Indian Debt Collectors & More

Today’s New York Times has an article by Heather Timmons about debt collection agencies using phone banks in India to make calls to delinquent credit card customers in the US. Delinquencies were up to 4.5 percent of accounts in the fourth quarter of 2007, from 3.5 two years earlier. Foreign collections calling represents a small fraction of the overall collection business, but bill chasing is just the latest industry to be outsourced to India. These are boom times for the financial misery business, and the influx of well-paying call center jobs has created a group of Indian workers who, as Timmons writes, “are amassing some of the status symbols that probably got their clients into trouble in the first place— new scooters, iPods, Swatch watches and exotic vacations.”

The movement of collections jobs to India is news, but the article includes a couple of other points that I find much more interesting:

1. Collections agents are targeting customers’ economic stimulus package rebate checks. On the one hand, this sounds like a ruthless collections technique. You know the debtor is expecting a windfall, so you ask him or her to turn that money into a payment on a credit card. On the other hand, this is precisely what these people should do with their rebate checks. The stimulus package is supposed to be a bit of fuel for the consumer economy, given out in the hope that people will continue spending. But spending is what got delinquent credit card customers into trouble, so they would be much better off paying down debt. This won’t help the economy, but debt-ridden consumers have already done more than they can afford for the sake of the economy. It is time for them to take better care of their personal economies. Collections callers are a hated group who often employ abusive and unethical techniques to track down and intimidate their prey, but here is an unusual case where the interests of both the collection agency and customer are in concert.


2. According to Timmons’ article, industry analysts are seeing a new trend: “People are walking away from their homes and hanging on to their credit cards, because that is their lifeline.” If this is a valid observation—and I think it is—it shows the centrality of credit cards in our lives, a point I made in a recent op-ed, “Our Love-Hate Relationship With Plastic.” I also believe that, unlike the current foreclosure trend, the bankruptcy boom of a few years ago was a renters’ phenomena. Renters have no choice but to give up their credit cards. They are a lower income group who are more likely to be living in relatively inexpensive housing, and their debts are credit cards and other forms of commercial loans. Many of those who are now in trouble with their mortgages may be people whose incomes are not really sufficient to handle home ownership: homeowners who should be renters. But it is interesting to note that, for debtors who have a choice, walking away from the home and mortgage—as difficult as that decision must be—is often more attractive than giving up credit cards.

A final random bit: the novelist Stanley Elkin wrote a wonderful novel or short story about a telephone bill collector, but for the life of me, I can’t remember the title. Will do some more research and report back.