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A Candy Store for Criminals: The Debt-Collection Business

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What could be worse than a criminal approaching you, assaulting you and demanding money?

When criminals are hired to do just that at a desk for their 9-to-5 job.

Every line of work has people who start out fine but go astray somewhere along the way, breaking the rules and maybe even the law. It would be convenient to paint such an innocent, it-happens-to-everyone portrait of the debt-collection industry, but the truth looks much less like a portrait and more like a mug shot: The debt-collection business has become a career of choice for criminals.

One woman disclosed on her application that she previously had been convicted of financial-card fraud and also for being a lookout in a burglary. She was hired by a major debt-collection firm, which told the Minnesota Commerce Department that she had no criminal history. That company had on its staff at least 81 people with felony or gross-misdemeanor convictions.

In other cases, criminals simply checked "no" to the application question about prior criminal convictions and that was a sufficient background check for the debt-collection company:

• One guy had a felony conviction in 2006 for sexually assaulting a woman. His debt-collection company fired him -- not for the conviction but because he did not collect enough money.

• A woman was convicted of forgery and then went on to swindle her former employer using fake payment requests. While on felony probation, she became a debt collector and stole credit-card data to pay for $1,561 of jewelry, food and car repairs.

• Another felon was convicted for receiving stolen goods and for felony domestic assault, after police found his girlfriend bleeding in a hotel lobby. Nevertheless, eight years later he was still working for a debt-collection firm.

Lobbyists for the debt-collection industry whine that these are isolated incidents of "bad apples," but that's not how Minnesota Department of Commerce Commissioner Mike Rothman saw it, who has come down hard on debt-collection companies: "Our investigation discovered a handful of companies that disobeyed the law, and effectively let the wolves loose in the henhouse. In numerous instances, credit card numbers, bank accounts and personal financial information of vulnerable, financially stressed people were handed over to criminals. It should come as no surprise what happened next." He added that the same thing has happened in many other states.

Fortunately for Minnesotans, Attorney General Lori Swanson has been aggressive in prosecuting companies with a history of abuse of various types.

Then there are the constables. In case you have a romantic image of these officers walking down the street, smiling and whistling, that's not what we're talking about: A Massachusetts woman heard a knock on her door shortly after midnight. "They looked like police officers," she said. One of them was tapping his nightstick and the other one said they were there to seize her car for unpaid credit-card debt. They said: "Don't argue with us."

Constables are appointed by towns to serve court papers and execute court orders. They receive no training and no state agency keeps track of their identities, yet they get to carry a badge and can charge whatever they like to seize a car. The fee previously was capped at $25, but constables sometimes charge $600 or more if you want your car back. If you don't pay, they get part of the proceeds when your car is auctioned.

A Boston Globe investigation of just five counties showed that constables seized around 2,500 cars for debt collectors. In Boston alone, 88 constables had criminal arrest records.

Massachusetts Attorney General Martha Coakley has proposed regulations that would hold debt buyers responsible for abusive behavior by third parties that collect on their behalf.

Does the act of a criminal employee make the company a criminal itself? It does when the company doesn't take its responsibilities seriously to screen carefully, train fully, monitor constantly, and fix problems immediately. And the same is true for debt-collection industry lobbyists and spokespeople: They need to stop their see-no-evil approach to claiming that the business only has a few "bad apples." As with any degenerative addiction, only when the patient is honest about having a serious problem can effective treatment begin.

Bill Bartmann is CEO of CFS II, a debt-collection company. His companies have helped to settle debts of more than 4.5 million people without ever filing suit against a customer.