The Government’s Double Standard on Debt Collection

From American Banker, last week:

Sure, the U.S. government recently handed down strong new rules designed to protect consumers from unwanted robo-calls. But maybe some robo-calls aren’t so bad. Like debt-collection calls in cases where the debt happens to be backed by Uncle Sam.

The freshly minted budget agreement between the Obama administration and congressional leaders includes one specific carve-out from existing restrictions on autodialed calls. When the caller is seeking to collect debt owed to or guaranteed by the U.S. government, it will not be necessary to get consumers’ consent to robo-call them, according to the legislation. [Emph. added]

Ah, our Solomonic federal government at work. A robo-call, in case you’re not acquainted with the latest in debt-collection technology, is a call that’s been generated by an automatic dialing system rather than an actual human being’s finger. Debt collectors like to use robo-calls because they boost collector productivity. Consumer advocates hate them for basically the same reason: the industry has been accused of using robo-calls to pepper delinquent borrowers with so many calls so frequently that the practice amounts to outright harassment. I’ve been in a number of debt collectors’ call centers and so have seen first-hand how robo-calling can be a legitimate tool to make the collection process more efficient. But I’ve also heard enough horror stories of collector abuse and can easily imagine how, when used by underhanded collectors, they can make life hell for borrowers.

So for the purposes of this discussion, mark me down as agnostic. That said, if robo-calling really can be so abusive that federal regulators have seen fit to severely restrict it, why should collectors for the federal government get a free pass on the matter? It’s not as if collections on delinquent federally guaranteed debt is inherently somehow a more virtuous activity, or that federal agencies can be counted on to only sell their receivables to Boy Scout-caliber collection agencies. The reason the federal government is carving out a loophole for itself is of course that, potential harassment aside, it wants to get its hands on every last dollar it can. I have no problem with that. But then again, if it’s ok for the federal government to take an aggressive line in collecting its own debts, why shouldn’t private-sector creditors be allowed to as well? Instead, the government seems to fall all over itself to give consumers/voters a break at every turn.

That’s not right. These borrowers knowingly incurred the debts they took on, and ought to be expected pay them back. If the federal government thinks it’s not unfair to use robo-calls in its own collection efforts, simple fairness says that the private sector ought to be able to use robo-calls too.

What do you think? Let me know!