I Was a Debt Collector – Then I Ended Up in Credit Card Debt

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I Was a Debt Collector – Then I Ended Up in Credit Card Debt

I've been speaking with friends and family about personal finances and their experiences with debt. I was surprised to learn stories that don't come out in day-to-day conversations - who's dealing with debt, where it came from and how they're paying it off.

One family friend, Paul*, told me that he'd short-sold a house, defaulted on credit card debt, and had judgments against him - court orders that could let lenders garnish wages, freeze bank accounts or seize and sell personal belongings. In his words, he'd "had it all."

Then the twist: Paul told me he used to be a debt collector for a credit card company.

I asked him what he learned and how he feels having been on both sides of a collection call. This is his story.

Paul's Story in His Words

In 2001, I moved to South Carolina from New Jersey. My friend told me about a job opening at a call center doing collections for credit card companies. The pay was good, especially if you earned bonuses, and I was intrigued.

I enjoyed being a debt collector.

I started working for the collection company. The company mostly dealt with credit card collections for people with credit that needs work. The cardholders would typically get a $300 to $500 credit limit, and the accounts I had to deal with were often 60 to 120 days past due.

I liked the job. When we found someone with an unpaid account, our job was to tell them that they had to pay the money back.

We were able to find about half the people with unpaid accounts, but only a third of the ones that we found repaid the money.

I got caught up in the housing bubble.

Around 2005, I bought a house in South Carolina for $275,000. I quit my job with the debt collection agency when they stopped paying bonuses, but I couldn't find another good job. I worked at Office Depot in the sales department, did direct mailing as a contractor and tried my hand at trading currencies. After two years or so, I moved to Michigan, where I have some family. I bought a business -- a dog day care center -- with an investment from friends and family.

Things got hard when the housing bubble burst around 2008. I was renting out the South Carolina house, but rental prices kept dropping. Between the mortgage, taxes and insurance I was paying $2,200 a month for the house, but I could only get $1,000 a month in rent.

Something had to give - I sold the house.

The house's value kept dropping, and the payments weren't manageable anymore. My mortgage interest rate was 7.5 percent and rates were around 4 percent in 2009, so I tried to work with the bank to refinance my mortgage. However, the bank wouldn't refinance because the house was a rental and was worth less than the mortgage balance.

I short-sold the house in 2009, meaning I sold it for less than the outstanding mortgage amount. In the end, I got $90,000 back on a house that cost $275,000.

As a debt collector, I told people over and over again that if they owe money, they need to pay it back because it's the right thing to do. I truly believe that. I fully intended to pay back my debts, and I was trying to work with the banks, but like millions of others, I got caught off guard.

I also still had to live and run a business throughout all of this. That's how I wound up in about $10,000 of credit card debt. After I sold the house, I defaulted on that debt as well.

As a former debt collector, I knew what they'd do.

Being a former debt collector, I knew what was happening on the other side. The companies could get a judgment against me, but some of the cards' balances were too small for them to bother - they'd just sell the debt to a collections agency. I owed $5,000 on one card, and that's the one that got the judgment.

Lessons Learned

You get into big debt because you don't have the money to pay. That might seem obvious, but after you've taken all the steps to cut your expenses, you might still owe something. I'm pretty frugal and I know if you legitimately can't pay, you might have to cut off a leg to feed the body. In my case, I knew I couldn't pay it all off.

I don't get upset when the collectors call. They have a job to do. You owe someone money, and I think the right thing to do is to try to pay it back.

I have taken some steps to rebuild my credit - I have a card with a $300 limit which I use once or twice a month and pay off in full.

The path I took isn't necessarily the one I'd recommend. I let the credit card debt go unpaid and decided to live with the collectors' calls and bad credit. I knew I'd be running my own businesses for years to come and have access to financing through family. The derogatory marks are on my credit, and for me it's a waiting game until they're removed.

*Names and locations have been changed to maintain privacy.

About the Author: Louis DeNicola is a personal finance writer and educator. In addition to being a contributing writer at Credit Karma, you can find his work on MSN Money, Cheapism, Business Insider and Daily Finance. When he's not revising his budget spreadsheet or looking for the latest and greatest rewards credit card, you might spot Louis at the rock climbing gym in Oakland, California.

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I'm guessing he got super lucky and didn't have to deal with the sort of debt collector most people get saddled with, if he "didn't get upset when they call".

Back when my roommate was the one with the lousy credit, after he moved out I had to put up with collectors constantly calling the house and refusing to accept that 1. yes he had moved out, 2. no I was not going to tell them his new address and phone because that was neither my legal nor moral place to do so, 3. no I had no personal obligation for his debts. I eventually had to tell them I was going to go to the police and phone company and see if I could take action against their company to get them to finally stop. (I did also tell my friend what was happening and if he could please try to do something about the situation on his end.)

Then when I ended up going from perfect credit history to major issues because I lost my job, was getting zero call-backs for a new one before my savings ran out, and my unemployment was insufficient for both bills and paying off debtors, they went into a whole host of other misbehaviors:

1. Calling and sending mail on a regular basis despite my telling them I had literally no income beyond some paltry unemployment that went straight out to basic living expenses (and even those weren't being met), and eventually literally no income at all, and no prospects of getting some any time soon, and would contact them once that changed.

2. Repeatedly calling before 7AM and after 7PM. (And of course repeatedly calling during the day as well.)

3. Leaving messages giving my personal information all over the place.

4. Refusing to respect that my mother was disabled/sick and items 2&3 were constantly disrupting her attempts to sleep, even aside from item 1 making this behavior pointless to begin with.

5. Doing all of the above despite my, again, repeatedly sending letters or making phone calls explaining my situation of again literally no money to spare and asking them to stop contacting me per what they claimed were their policy guidelines. I started getting really salty after a while and was sending letters like, "I humbly suggest you start hiring secretaries and such who understand English to a basic degree, since the very clear and easy to understand sentence 'I have no money to spare so you need to stop contacting me because it is literally accomplishing absolutely nothing except ticking off me and my mother' seems to be beyond the reading comprehension level of your current employees."

It eventually got to the point where I had to contact a lawyer that specialized in dealing with collectors to desperately try to get them to stop, and ironically on top of getting my goal achieved I even actually got a little settlement too because some of what they were doing violated Federal rules. Didn't have to pay out of pocket costs for the legal help, either.

And I was still lucky in some ways; I've heard stories of people who've had collectors actually insult them or give them threats to their safety, on top of everything here.

So I guess I feel kind of sad that this sort of story happened to what sounds like the rare decent debt collector and didn't instead happen to the sort of debt collector who could have used the wake-up call of what the harassment they and their colleagues engage in feels like when you're on the recieving end.

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