The New York Times reported several days ago on what it calls the “newest frontier in debt collecting”: calling the decedent’s relatives and seeing if they will voluntarily pay the decedent’s debts. The article reports that the agencies report that lots of people are very happy to pay up.
I have no doubt that many people pay the debts out of a sense of morality or the feeling that the decedent would have wanted them paid. But the methods used are troubling, not least because the relatives are apparently not told that they’re being asked to give charity to credit card companies. The article reports:
[S]ome of those who pay a dead relative’s debts are unaware they may have no legal obligation.
Scott Weltman of Weltman, Weinberg & Reis, a Cleveland law firm that performs deceased collections, says that if family members ask, “we definitely tell them” they have no legal obligation to pay. “But is it disclosed upfront — ‘Mr. Smith, you definitely don’t owe the money’? It’s not that blunt.”
The debt collection agencies seemed to have micromanaged the information the Times reporter had access to, all in the name of debtor privacy. Not surprisingly, despite Scott Weltman’s minor indiscretion, the article comes across as credit agency PR spin, as though we’re to believe that out of the goodness of their hearts the collection agencies are helping the dead rest easy. But really, how many people send in letters expressing appreciation for the opportunity to pay off loved one’s debts? Or is the real story that people, unaware that they have no obligation to pay, appreciate that the debt collection agency rep was sympathetic and let them “work out a deal”? Many people wouldn’t know to ask if they have a legal obligation to pay, especially if the decedent was the one handling the family’s bills, and even more so shortly after the death of a loved one when family members are in the early stages of grief.
Contrast the Times article with this article which reports that according to a former Bank of America rep, BoA’s debt collection agents are given financial incentives to recover a decedent’s debts.
The rep said that employees were encouraged to walk right up to the line of actively deceiving a caller about the consequences of non-payment. “As long as you don’t get caught [lying],” the former rep added, “there’s no really no punishment.” (sic)
The article describes the tactics used by a Bank of America rep to get Paul Kelleher to pay his deceased mother’s credit card bill. When Mr. Kelleher told the rep that he wouldn’t pay the bill, the Bank of America rep reportedly responded, “I know that if it were my mother, I’d pay it. That’s why we’re in the banking crisis we’re in: banks having to write off defaulted loans.” (Credit to Gerry Beyer for linking the article on his blog.)
Hopefully, outrageous statements like that are not representative of techniques used by debt collectors. But it certainly highlights the fine ethical line between asking a relative if they would please like to assume a debt they have no legal obligation to assume and using varying combinations of deceit, false sympathy, manipulation and intimidation to get relatives to dig deeper than they already have to provide a bank with a private bailout.
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The point is, the debt continues to exist regardless of a creditor’s ability to legally enforce the obligation. Hence, some scrupulous individuals feel the “moral” obligation to repay the debt. The idea behind their actions, I believe, is that the debtor should not suffer a loss. This is in no way a “private bailout” of a bank.