Repo Men: Like Santa Claus… in Reverse

Despite reports to the contrary, even rich people got their feet wet as the global economy was flushed down the toilet last year. Or they at least got splashed a little.

CNN has an interesting profile on some people who aren’t your ordinary repo men. Instead of repossessing cars or televisions because their owners have defaulted on their payments, they go after bigger fish: repossessing yachts, private jets, and other ultra-high-end items from debtors of a different sort. These repo men deal with extremely wealthy individuals. Of course, the principles are basically the same no matter who the debtor is, and what’s being repossessed: a person needs (or wants) a relatively expensive item. If they’re a person of average income, this might be a new car, a TV, or home furniture. Not having enough cash to pay for it up front, they arrange for financing with a bank, or the buyer itself, allowing them to get the item, and pay for it in installments, over time. The same thing probably happens with very wealthy individuals, except they’re buying things like boats and airplanes and maybe luxury submarines. You’ll have to excuse me while I update my Christmas wish list.

Now, if you’re reading this, you probably aren’t too worried about your Yacht being repossessed, since you probably don’t own a yacht. However, if you’ve been hit by the recession in any way, it’s very possible that the specter of repossession is hanging over your head. While the availability of credit to buy expensive consumer goods such as cars has undoubtedly improved our standard of living, it can occasionally put people in an impossible position.

Many people who work hard but still live paycheck to paycheck depend on their cars to get to their jobs. Without a working car, they’re literally unemployable. If they fall on hard times, or the interest on their car loan piles up, they might have to choose between spending almost all of their income on their car payments so they can continue to go to their job, or skipping their car payments and using the money they earn at their job to cover things like food, clothing, and shelter, you know, the reason they have a job in the first place.

Because of the threat of repossession, people are sometimes put in a position where the only way they can keep their job is to sacrifice the main reason anyone has a job in the first place. It’s a very unfortunate situation, to say the least.

This is, of course, not to say that I don’t think creditors have rights. If you borrow money, and agree to put up some property as security, you need to be aware of the fact you’ve agreed to pay that money back within a certain period of time, and that you’ve also agreed to certain consequences in the event that you can’t keep up with your payments. In the end, lenders lend money with the expectation that they will eventually profit from the loan. Unexpected financial difficulties on the part of the debtor aren’t really their problem (unless they had some hand in deliberately bringing them about).

On the other hand, a creditor can’t vindicate their own rights by violating the rights of creditors, which happens more often than anyone would like. Threatening phone calls, constant harassment, and even physical violence have been known to occur. This is, obviously, a serious problem.

And while the story linked above may be mildly amusing, or at least a little bit interesting, it’s safe to say that a multimillionaire who’s behind on his payments for his personal space shuttle probably isn’t going to face the same problems as an ordinary consumer. A very wealthy person, even if they are defaulting on debts, probably has a law firm on retainer, to which he can direct his collection calls. Furthermore, simply having the best legal representation that money can buy helps a great deal in avoiding pesky little problems like this.

The average consumer, on the other hand, doesn’t have access to these resources. When they are being harassed by unscrupulous collectors or repo men, they often aren’t aware of their rights. This is unfortunate, because the rights of debtors in this context are extensive. Collectors are quite restricted in what they can do when demanding repayment from debtors. They are not allowed to make any type of threat, and they can only call during certain hours of the day. Furthermore, if the debtor demands that they stop calling, they have to comply (of course, at this point, they usually file a lawsuit to collect whatever’s owed, so that doesn’t make the debt go away).

The rules governing collection agencies and repo men in the U.S., as well as the laws of many states which go above and beyond the federal regulations, are extensive, and very detailed, and almost all of them provide debtors with some form of monetary remedy for even the slightest infraction of these rules. However, some unscrupulous collection agencies bank on the fact that many debtors don’t know their rights.

For example, collectors are prohibited from calling debtors between 9pm and 8am (debtor’s local time), using obscene language, harassing debtors over the phone, calling debtors at work without the consent of the employer, or using religious or ethnic slurs, among many other things.

Also, while debt collectors can sue debtors to collect, they cannot use the threat of a lawsuit to force the debtor to pay up. Basically, if they say they’re going to sue, they pretty much have to.

Some lawyers have made a business out of suing debt collectors who (perhaps unknowingly) violate some of the more technical rules that bind them. I’m not sure how I feel about this. On one hand, I’m all for enforcing the law, including (perhaps especially) against debt collectors. However, if a minor infraction of a technical regulation doesn’t really case the debtor any harm, it’s hard for me to justify “gotcha” litigation tactics resulting in awards of statutory damages.

This is a relatively minor issue, however. In the end, it would be really nice if debt collectors would always follow the law. And it would also be really nice if debtors knew all of their rights. That’s unlikely to happen any time soon, and, until then, it’s good to know that there are lawyers out there who can help.