Main Street

The Debts of the Dead

Americans are still defaulting on debt. The unemployment numbers are in the double digits, poverty is on the rise, and for most folks, the “economic recovery” we keep hearing about is just a rumor. In an effort to reclaim even more money, debt collection agencies have begun aggressively going after the debts of the dead. The Federal Trade Commission wants to revise the guidelines on who, exactly, is possibly responsible for the debts of the deceased. From the Washington Post:

The federal Fair Debt Collection Practices Act limits the people that collectors can contact to those with authority to pay the debt – typically a spouse or family member, and possibly a third-party executor of an estate. But in a proposed policy statement, the FTC said changes to court procedures have widened the pool of those who may be able to pay to include a host of other legal representatives.

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Locating those who can pay the debt creates another challenge. Often, collectors may contact several friends or relatives in their attempt to find the right person. Current law allows collectors to only ask for “location information” without revealing that a debt is owed. The FTC is considering relaxing that rule for those who are deceased.

But that could pave the way for collectors to persuade unobligated consumers to pay the debt, consumer groups say. In its investigation of the practice, the FTC listened to thousands of phone calls and found debt collectors often operating in a gray area, Winston said.

That would be the gray area of trying to guilt someone into thinking they’re responsible to pay the debts of someone they loved, who has died.

The FTC proposal states that collectors appealing to consumers’ “moral obligation” to close the debt could violate federal law. In addition, it emphasized that collectors cannot imply that those with authority to pay the debt must do so out of their own pockets. All debts should be paid out of the deceased’s estate.

Instead of making it easier to harass the bereaved, it’s a shame that the FTC isn’t changing the rules to protect those who have lost someone they loved.

I confess to having a personal bias and some experience here. My husband died in 2009, and over the last year, I’ve been harassed by debt collectors, been through a very hasty foreclosure, and I’m still getting letters from lawyers. I don’t worry about it any more. There’s really nothing they can do to me. I’m earning less than the federal poverty guidelines for a single person. I do, however, worry that relaxing these rules will create a great deal of misery for elderly widows and widowers.

The whole proposal is available to read here. You can also comment on the proposed rules changes until Dec. 1.

Tags: debt, foreclosure