Debt Collection Tactics

Picture a hot-rod truck with siren blaring and a bright, pulsating light on top. As it pulls up to a clothing store, a very husky man along with a large, barking dog jumps from the truck. The man is wearing a devil's mask and carrying a brief case brightly labeled, "Deadbeat Collections." The accompanying lawyer informs the store's owner, "You have an appointment with Dr. Diablo." Actually, this is only the last step in the collection effort. Previously, the debtor had failed to respond to two written requests for payment. Mr. Herrera, the owner of the firm, claims an 80 percent success rate, with the mere threat of sending the "Mobile Command" enough to persuade most debtors to pay.

What brought about these harsh collection tactics? In his article in the Wall Street Journal, Marc Lifsher points to a number of interrelated causes. First, the country, Venezuela, has only recently entered into consumer credit. The banks competed vigorously to issue credit cards. Issuing cards was easy, since there were no functioning credit reporting agencies to foster caution. Over the past four years the number of credit card accounts in default has grown by 18 times. At the major banks, 11 percent of credit card accounts were more than 90 days past due. Even when credit card rates are 40 percent, it doesn't help if the cardholders are not paying. Finally, the legal system is thought by many to be corrupt. So, what else can you do but send out Dr. Diablo?