August 16, 2014

MEGAN MCARDLE: Old Debts, Shady Collectors, and Your Rights.

As the industry has been described to me, there’s a hierarchy of debt-collection professionals, from the people who work for your bank or utility (indifferent, sometimes incompetent, occasionally mean) to the folks who buy ancient debt — known as “paper” — for pennies on the dollar and attempt to collect it, relying on no more than the occasional goodwill of debtors and their own antisocial tendencies. Very old debts are very difficult to collect, because they disappear from credit reports after seven years, and after a state’s statute of limitation on debt collections expires, the collector can’t even sue. So these wily collectors either hope that the debtor feels bad about being a deadbeat and wants to clear his good name . . . or that he doesn’t know the law. And when hope fails, collectors frequently resort to less savory tactics such as threatening to sue (legal), threatening to have you arrested (it may be legal to make the threat, but they can’t actually make good on it) or impersonating a law enforcement officer who is going to come arrest you (very, very, very illegal).

The problem is that even if they engage in illegal tactics, it’s a pretty low priority for the government. The harm these guys do is real, and it’s not like this is an industry where you clutch your hand to your heart in the fear that tougher regulations might put you of business. The problem is enforcement. The Federal Trade Commission, which is in charge of regulating this stuff, is not really equipped to rid the world of a bunch of fly-by-night collection shops operating out of temporary office spaces or the back of some guy’s warehouse; it’s good at wrangling with corporations that have big, marble-floored headquarters that can’t easily be moved to a nearby shed if the government comes knocking. It’s easy to see why enforcement would be a low priority when shutting one fishy operation down just means that someone else will pick up the paper and do the same thing — maybe even the owner, operating through a brand-new shell company.

It’s funny, but one of the reasons people use to argue against libertarianism is that under libertarianism shady operations like this won’t be restrained by law enforcement. And yet. . . .