September 23, 2010
Thursday

Dead men pay no bills, but their grieving families can. Collecting on those debts has become a lucrative specialty throughout the nation in the booming collections industry -- some are even sending sympathy cards.

Todd Murray recalls the exact moment when he decided to end his brief career as a debt collections attorney.

In late summer of 2008, his boss at the collections law firm of Gurstel Chargo in Golden Valley, Minn., informed him that he would be going after a particularly hard-to-tap group -- the dead.

"I remember thinking, My God, how can anyone actually do this?" said Murray, now a consumer rights attorney. "The whole idea of calling someone still grieving from the loss of a loved one, over some credit card debt, seemed so repulsive to me. I just couldn't do it."

Employing tactics developed specifically for persuading the grief-stricken to pay, including the use of sympathy cards and scripted appeals, a select group of collection firms has made this its niche.

Creditors have always had the right to make a claim against a person's estate. In some cases, however, these collectors are working to persuade survivors to pay debts that they have no legal obligation to honor, because they weren't co-signers on the credit cards or loans. In others, the collectors are essentially trying to bypass the traditional probate process and get survivors to pay directly rather than take the chance that a court won't honor their claims.

Consumer advocates argue that the collection efforts rely on guilt or misinformation to get people to pay. The elderly are particularly vulnerable, they argue, often willing to write a check just to make the phone calls stop.

"The firms that do this are experts in all the psychological persuasion techniques," said Sally Hurme, an elder law attorney with AARP, an advocacy group for people aged 50 and older. "A month after the memorial service, the flowers are wilted, the casseroles are eaten up, you're all alone, and here's this person calling about a financial situation. ... The first impulse is to just make it go away."

Some household names are turning to these collectors. In court documents, Nordstrom, Citigroup, Wells Fargo & Co., J.P. Morgan Chase and Discover Financial Services have all been identified as clients of firms that collect dead people's debts.

There's a compelling reason to expect this peculiar branch of the debt collection business to keep growing: People are taking larger amounts of debt with them when they die.

Among the largest of these debt collectors is DCM Services LLC of Golden Valley, Minn. At least four other firms -- including Phillips & Cohen Associates Ltd. of Delaware; Estate Information Services LLC of Columbus, Ohio; Weltman, Weinberg & Reis Co. of Cleveland; and West Asset Management Inc. of Omaha -- also specialize in collecting the debts of the dead. Minnesota's largest collection law firm, Messerli & Kramer, is active in deceased debt collection, though the firm doesn't specialize in the area. All these firms declined to comment or did not return requests for comment.

A spokeswoman for Gurstel Chargo said the firm has worked to collect on the accounts of the dead only in "isolated situations" and doesn't cold-call survivors.

Some outside the industry defend the practice.

Manny Newburger, an attorney who also teachers consumer protection at the University of Texas School of Law, said critics have failed to suggest realistic alternatives to calling family members, particularly when no court documents have been filed identifying the estate's representative. Survivors often fail to realize, he added, that creditors have a right to seek payment.

"If there are assets, shouldn't the creditors be paid before the family walks off with the jewelry and the TVs and the furs and whatever else there may be?" Newburger asked.

The median debt level for families headed by someone age 65 to 74 is growing faster than that of any other age group, according to a Federal Reserve survey. Families in this group have seen their median debt load surge from $9,500 in 1995 to $40,100 in 2007. The percentage of these households carrying credit card debt has increased 20 percent over the same period.

"I'm sure there are heavy discussions right now among the major banks and credit card companies on how to handle the debts people are taking to the grave," said Lucia Dunn, an economist at Ohio State.

Increasingly, surviving family members are turning to the courts for help. Collection firms that call families repeatedly are being sued under the Fair Debt Collections Practices Act, a federal law that protects consumers from harassment and misleading tactics by collectors.

In a lawsuit filed last year, Gloria Meyer, 70, of St. Paul, accused West Asset Management of calling her at least 15 times over a six-week period in 2009 about an unpaid loan taken out by her late husband. One of the collectors told Meyer that she was "now responsible for all of her late husband's debts," the lawsuit said. Another collector with the firm threatened to go after Meyer's home, while a third told her to write a $9,000 check, the suit alleged.

An Alabama plaintiff, Carlee Walker, accused DCM Services in a 2008 lawsuit of sending collection letters to her home less than four months after her son committed suicide. Walker said she repeatedly told DCM employees that she was not liable for her son's debts and there were not enough assets to open an estate for him. Even so, DCM called her 45 to 50 times, she alleged.

"The biggest culprits here aren't the collectors but the banks," said W. Whitney Seals, the Birmingham, Ala., consumer attorney who represented Walker. "Not only did we give them billions of dollars in bailout money, but now they're hiring goons to harass our brothers and sisters after we die. When does it end?"

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