be "bought" for pennies per dollar, why can't it be settled for this amount by the unfortunate people at the end of the bludgeoning stick?

This is basically what an attorney will do for you (especially if you get one before sent to collections). Because of the vagaries of attorneys and creditors, your mileage may vary.

I'm guessing the availability of quality legal services is also poorly distributed, compounding the entire problem in the article.

I can't help but read these stories and see them as a continuation of problems with redlining and school district funding that are providing a relentless headwind to racial equality.

For more frustrating neighborhood disparities: http://www.thisamericanlife.org/radio-archives/episode/512/h...

Basically any TAL coverage on schools makes me want to pull my hair out.

You often can. Sending a check marked 'Payment in full' is the common law way to do so, but it varies by state.

Looks undetermined in California. http://www.yourlegalcorner.com/articles.asp?cat=biz&id=150

If you intend to negotiate something like them you need to GET IT IN WRITING FROM THEM before sending payment. If they don't send you an invoice or whatever with the proper total amount due on it, DO NOT SEND OUR MONEY. They will often lie to get you to send a payment and if you can't prove you negotiated the lower amount you will still owe.

A targeted version of this idea exists, for people's overdue water bills in Detroit and Baltimore. Tiffani Bell is the co-founder and director: https://www.detroitwaterproject.org

Collections companies very often (if not always) offer to settle for a fraction of the debt owed. Many times in their first attempt to collect.

The value of a debt is nominal amount times probability of payment. If it could be settled for pennies, then it would be worth even less. This may or may not be a desirable outcome.

"So if the debt can be "bought" for pennies per dollar, why can't it be settled for this amount by the unfortunate people at the end of the bludgeoning stick?"

Statistics and overhead are part of the reason.

You can buy debt for pennies on a dollar because a lot of it cannot be collected because the debtors do not have the money and/or are hard to locate.

Debt collectors are on par with scammers for me. I've never had a bad debt of my own, but whoever had this phone number prior to the time I got it sure did.

I had to start blacklisting phone numbers by the dozens to get any peace. I'm always hearing someone asking for someone I've never heard of and even if you manage to tell a human that you've never heard of that person and that this is your phone number and the person they want will never, ever be here, the debt (and your number) will just get passed to the next batch of collectors and the cycle will continue ever onward.

I can't count how many random bogus legal threats and whatnot I've gotten for someone who I don't know.

Debt collectors are awful. I've received foreboding messages on my voicemail, which turn out to be debt collectors asking me to rat out former roommates' contact info.

That said, I've found a quick and easy solution for avoiding them: don't buy shit you can't afford, and if you do fall in that trap, negotiate your way out. You can't expect to rack up a huge bill and be surprised you're being held to it.

How about hospital bills? Taxes? Obligatory insurances?

In the US hospital bills are typically negotiable.

Medical debt doesn't go on credit reports, so generally speaking they don't really push since there's little teeth to bite with. I've had a LOT of debt on me, and I've dealt with many debt collectors, as well as someone with a ton of medical expenses - all I ever received was letters on those, as opposed to the aggressive calls related to other debts.

Medical debts show up on your credit report just like any others once they go into collection.

The newest version of the FICO credit score[1] does differentiate between medical and non-medical debts, though, where previous ones did not, and it weights the former less severely.

1: http://www.fico.com/en/node/8140?file=7786

You tell a story about how you encountered debt collectors using you to look for someone else, then immediately say the easy way to avoid them is not to get into debt? Do you not see the obvious contradiction here?

That I shouldn't post about debt on the Internet until I've purged all association with people in debt? Help me out here.

No, that from your own story, avoiding debt doesn't necessarily mean you avoid debt collectors.

Many of the complaints against debt collection practices are coming from people who aren't debtors, but are being harrassed because they have a phone number that's changed hands or have been misidentified. That's not something one can avoid by not buying things, and for people who've been the victim of this sort of harrassment, it's a big deal and a reason to hate the industry.

If you lose your job, the "shit you can't afford" can easily include food and rent.

And the trap is made of punitive fees with high rates of interest that soon make any initial borrowing a trivial part of the sum owed.

Anyone who thinks this can't happen to them is being naive. It can literally happen to anyone, including people who are currently independently wealthy millionaires.

All it takes is a major economic downturn and/or some bad investment choices.

This is harsh but true. If you're at risk of losing your job, and you need all that income just to survive - without saving anything - then you're already not in a sustainable situation and should fix it while it's easy, not after you lose your job and become desperate enough to take on foolish debt in the stress of the moment. Similarly, if you depend on your job to pay the mortgage, then be prepared to lose your house when you lose your job. It's not the end of the world, you can still get a pile of cash out of it.

>If you're at risk of losing your job, and you need all that income just to survive - without saving anything - then you're already not in a sustainable situation and should fix it while it's easy

If you're making $100k a year, living in a nice 4 bedroom house, driving late model cars, and not saving, that is a relatively easy fix.

If you're making $10 an hour working retail, there just isn't enough money to pay for cost of living and any kind of substantial savings.

People in this situation (who make up a huge chunk of America), are one expensive car repair away from disaster and debt collectors.

Yes. If you're living hand-to-mouth, then you're already having a problem. Things have already gone wrong. It's too late to put the ambulance at the bottom of the cliff and only worry about people when they fall off - which everybody in that situation is bound to do given enough time.

There is no guarantee people in this situation must fail. They might get a raise, or a promotion, or a surprise inheritance, or win the lottery, or who knows.

Now, obviously you don't want to get into this situation in the first place, if you can help it. But if a person is, then they are not simply doomed as you're saying.

We should not excuse exploitation of people living paycheck-to-paycheck simply on the basis that they're bound to get fucked over eventually so it doesn't matter when or how it happens.

We've had multiple companies falsely claim we owed them money after closing the account. For example, for years a debt collection agency would send us emails and call us about a debt of €0.63(!) - plus a few dozens of euros in late fees - even tough we had a receipt of the payment, which we sent them multiple times.

In the US it's illegal for them to continue calling once you've made it clear you don't know who the person is, and it's grounds for suing.

3rd party debt collectors know just how easily they can be sued, so while they do push the envelope, if you demonstrate that you understand the laws, they'll back off quickly.

They're either robocalls or they hang up the second I find out who they're looking for, so good luck even figuring out who the debt has been sold to :/

My wife and I were in a crazier situation. A phone number was associated with someone with big debt problems.

What made it more complex was that store loyalty cards (CVS in our case) caused her to get associated with our new number years later. Retailers sell this info to skip trace people and collectors.

We didn't realize it until we received a mailing addresses from CVS a year ago to a familiar name -- the debtor. Around the time we got really weird calls from bottom of the barrel collectors who buy debt about to age out for less than a penny on the dollar, re-animate it by "making contact" and then reselling it for more money.

This is something that must be, and can be fixed.

One thing the story does not address is up front education. People are tragically under informed about the dangers of credit. Hence you see this problem combined with the other three horses of the credit apocalypse. Payday loans, medical expenses, credit cards. Informing people about the dangers of these upfront is critical. Especially because we have laws to protect people - bankruptcy exists for a reason.

Part of the problem is determine credit risk for underserved markets. Credit Scores are based mostly on what credit you already have, and even low information scores depend on utility bills, etc to determine credit worthiness. That makes the problem far worse because effective and relatively safe credit escape valves are unavailable to to those who really need it, because systems can not determine the difference between a mom down on her luck, and someone who really is just trying to get money for nothing.

Don't forget car title loans -- usually capped by law at 300% interest (!).

Those aren't good enough for car-title loan companies, like TitleMax, so they try to up-sell/roll-over from the car-title loan to a "Consumer Finance Loan", which I believe is basically unregulated and can have insane terms.

Average for car-title loan customers is to 'refinance' it EIGHT TIMES with the title-loan company, so the goal is to keep a population of financially illiterate people in a constant state of indebtedness, and ensure payment with the threat of repossession.

Why is this racial ?

Because it gets more clicks than "towns in dire economic straits struggle to deal with debt collectors." Zeitgeist etc etc.

From TFA:

>The disparity was not merely because black families earn less than white families. Our analysis of five years of court judgments from three metropolitan areas — St. Louis, Chicago and Newark — showed that even accounting for income, the rate of judgments was twice as high in mostly black neighborhoods as it was in mostly white ones.

Accounting for income, but not accounting for indebtedness and more crucially, debt delinquency.

It'd be one thing if these lenders were disproportionately targeting black borrowers and letting white borrowers slide. But that doesn't seem to be the case.

As you say, they found a racial, not socioeconomic, difference in debt lifecycles. That's why it's racial.

One paragraph later, they also propose that the disparity is likely because black families have less accumulated household wealth and so are more likely to end up in delinquency than white borrowers of the same income. Like a lot of racial disparities, it doesn't come down to explicit racism by companies or debt collectors, just by a confluence of societal factors that leave minorities in a more precarious financial position.

There is no real reason for the state to enforce debt collection to this extreme. If you don't want to lose money, don't lend it or at the very least have a secured collateral. That should get us rid of this entire problem of debt collection and exploitation. Would also encourage people to live within their means.

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