Data-Driven Look at America’s Brutal Debt-Collection Machine

Posted by Nikitas Tsoukalis on May 10, 2016

Data-Driven Look at America’s Brutal Debt-Collection Machine

If you default on a loan and fail to pay or work out some sort of arrangement with the creditor within three to six months, things have the potential to get really sticky. You may be hounded day and night by the creditor seeking information on the status of the payment you owe to the point where their tactics may be considered illegal. Your creditor may also sue you and take you to court for the money that you owe – and that’s where things have the potential to get even more tumultuous. According to a May report from Prorepublica via Boing Boing, debt collectors often prey on minority and underprivileged groups, filing lawsuits in states with low filing fees in an effort to recoup as much as possible from the people that owe. It’s further proof that the debt-collection machine is ruthless, and this post is designed to take a closer look at just how brutal it really is.

Inside America’s Debt-Collection Machine

So just how appalling is the debt collection process in America? Just take a look at these takeaways from the Prorepublica piece:
  • In 2008, the state of New Jersey heard about 140,000 debt collection cases. Almost all of these cases were filed against African Americans that were unable to afford legal representation. These 140,000 cases were up exponentially from 12 years prior, when only about 500 cases were heard.
  • Most of the debt collection cases were filed by what’s known as “vulture capitalists,” or those who purchase the debt on the cheap and quickly file a lawsuit in a predatory manner against those they know are the easiest victims.
  • Medical debts are among those that are most sought after – and some of the victims that debt collectors and their lawyers have gone after for payment include active-duty soldiers.
  • Capital One was discovered to be the leading U.S. bank when it comes to filing lawsuits against its own customers.
  • The debt collection process for many lenders is highly predatory. It not only involves purchasing debt on the cheap, but filing suit in the states were it’s most affordable to do so to keep their own costs down. It’s a low-risk, high-reward type of proposition.
  • Creditors are always represented by legal teams in court. In 2013 New Jersey, a whooping 97 percent of defendants were without legal counsel.
  • When collectors are given access to and permitted to tap into a consumer’s bank account to seek repayment, the average amount that they net is a measly $350.
Not only does Prorepublica shed light on a damaged debt collection system in need of reform, but it also serves as a good reminder on why you should do your best to avoid financial issues at all costs. Not only can such issues hurt your credit score, but you may also find yourself on the wrong side of the predatory ladder.