Although debt collection law firms are the fierce and hated adversaries of my Long Island bankruptcy clients, I have gotten to know several collection attorneys fairly well over the years.
Some of them are the same age as I am, and we started practicing at the same time, and were members of the same young attorney groups 25 years ago. My practice happened to take me in the direction of helping consumers, whereas some of my colleagues ended up representing credit card companies.
Although my practice only helps consumers and business owners who have financial problems, I like to hear what it’s like on the other side — from those attorneys who actually pursue my clients before they have the opportunity to file for bankruptcy relief or achieve a negotiated settlement.
A Collection Attorney Colleague Recenty Confided In Me
My clients are always complaining about the unabated and aggressive pressure that bill collectors put on them, so it was interesting to have an informal chat with a collection attorney colleague who I’ve known for years and years. He complained that those law firms who specialize in debt collection in New York are not exactly doing so well these days.
He commented that his firm is facing the horrifying prospect of taking in millions of dollars in collection proceeds, but not making any profit whatsoever.
Here’s Why Bill Collectors and Collection Law Firms Will Have a Tough Time in 2010:
1. Debt Collectors and Collections are Under Greater Scrutiny. It’s no secret that the entire debt collection business has come under great scrutiny during the past year as the result of some unscrupulous debt collection practices. I’ve written extensively about this previously. See:
2. It’s Harder to Collect. My colleague complained that he and his firm were working incredibly hard, yet not making much money. Apparently, the economic pressures that are pushing more and more Long Island families to seek bankruptcy relief also mean that collection firms are having a much more difficult time collecting the amounts that they’ve collected in the past.
3. Lenders and Their Collectors Are Paying the Price for Easy Credit. One of the key reasons for the relatively low rate of collectability is that several years ago, banks and lenders were so loose with their credit policies and underwriting standards that they extended credit to too many consumers who weren’t credit-worthy. That translates into greater difficulty collecting on delinquent accounts.
4. Unemployed Debtors Mean No Funds for Creditors. Many consumers do not have the funds to make any payment simply because they are unemployed. Projections for continued unemployment mean continued difficulty into the new year with trying to collect.
5. Changing Sentiment Against Banks, Bill Collectors and Collection Law Firms. We now have a more consumer-friendly atmosphere in which courts tend to side with the consumer as opposed to the creditor. In addition, there are always new debt collection laws and regulations, and the trend is to make it harder for the debt collector and easier for the consumer.
6. BANKRUPTCY. I saved the best for last. Over a million and a half American consumers will probably file for bankruptcy in 2010, and most of them will be able to totally eliminate all credit card debts. This is how my Long Island bankruptcy law firm and I will be helping many consumers in 2010.