Trevor Powell* was a high school student working part-time at Target in Sioux Falls, South Dakota, in 2007 when he first heard about job openings for collections agents at First Premier Bank from a friend’s mom.
“I just wanted a job that paid more,” Powell explained. First Premier offered him $16 an hour in base pay, which could rise with incentive pay to $18 to $20 an hour depending on Powell’s success in collecting debts.
In a country where middle-class wages are hard to come by without a college degree, the comparatively good pay of debt collection can be a big draw. According to data from the Bureau of Labor Statistics, the median hourly pay in 2018 for debt collectors was $17.32, a big step-up in pay from other lines of work such as retail sales ($12.75) or fast food ($10.89).
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71 million U.S. adults have fallen behind on a bill and now have debt in collections. According to data from the Federal Reserve Bank of New York, U.S. household debt is at an all-time high — and behind our system of easy credit are roughly 300,000 debt collectors, working for both lenders and 3rd-party collection agencies, whose job it is to recover money from American families.
These debt collectors may not match your expectations of slick-talking hucksters willing to do whatever it takes to get paid. Like many of the debtors they collect from, the collectors are often low-income themselves. While most have a high-school diploma or equivalent, some, like Powell, are teenagers. 69 percent of debt collectors are female.
At relatively low wages, debt collectors are expected to engage in what University of Brighton psychologist Carl Walker has called “mental warfare” in order to collect; the industry can leave behind scars for both the borrowers and the collectors. It’s a grueling job. In a 2016 Consumer Financial Protection Bureau survey, debt collection agencies with more than 250 employees reported an average turnover rate of 75 percent to 100 percent.
If you were born into the middle class, you’ve probably never heard of Powell’s former employer, First Premier, but it’s a major player in America’s system of subprime credit. At one point, it accounted for as much as 47 percent of all subprime credit card solicitations sent out in the United States, and now it’s the nation’s 12th biggest issuer of Mastercard credit cards.
First Premier credit cards often come with eye-popping fees. One, for example, has a $300 credit limit, a $95 one-time “program fee,” $75 in total monthly and annual fees in the first year, $120 in monthly and annual fees in all subsequent years, and a 36 percent APR. Those exorbitant prices draw in only those consumers with few other options for credit.
As Powell explained, if the borrower couldn’t pay on the spot, the collections agents at First Premier would ask for a “promise to pay.” There was folk wisdom about what different promises to pay meant: a $20 money order on the 3rd of the month meant the customer was on disability, and if it was coming on the first of the month, it meant the customer was a senior collecting Social Security. Getting a customer’s checking account credentials was ideal — it let First Premier automatically debit the customer’s bank account on the specified date — but debit and credit card payments, payments by Western Union, or money orders were all fair game as well. A lot of customers were surprised or angry about how much they owed.
The job “definitely broke you down,” said Powell. “At a certain point, you felt like you weren’t doing the right thing.” Powell “no-called, no-showed” — e.g. got fired after failing to show up to work — a little more than a year after he started. “The lion’s share [of customers] probably would have been better off if they had never opened the card,” he said.
When Chaz Fertal went in for his job interview at Checkmate in Phoenix, Arizona, in 2010, he was originally afraid he was getting duped in a Craigslist scam. Fertal showed up to an office that appeared deserted, with blacked-out windows, only to find out the building had been intentionally obscured; Checkmate was concerned that angry customers would try to track the debt collectors down. Fertal’s base pay at Checkmate was around $2,000 per month, but offered the possibility of big commission checks. Fertal says his biggest was around $4,400, meaning your pay could more than double if you were good at getting borrowers to make payments.
A current Checkmate employee confirmed over the phone that the company’s current interest rates in Arizona were as high as 180 percent per year. As Fertal explained, a customer wouldn’t actually have to make progress on paying down their debt for the Checkmate collector to earn his commission. If customers fell behind and went into collections, Fertal said he would earn commission whether he convinced them to pay the full balance or if he convinced the borrower to pay off outstanding interest while taking out a new loan. For the purposes of commission, taking on a new loan counted as “paying off” the old one.
Fertal said the incentive scheme encouraged agents to push borrowers into these loan “rollovers.” “You’d talk to a customer on the phone who after four or five months would still owe the whole amount” and they’d be outraged, Fertal said, when they realized the payments they’d made had done nothing to pay down their debt.
For Fertal, there was a clear day, he said, when he realized he didn’t want to work at Checkmate anymore. When Checkmate customers applied for loans, they typically gave Checkmate a bank account routing and account number, giving Checkmate the right to withdraw payments; if a customer went past due, the loan entered default, and, Fertal says, Checkmate would attempt to withdraw the whole outstanding loan balance from the customer’s checking account. If Checkmate wasn’t successful at withdrawing the full amount, they’d break the balance into smaller amounts and try again — Fertal said the company’s practice was to make three attempts per day, starting at 4:30 in the morning, just after any direct deposits would have landed in the borrower’s account overnight. The only way, Fertal says, a borrower could stop the process, was by making a promise to pay and providing a credit card number or debit card number to do so.
Fertal remembers one borrower well. Overnight, Fertal says, Checkmate had taken the woman’s “entire paycheck, I think it was a thousand dollars,” he says. “She had two or three kids. She told me, ‘I have nothing to feed my kids, our refrigerator is empty, they took everything.’ I went to the ACH department and they couldn’t reverse it. She told me, ‘I don’t know what I’m going to do, the only thing I can think of is killing myself’ — and I knew it wasn’t a lie, you could hear the loss in her voice. I remember telling her, ‘your kids need you more than anything right now, and that that’s not the answer.’ I was trying to see if there was anything we could do, even taking out a new loan, but she still had a balance on her existing loan.”
Fertal quit shortly after that phone call in 2011, and he said he still thinks about that woman and her family.
Fertal and Powell’s experiences show the toll subprime credit and debt collection industries take not only on their customers, but on the front-line agents as well. These debt collection jobs offer Americans a step up in financial security, in exchange for taking on the difficult role as intermediary between high-priced lenders and consumers in dire straits.
“The environment would just be toxic. You’d get a worse and worse impression of people,” said Fertal. “The reality is that you’re not talking with people who are in a great place in their life.”
Editor’s note: Trevor Powell asked that his name be changed for privacy.
This post has been edited to clarify Fertal’s commission earnings.