Death Debt Collection

Death debt collection, a new low for a despicable business. I put off writing this one for almost two months because I just couldn’t wrap my arms around the concept of debt collection agencies harassing the surviving relatives of the dead, in order to get them to pay what they do not owe. If a person takes out a credit card or a mortgage is his or her own name and then dies before the bill is paid, the surviving relatives including the spouse owe nothing. If the credit card or the mortgage is in both names, the surviving spouse is on the hook.

Older Americans are carrying more debt than in the past, much of it associated with costly medical procedures. To the hospitals’ credit, they rarely dun the survivors of their dead, former patients. However, the major banks that issue the credit cards have no such scruples. They hire the work out to third parties to shelter their names from a public opinion backlash. An article from the Wall Street Journal, “For the Families of Some Debtors, Death Offers No Respite,” notes, “Tony Lloyd, a former manager for debt collector DCM Services LLC of Minneapolis, says the benefits of using death-debt collectors are clear. "The big selling point is that these collectors offer banks a cushion that shields them from actually having to do the gritty work of going after dead people's families,"

These people, I use the term loosely, state that the survivors have a moral duty to pay the debts of the dead since they may have benefited from those credit card purchases. They also contend they are only working in the interest of older Americans. If they don’t do this work, then older Americans couldn’t get credit. Baloney, banks are very sophisticated in their understanding of their clients’ ability to pay off their credit cards. Sometimes they just make a mistake. Don’t worry about the banks, while they can not predict which individual customer will die with an unpaid balance. They have a pretty good idea of how many clients will die and what their total unpaid balance might be. That information is factored into the interest rate charged by the bank. From Wikipedia, “Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in the insurance and finance industries. Actuaries are professionals who are qualified in this field through education and experience. In many countries, actuaries must demonstrate their competence by passing a series of rigorous professional examinations.”

The Wall Street Journal, recounts the story of one poor widow who received up to ten phone calls a day from West Asset Management of Omaha, Nebraska, harassing her into paying off her dead husband’s credit card so she could get them “taken off your plate.” Disgusting, and these were some of the better examples of this sort of slime. According to the article, at least they told her she was not legally obliged to pay. The article also recounts the story of a daughter who has received roughly 200 phone calls from one of these agencies following her mother’s death.

Many of these companies misrepresent the nature of the obligation. If they do this, you can sue them.

Nobody knows how big the death debt collection has grown, but it is big and getting bigger. One company, DCM Services that exclusively collects deceased debts says it manages over $1 Billion in deceased accounts PER YEAR! The Wall Street Journal notes, “Typically, death-debt collectors get paid based on the amount of money they recoup for the lenders, say lawyers for debt-collection firms. Firms can pocket up to 40% of the payments collected, roughly double the rate for other kinds of delinquent consumer obligations.” Fortunately, as these vultures grow in number they are attracting the interest of the Federal Trade Commission and consumers rights attorneys.

These companies are building huge data bases of information from obituaries then cross referencing it to information from the banks. They are coming after the surviving relatives and even the friends of the dead, using a sophisticated, psychologically effective mix of harassment, guilt manipulation, and even what these wretches term, “empathetic active recovery,” a sort of a disingenuous form of grief counseling. If these scum come after you and they are not violating the law, which is way too permissive, there isn’t very much you can do. In dealing with these contemptible people, Dave Ramsey recommends recording all telephone conversations after identifying yourself and telling the agent the conversation is going to be recorded. If they are abusive or threatening, hang up. He recommends setting a time; say every two weeks, to talk to these people. If they call more often than that, just hang up. If they break the law and you have a recording of the conversation there is a good chance just playing it for the legal department of the collection agency will make the problem go away. If not, it might be time to talk to a consumer rights attorneys.