THE CALL CAME on a Saturday morning, 8:30 a.m. Tara Burkholder remembers the time so precisely because the call woke her from a dead sleep. The lady on the other end of the line was from a company called NCO Financial, Tara says. The lady didn’t give her name. No pleasantries, no how ya doin’. Straight to business. She wanted Burkholder to pay back a $9,000 educational loan that her husband, Ryan, had taken out a few years earlier. “I told her, I’ve got $92 in my checking account, two inches of milk in the fridge,” Tara recalls. “It just ain’t possible.”
This was back in April. Times were getting tough. Tara, then 30, had no income. She was a student teacher in Georgia, working for free in hopes of landing a full-time teaching job. Her husband was a lawyer in civilian life, but at that moment he was half a world away, deployed in the Iraq war, helping Iraqi judges restore order in a violent region east of Baghdad. Until he came back home, to the Fort Benning Army base, Tara had to watch her budget carefully — and food for her daughter came first, before any loan repayments. Tara explained all of this to the NCO lady, but the NCO lady was unsympathetic, Tara says. The NCO lady told Tara it was time for her to give up on her dream of being a teacher, and get a paying job immediately: “Honey, sometimes we have to do things that we need to do.” The lady also told Tara that NCO had contacted her husband’s commanding officer in Iraq, and that if she didn’t pay back the loan, her husband would be dishonorably discharged from the Army.
NCO, which is headquartered in Horsham, is, like the other third-party debt-collection companies that comprise a $17.5 billion industry in the United States, relentless. I know from personal experience. Last fall, I started getting these weird phone calls. The voices were prerecorded, and they weren’t looking for me. They were looking for this other guy. I figured I must have inherited this other guy’s old phone number, and that eventually the robo-callers would get a clue and stop calling me. But they didn’t. The calls kept coming, three or four a week for six months from a lot of different debt-collection companies that didn’t ID themselves as debt collectors, which is illegal.
ABOUT THE ONLY company that didn’t break the law in its calls to me was NCO. The NCO robo-dude clearly identified himself as a debt collector. But as I began to dig into NCO, clicking through federal court databases and consumer websites, I found a lot of stories like Tara Burkholder’s. Claims of deception. Allegations that NCO collectors were saying they were calling from law firms, calling people’s co-workers, berating people’s mothers and in-laws, disclosing private information to spouses and kids, breathing heavily into the phone like perverts, threatening to garnish people’s wages and put liens on their homes, taunting them about their inability to afford a lawyer. NCO denies engaging in such tactics, all of which are prohibited by the federal Fair Debt Collection Practices Act, or FDCPA. You can’t harass or lie to a consumer to collect a debt, and you can’t apply pressure by disclosing the consumer’s debt to third parties. But it seems to happen all the time. Regulators have slammed NCO; in 2004 it paid a $1.5 million settlement to the Federal Trade Commission, the largest civil penalty in that agency’s history to that point, and in 2006 it paid a $300,000 settlement to the state of Pennsylvania after the Attorney General received 800 complaints about NCO from consumers, some alleging that NCO’s collectors “used obscene or profane language and engaged in conduct to threaten, annoy, abuse, or harass consumers.”
The world headquarters of NCO happens to be in a long, single-story building out in Montgomery County, hidden in plain sight. To look at it, you’d never guess that NCO is, in fact, the largest bill collector in the world — a corporate alpha dog disguised as just another puppy. NCO boasts 30,000 employees, yearly revenues of $1.6 billion, and 120 locations (mostly call centers) in the likes of Antigua, Australia, Barbados, Canada, India, Panama, Puerto Rico and the U.K. It’s the leader of a powerful industry whose highly sophisticated modern incarnation it helped to create. It’s huge. And it’s ours.
Now, as America slouches into a new Great Depression, we’ve got a piece of the action. Now, when the banks fail, and the car companies fail, and even pretty healthy companies find they need to collect on their past-due bills just to make payroll, they’re going to call NCO, and NCO’s going to call you. And whether you like it or not, you’ll have a new friend in Pennsylvania.
Chuck Piola leaned back in a deck chair by his pool. He wore a St. Croix tank top, Nike sandals and gold-rimmed sunglasses. Ruddy flesh spilled from the tank top’s armholes. He lit a cigar. “It’s a cheapo,” he said. “Occidental. But they’re good every day.”
THIS WAS ON a sunny afternoon at Iron Horse Farm, a hilly 80-acre tract in Chester County that Piola, 61, bought when he left NCO six years ago. He built his dream house on the top of the hill. It’s a marvel of peach stucco and Douglas-fir lumber, crafted to look like “a manor house in the South of France somewhere,” Piola said. It was built atop a foundation dating back to 1740 — some Revolutionary farmer’s abode. Piola loves that. “Very American, to come here and carve something out.”
Working as a salesman for NCO was Piola’s second career. His first career was teaching. As a young man, Piola used to teach American history to junior high-schoolers. But then his wife gave birth to two children, and Piola got scared he wouldn’t be able to support them on his $10,500 teacher’s salary. So he made the leap into cold-call sales. He read Dress for Success and bought a single midnight-blue suit. He wore it every day. He drove a burgundy 1979 Plymouth Horizon up and down the interstates of the East Coast. In 1986, Piola became the second employee of NCO.
The first employee was the company’s founder, Michael Barrist. Barrist was young. Remarkably so: a CEO at age 25. But he had a powerful idea. He had grown up in Havertown, where his parents ran a small debt-collection company out of their converted garage. Most debt companies were mom-and-pop operations. Barrist dreamed of bringing the industry into the age of computers and databases and offshore call centers. The time was ripe. All over America, people were flashing plastic. It was the dawn of the credit-card era. In 1952, according to a report by the think tank Center for American Progress, American families had less than 40 cents in debt for every dollar of disposable income; basically, for every buck in their wallet they could spend on food or gas or a new TV, they owed 40 cents to stores or banks. Manageable. Reasonable. But by 1990, it was 80 cents in debt for every dollar of disposable income. (By 2007, it was $1.34 in debt for every dollar.) Suddenly, organizations of all kinds — department stores, sports teams, dentists, surgeons, colleges, municipalities, even the federal government — found themselves unable to deal with the flood of consumers who owed them money.
And now here were these nice men from Philadelphia — these businessmen, taking advantage of a shift in the culture — who were more than willing to handle that fraught and nasty business of collecting debts, in exchange for a cut of the action.
BARRIST GAVE ME a tour of NCO’s modern headquarters, a glimpse of the literal machine the company has become. Barrist is a big, broad-chested guy, with a salt-and-pepper beard and incongruous glasses. His voice is deep and Philly-accented. In NCO’s mailroom a truck-size machine was sorting envelopes, and a scanner zapped checks that had just come in that day, tiny personal checks — $50 whhhzzz beeep, $20 whhhzzzz brrreeep, $11.85 whzzzzz … something like a million payments every month. “It’s incredibly complicated,” Barrist said.
The business used to be more personal, more one-to-one, back in the days when Chuck Piola was driving around Center City in a Mercedes-Benz he called “The Beast,” pumping himself up by listening to Guns n’ Roses’ “Welcome to the Jungle,” parking the Beast in front of random skyscrapers on a whim and striding inside and selling them blind on the virtues of NCO. The story of NCO became a classic fable of American capitalism: the story of men who had come from nothing, and were taking risks in service of a bold idea, and were working their asses off to make it happen, and were winning. Back then, most of NCO’s business came from doctors and hospitals, and most of the checks that came in were from people who either wouldn’t or couldn’t pay their medical bills. But in 1993, Hillary Clinton tried to create a national health-care program, and Barrist worried that NCO could go bust if she succeeded. So he diversified. He bought lots of little debt-collection companies that specialized in other kinds of debt — credit-card debt, student-loan debt. He also began to experiment with “debt buying”; a bank might package thousands of its old debts together and sell them for 40 cents on the dollar to a company like NCO, which might turn around and sell the debts for 20 cents on the dollar to another debt collector. If this goes on for years and years, the debt can become “zombie debt,” unmoored from the act of its creation (i.e., your trip to Wal-Mart to buy that plasma TV), virtually unbillable, virtually impossible to collect.
Which brings us to “The Vault.” The Vault is the pulsing heart of NCO. It’s a room full of long rows of funereal gray disk arrays containing 20 terabytes of Social Security numbers and credit reports — all of it encrypted, Apocalypse-proof. Collecting debt in 2008 is about statistics, computers, robots. “Motion, smoke, heat and water detection,” Barrist told me, and pointed to the ceiling: “FM-200 fire suppression.” It really is just a numbers game now. NCO generates 500 million “consumer touches” every year. Five hundred million phone calls, letters, e-mails. This is why Barrist has several Ph.D. mathematicians at NCO headquarters, writing algorithms that engorge this massive universe of information — info from the Post Office, from phone books, from consumer credit reports, from the private records of NCO’s clients, from pricey demographic data — and spit out patterns. The patterns help NCO figure out how best to contact you, how best to get the cash in your bank account from one place to another place, so that it can go to another place, and another place, and another place. In here are some of the crucial, hidden gears of the consumer economy. This place is the Death Star, basically. And it’s boring. By design. It emits a low, pleasant hum.
When I asked Barrist about Tara Burkholder, the Army wife, he said, “I don’t know this woman, and I am not going to research any consumer’s account with you.” He cited Burkholder’s privacy rights. “Could it have happened? Anything can happen … but it doesn’t really sound like a story that could have happened in a call center that’s pretty carefully monitored.”
THE PROBLEM WITH Barrist’s bad-apple defense — “From time to time our people do things wrong, and those people get caught” — is that Tara Burkholder’s story is far from unique. Spend an afternoon surfing the PACER database of federal lawsuits, and you can find claims that make Burkholder’s experience seem like a tongue kiss. A California woman named Chanada Harmon says that in April 2005, she got a call from an NCO collector who wanted her to pay up on a Capital One account she owed money on. According to allegations in a federal complaint filed by Harmon, which were denied by NCO, she told the NCO collector she had already made arrangements to pay the bill. At that point, the collector allegedly asked to talk to Harmon’s mother, so he could “tell her what a horrible job she did” in raising a “low-life” piece of “white trailer trash.”
“At all times material and relevant hereto,” reads the complaint, “the Plaintiff is an African-American.” NCO settled the case for an undisclosed sum.
The more you read about the industry, the more it seems like the Mean Debt Collector is the norm and not the exception. This was certainly the impression I got from a woman I’ll call “Debbie,” who worked for seven years as a collector with several debt-collection agencies (not NCO).
Her first two weeks on the job, same as NCO’s debt collectors, Debbie was trained to follow the FDCPA. In her third week, she learned to forget it. Debbie made $15 an hour plus 20 percent of any checks she brought in beyond her $15,000 monthly goal. If she didn’t hit her goal, her bosses were “on my ass,” and she couldn’t hit her goal unless she broke the law. Consumers wouldn’t talk to her if she identified herself up front as a debt collector, as required by the FDCPA. So she lied. She’d say she was calling from an attorney’s office. Or the Attorney General’s office. Or she’d say there was an emergency with a family member, please call us back. If she managed to get the debtor on the phone, she pummeled him with threats. She was mean: “You have to be mean to collect. You have to tell them you’re going to take their kids and their house and ruin their life.” She even divulged debtors’ finances to third parties: “Your friend, he owes $2,300 on his Visa card, you wanna have him call me back?” That’s illegal. “But we did it every day,” Debbie said. “The whole industry does it.”
Barrist’s trump card in the argument that NCO is different is volume. Pure numbers. It may be true that consumers “in the thousands” complain about NCO every year, but this is to be expected (“We’re in a business where we’re having difficult conversations with consumers”), and anyway, if you look at the ratio of complaints to those 500 million annual touches, it’s actually pretty low. As for the complaints themselves, the ones sent to government regulators or to NCO’s special hot line, “Every one of them is read and acted upon,” Barrist said.
AND THERE IS, of course, the classic defense of bill collecting: It may not be pretty, but it’s necessary, because without bill collectors, there’s no way to separate the people who make good decisions about how to spend their money from the people who make bad ones. The bill collector is a responsibility enforcer in a system that depends on responsibility for its very survival; he is basically the consumer economy’s obese and omnipresent umpire. The fans may hate the ump, but without the ump, the game grinds to a halt. The game stops being fair. The ump isn’t good or bad, he’s just a necessary part of the way the game is played, entwined with its fundamental structure. But this leads to the question that Barrist — and all of us — are now facing: Who’s good anymore? Who’s bad? How do you spot a deadbeat in the middle of a Depression? Is a laid-off worker at General Motors or Goldman Sachs a deadbeat? Is a recent divorcée? An uninsured cancer patient? “We’re on the Main Line here,” Cary Flitter, a Narberth attorney who represents plaintiffs in FDCPA cases against debt collectors and buyers, including NCO, told me. “We’ve got a lot of [clients] who make healthy six-figure salaries. I’m not talking $100,000. They’ve got homes over a million dollars. And they’re getting collection letters.” Here’s the weirdest part: Barrist actually agrees with Flitter. He admits that the profile of the average debtor is changing.
If Barrist never describes the people who owe his clients money as deadbeats, it’s not merely because they simply aren’t; it’s also strategic, his concession to the fear and panic of the moment, the feeling of pervasive doom that’s enfolding America like a Snugli. “The new economy we’re in, while overall it’s good for people in our business,” Barrist says, “the reality is, it’s harder and harder to collect from consumers, because they’re in a tough spot.” (Sure enough, NCO has reported net losses for the past eight quarters.) The number of debtors has gone up, but the average payment has gone down. Barrist claims that NCO is softening the tone of its collection calls and offering more payment options to debtors: workouts for 80 cents on the dollar, installment plans. Getting a call from a debt collector is never going to be “the best part of the day,” but still, “We want them to see this as a professional, reasonable process,” Barrist says.
That might not be spin. For a time, it paid for the debt collectors to be nasty on the phone, because you, the debtor, probably still had something to lose; you still had a little bit of wiggle room in your budget, or a slightly decent credit rating. You could still buy a house or a car, assuming the debt collector didn’t spray shrapnel into your credit report. But today, even people with amazing credit can’t get a car loan or home loan. A debt collector who threatens to destroy your credit doesn’t seem quite as scary in a climate when good credit is increasingly irrelevant. Even as collectors see their business growing, they see their leverage shrinking.
This month, President Barack Obama will be sworn in, and life will get more difficult for debt collectors; the federal laws, which haven’t been substantially revised since they were enacted, when Barrist was a teenager, are about to be tightened. What this means, for someone like Tara Burkholder, is that help is on the way. The next call from NCO is likely to be a little bit nicer, a little bit sweeter, a little bit gentler. And what it means for Michael Barrist — this guy who built a billion-dollar company by predicting and molding the sorts of consumer behaviors that nobody else wanted to deal with — is that maybe it’s a good time to diversify into businesses “that are not directly tied to consumer behavior.” NCO has all these call centers, see, and many don’t have anything to do with debt collecting. They’re just buildings full of phones and headsets and Successories posters. You call a company about something you bought. You think you’re talking to the company. You’re not. You’re talking to an NCO employee. This may be the debt collector’s greatest trick. Envy his wiliness, his resilience: To wait out the coming Depression, he manages to disappear.