BUSINESS
04/10/2009 05:12 am ET Updated May 25, 2011

Debt Horror Story: Parents Hounded For Their Late Son's Payments

This story was reported with help from our readers. Have you been asked by a collection agency to pay debt for a deceased friend of relative? If so, we want to hear your story. Send a summary of what happened to submissions+debt@huffingtonpost.com.

Tony DiGregor died in July 2006 at 23 years old, just shy of graduation from the Cooking and Hospitality Institute of Chicago. His mother says he collapsed the day after attending a party. "[H]e had a bad interaction with alcohol and his doctor prescribed medication and he collapsed," she told me. The family was heartbroken.

Six months after Tony's class graduated without him, the phone started ringing at the DiGregor household in Crystal Lake, Illinois. Tony had taken out a student loan worth over $15,000, and Sallie Mae had hired debt collectors to get its money back. Linda DiGregor, Tony's mother, says she and her husband Ralph had sent their son's death certificate to Sallie Mae, but the collectors didn't get the memo. Several times a day, answering the phone brought new anguish over a lost son.

"Every time they called it just ripped that wound right open," says DiGregor. She says she and her husband knew they weren't responsible for the loan because they had not signed a promissory note. "We kept asking them, 'Send us the promissory note,'" she says. "They would not send it because it didn't exist."

Debt collection agencies are in high demand as loan default rates rise in a shrinking economy. Improved database technology has made it easier for agencies to find debtor's living relatives. New staffers at one collection agency, profiled in the New York Times last week, undergo three weeks of sensitivity training, which emphasizes "empathic active listening."

The friendly touch comes in handy when the deceased leaves no estate and there is no legal recourse for a lender to recover a loan. And people are often willing to pay off a dead loved one's debt out of a sense of duty or loyalty to a bank or credit card. But some people pay only because they are unaware they've got no obligation to do so.

"It's very ghoulish," says Linda Sherry, a spokeswoman for the Consumer Action advocacy group in Washington. She says calling dead debtors' relatives is a "reprehensible" practice. "Legally, it makes no sense. You're basically going in there and trying to trick somebody."

Federal law prohibits collectors from using threats or harassment to recover debt. According to its annual report on the Fair Debt Collection Practices Act, the FTC received 78,838 complaints about debt collectors in 2008, an increase over the 71,004 received in 2007. The commission receives more complaints about debt collectors than any other industry.

The collectors hounding the DiGregors certainly decided to forgo the friendly touch. They called several times a day for over a year, says Lynda DiGregor, and one caller threatened her with jail time. The phone kept ringing even after the DiGregors hired a lawyer. Sallie Mae put the debt in Ralph DiGregor's name, wrecking his credit score. Emotionally, "it was really affecting me," says Lynda, even though her husband answered most of the calls.

"Every time we got these phone calls, it was like our son died all over again," she wrote in an email.

The calls stopped only after word of the DiGregors' problem began to reach the highest levels of the U.S. government.

Ralph DiGregor wrote his senator, Dick Durbin (D-Ill.), in early 2008. An aide in Durbin's Chicago office got in touch with Sallie Mae to try to clear things up. In August, Sallie Mae sent a letter of apology to the DiGregors and a note to Durbin's office, which the DiGregors shared with the Huffington Post.

The letter said an update had been sent to the national credit-reporting bureaus and that Ralph DiGregor's credit report should be fixed up within four weeks. The letter apologized that "the level of service Mr. DiGregor received did not live up to our standards."

Sallie Mae has not responded to inquiries from the Huffington Post.

This story was reported with help from our readers. Have you been asked by a collection agency to pay debt for a deceased friend of relative? If so, we want to hear your story. Send a summary of what happened to submissions+debt@huffingtonpost.com.