
The Color of Debt: How Collection Suits Squeeze Black Neighborhoods - ohjeez
https://www.propublica.org/article/debt-collection-lawsuits-squeeze-black-neighborhoods
======
jacquesm
I don't have a problem with debt collection per-se, you should pay for what
you consume, if you can (and if you can't and it's a life necessity such as
water or another utility, or a hospitalization or such then society should
pick up the bill).

What I _do_ have a problem with is that the debt collectors regularly tack on
charges (quite often illegally so) that are a large multiple of the original
amount. This then puts the person in debt much further into debt still.
Intimidation tactics, legal threats (which never materialize) and so on, not a
trick in the book stays unused.

I've seen this with a close friend, original debt 45 euros (phone bill
overrun, bill did not arrive due to a move). This then spiraled out of control
until the total amount was in excess of a thousand Euros at which point I got
involved and managed to get rid of almost all of it except for the original 45
euros + some token fee. Now if not for the fact that I was perfectly happy to
go to court (by paying for the legal fees) and made this very clear to the
counterparty (KPN, NL former monopolist telco) and their attack dogs it would
have probably been going still. Very annoying how they prey on the weak. And
of course, those with a good income never have these problems so for them it's
not an issue.

~~~
mikeash
What really gets me is that this _never_ goes both ways.

If you fail to pay, you get hit with penalties and fees and interest and it
spirals out of control with great speed.

If they overcharge you, then you'll usually get your money back eventually,
and with _no_ extra anything.

You want to charge me a ton for missing a bill? Fine, but only if I get to
charge you a ton for, say, charging me an ETF I don't actually owe.

~~~
jacquesm
That's so true. The power asymmetry is incredible.

------
yummyfajitas
The mood affiliation of this article is pretty shocking. Is racism at work in
debt collection? Are debt collectors disproportionately ignoring bad debts
owed by white people? Why would they do that - white supremacy is somehow
overriding profit motive?

This is a very odd question for the article to ignore. Another obvious
question: why can't some greedy person go collect these debts and get rich? Is
this a business opportunity?

The article also chooses lots of odd base rates:

"Most of MSD’s customers are white, but the suits were largely filed against
residents of black communities..." \- Isn't the relevant comparison to the
number of delinquent customers in the aforementioned regions?

"...even accounting for income, the rate of judgments was twice as high in
mostly black neighborhoods as it was in mostly white ones." Why are they
accounting for income, rather than accounting for the amount of bad debt?

I don't quite understand what this article is attempting to claim. Can someone
clarify it for me?

~~~
massysett
"This is a very odd question for the article to ignore."

It didn't ignore that question. It said that blacks have much lower net worth
than whites, so they have fewer resources to draw on to pay bills than whites.

"why can't some greedy person go collect these debts and get rich?"

Because the debtors have little money to collect. You can't squeeze water from
a rock. However, the article does point out that many of the plaintiffs have
purchased the debt and are now collecting it, which would seem to qualify as
the "greedy person" looking for the "business opportunity" that you mention.

"I don't quite understand what this article is attempting to claim. Can
someone clarify it for me?"

The thesis is stated right in the headline and sub-headline.

~~~
yummyfajitas
Your first paragraph suggests that blacks are more delinquent than whites. Is
that your intent? Or do you mean something else?

Your second paragraph makes no sense. Do black people but not white people
have money to pay debts? That would seem to contradict your first paragraph.
Remember, I was asking (predicated on the idea that there is some unfairness)
why people would collect debts owed by blacks but not whites.

If the headline is the sole thesis, that's fine. I guess I thought the article
was hinting at some kind of unfairness, rather than merely the fair
application of debt collection processes being applied to disproportionately
delinquent black people.

~~~
DanBC
Imagine poor white people and poor black people have similar levels of debt.

Now imagine the poor black people are subjected to vastly more police stops
and prosecution and fines (even though crime levels are similar). Those poor
black people now have to pay money to courts or go to jail, which means they
can't service the other debt, which means their debts are sold off to
aggressive debt collectors.

~~~
yummyfajitas
If black people did commit crimes at a higher rate than whites, this might
contradict your narrative...

You also seem to be postulating a large amount of undetected and unprosecuted
criminality among all populations. Why do you believe this is the case?

------
noonespecial
_The companies buy debts for pennies on the dollar and then try to recover
what they can from debtors._

So if the debt can be "bought" for pennies per dollar, why can't it be
_settled_ for this amount by the unfortunate people at the end of the
bludgeoning stick?

You know what would be fun? A site that lets people get together and buy these
debts and then instead of hounding the debtors, forgives the debts and then
sends a nice card informing the debtor that they are now forgiven this debt
with the names of all of the people who kicked in to wipe it out.

~~~
mkeeter
Such a program already exists:
[http://rollingjubilee.org/](http://rollingjubilee.org/)

~~~
moultano
'did' exist. They aren't taking donations anymore. Bummer.

------
Natsu
Debt collectors are on par with scammers for me. I've never had a bad debt of
my own, but whoever had this phone number prior to the time I got it sure did.

I had to start blacklisting phone numbers by the dozens to get any peace. I'm
always hearing someone asking for someone I've never heard of and even if you
manage to tell a human that you've never heard of that person and that this is
your phone number and the person they want will never, ever be here, the debt
(and your number) will just get passed to the next batch of collectors and the
cycle will continue ever onward.

I can't count how many random bogus legal threats and whatnot I've gotten for
someone who I don't know.

~~~
ingsoc79
Debt collectors are awful. I've received foreboding messages on my voicemail,
which turn out to be debt collectors asking me to rat out former roommates'
contact info.

That said, I've found a quick and easy solution for avoiding them: don't buy
shit you can't afford, and if you do fall in that trap, negotiate your way
out. You can't expect to rack up a huge bill and be surprised you're being
held to it.

~~~
mikeash
You tell a story about how you encountered debt collectors using you to look
for someone else, then immediately say the easy way to avoid them is not to
get into debt? Do you not see the obvious contradiction here?

~~~
ingsoc79
That I shouldn't post about debt on the Internet until I've purged all
association with people in debt? Help me out here.

~~~
jimrandomh
Many of the complaints against debt collection practices are coming from
people who aren't debtors, but are being harrassed because they have a phone
number that's changed hands or have been misidentified. That's not something
one can avoid by not buying things, and for people who've been the victim of
this sort of harrassment, it's a big deal and a reason to hate the industry.

------
InTheArena
This is something that must be, and can be fixed.

One thing the story does not address is up front education. People are
tragically under informed about the dangers of credit. Hence you see this
problem combined with the other three horses of the credit apocalypse. Payday
loans, medical expenses, credit cards. Informing people about the dangers of
these upfront is critical. Especially because we have laws to protect people -
bankruptcy exists for a reason.

Part of the problem is determine credit risk for underserved markets. Credit
Scores are based mostly on what credit you already have, and even low
information scores depend on utility bills, etc to determine credit
worthiness. That makes the problem far worse because effective and relatively
safe credit escape valves are unavailable to to those who really need it,
because systems can not determine the difference between a mom down on her
luck, and someone who really is just trying to get money for nothing.

~~~
mr_luc
Don't forget car title loans -- usually capped by law at 300% interest (!).

Those aren't good enough for car-title loan companies, like TitleMax, so they
try to up-sell/roll-over from the car-title loan to a "Consumer Finance Loan",
which I believe is basically unregulated and can have insane terms.

Average for car-title loan customers is to 'refinance' it EIGHT TIMES with the
title-loan company, so the goal is to keep a population of financially
illiterate people in a constant state of indebtedness, and ensure payment with
the threat of repossession.

------
geggam
Why is this racial ?

~~~
superuser2
From TFA:

>The disparity was not merely because black families earn less than white
families. Our analysis of five years of court judgments from three
metropolitan areas — St. Louis, Chicago and Newark — showed that even
accounting for income, the rate of judgments was twice as high in mostly black
neighborhoods as it was in mostly white ones.

~~~
heptathorp
Accounting for income, but not accounting for indebtedness and more crucially,
debt delinquency.

It'd be one thing if these lenders were disproportionately targeting black
borrowers and letting white borrowers slide. But that doesn't seem to be the
case.

~~~
superuser2
As you say, they found a racial, not socioeconomic, difference in debt
lifecycles. That's why it's racial.

~~~
VanillaLime
One paragraph later, they also propose that the disparity is likely because
black families have less accumulated household wealth and so are more likely
to end up in delinquency than white borrowers of the same income. Like a lot
of racial disparities, it doesn't come down to explicit racism by companies or
debt collectors, just by a confluence of societal factors that leave
minorities in a more precarious financial position.

------
littletimmy
There is no real reason for the state to enforce debt collection to this
extreme. If you don't want to lose money, don't lend it or at the very least
have a secured collateral. That should get us rid of this entire problem of
debt collection and exploitation. Would also encourage people to live within
their means.

