The Certainty of Death and Debt Collection

Death may be the great equalizer, but it's no escape from the debt collector.

The explosion of consumer borrowing — not to mention the skyrocketing cost of health care, which many consumers finance at least partly on high-interest credit cards — means Americans are taking more debt with them when they die.

That has created a fast-growing new niche: debt collectors who specialize in squeezing the estates of the dearly departed or their unwary relatives.

Existing federal law makes collecting those debts difficult. In most cases, for example, it prohibits collectors from calling family and friends of debtors. Unless a debt was incurred by both the deceased and a survivor — in the case of a joint credit card account, for example — relatives usually are under no obligation to make good on the debt from their own funds.

But a newly unveiled draft policy from the Federal Trade Commission could erode those protections. The policy broadens the number of people debt collectors can contact to find out who's in charge of paying off debts incurred by the deceased.

Consumer advocates worry that would open the door to more aggressive debt collection practices. The FTC is inviting public comments on that policy until Dec. 1.

Ironically, the new policy comes as state and federal agencies, including the FTC, have begun cracking down on overly aggressive debt collectors and debt-settlement companies.

At least five national firms focus on collecting debts from the dead. Their business has exploded in recent years, in part because the economic downturn has made it more difficult to collect from the living.

Debt collectors, who often buy unpaid debts for pennies on the dollar, always have been able to file legitimate claims with a probate court.

But a recent investigation by the Minneapolis Star Tribune found that some collectors are reaching out to relatives of the dead.

Many use tactics developed to persuade grief-stricken relatives to pay debts they have no legal obligation to honor. The elderly are particularly vulnerable.

"The firms that do this are experts in all the psychological persuasion techniques," an elder law attorney told the Minneapolis newspaper.

Those tactics include sympathy cards, offers of grief counseling and scripted appeals.

They also can include appeals based on the "moral obligation" to pay and misleading questions that can lead some grieving family members to conclude they must come up with the money on their own.

The Minneapolis newspaper cited a lawsuit filed last year by a widow who was contacted 15 times over six weeks about an unpaid loan taken out by her late husband.

One collector told her she was "now responsible for all of her late husband's debts," the suit alleged, even though that wasn't true. Another threatened to take her home, while a third told her to immediately write a $9,000 check.

Clearly, there is a need to honor legitimate claims for debts incurred by the deceased, and states have resolution procedures for that purpose. But there must be adequate consumer protections as well.

It's bad enough when the debtor is alive and able to dispute the charges. But relatives of deceased debtors may have no way to know if the charges are inflated or downright fraudulent.

The FTC should be strengthening protections for the families and friends of deceased debtors. Instead, its new policy would open the door for fresh abuses.

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