Australian society

In the red
Inside the modern debt-collection industry

“So this is the bullpen,” I say, as I’m shown through the call centre, and the joke seems to land as a smile spreads across the manager’s face. Taking the lead, she gives me a quick tour of the floor before introducing me to the late-twenty-something sitting in his cubicle.

As I approach, I watch as he visibly shifts in his chair. Judging by the black tie and white button-up shirt no one else seems to be wearing, I get the sense he’s been told I’m coming and instructed to dress for the occasion.

Within a few minutes of us meeting, I notice the quiet that has settled over the room. No calls come in, a situation for which the floor manager apologises as she had hoped to let me listen in on a call, but I can’t help but observe how no calls go out either. Everyone stares solemnly into their computer monitors, eyes forward, pretending like I’m not there.

If I had to guess, I’d say they’re worried about their job security. Say something out of step around a journalist and everyone in the room knows it could end up on the record. Say something the boss disapproves of and it could cost you your job.

To get through the door of this debt-buying operation, I promised not to name names or give locations; debt-buying businesses have strict privacy obligations to their clients. I agreed because I wanted to see how it worked from the inside. Precious little has been written about the industry in Australia. Why this is so, I’m not sure.

What I do know is that on balance the collections business is media-shy. Part of this is due to a lack of interest from the media itself. But the industry is also conscious of its image problem. Everyone I spoke to who was either currently or formerly employed in some aspect of the collections business is afraid of being typecast. The debt-collecting trope of a muscled man with tattoos parking across someone’s driveway before knocking on their front door is outdated. Two decades ago the industry was forced to reckon with its bad reputation and ever since it has fought to present itself as professional, clean-cut and, above all, friendly. This leads to anxiety about media encounters, resulting in an effort to handle the interaction in the same heavy-handed manner of oil and gas lobbyists or senior federal politicians – with half the finesse.

I can, however, forgive this. Allowing me to see how it works from the inside is brave. Still, access comes with a price. As I sit down, I also notice that the manager does, too. She listens carefully to every word her employee says as he talks me through how they go about handling a phone call.

Seconds into this conversation, I start to wonder whether I’ve struck a bad bargain. What I was looking for was some answers. Who are the people doing this kind of work? How do they think about what they do and the people they deal with? Debt collection may have been a part of our world for a long time, but debt-buying is a new innovation, at least in the Australian context, so I came to talk nuts and bolts. With the floor manager listening to every word, I know that’s not going to happen. Instead, I patiently listen as the guy explains the various stages in collecting on a debt the company had bought for cents on the dollar. I’m not sure how much time passes before he starts talking about company policy for handling cases of financial hardship. It’s then I focus on what he’s saying as he explains how, within this company at least, forcing someone into bankruptcy is a last resort only undertaken when a person is dealing with multiple creditors and stuck in a hopeless situation. Legal action is costly, unprofitable and stressful for everyone involved. Instead, the company preferred to negotiate an arrangement.

As the employee is rattling off the standard operating procedure, he grows more comfortable. “So when someone calls up and says the shit has hit the fan,” he begins, and then starts to inform me how he would respond in this situation. “A lot of people get worked up,” he says, “but they get themselves into trouble when they don’t share their circumstances. People get embarrassed,” he concludes, with a shrug. “They’re in bad situations. But people don’t realise we get four or five of those calls a day. No one wants to be in debt, and they wouldn’t be if something hadn’t happened. At least if they talk to us, we might be able to do something about it.”

I make a mental note of this. The phrasing is easy to miss in passing, but it is the first glimmer of something real. Half an hour earlier the guy’s boss said the exact same thing while giving me an overview of the industry. It may not have been the professional tone and the clean image the industry desperately wanted to present, but it was an insight into how those in this business think about what they do: they are the people you deal with when shit hits the fan.

Debt-buying, as an industry, didn’t exist until the early 2000s. Up until that point, banks and other financial institutions found ways to make money off their bad debts in one way or another. Two decades ago, for instance, it didn’t matter to the bank if someone with a monthly credit card payment of $100 was only paying back $50. If the bank couldn’t draw an income from the payments, it would count the debt – and those like it – as an asset on its balance sheet. Treating the bad debt in this way meant they could use it to borrow money from other banks to fund their day-to-day operations.

If treating bad consumer debt as “assets” on a balance sheet and using them to borrow more money seems like it might lead to problems, the Australian Prudential Regulation Authority (APRA) tended to agree. In putting a stop to the practice, APRA presented lending institutions with a dilemma. Any consumer debt that fell 180 days past due was no longer bringing in money and could not be used to borrow more. The choice at that point was to either hold onto the debt in the hope payments started coming back in at some point in the future, or write it off entirely as a loss.

To solve the problem, at least in regard to credit card debt, the banks looked to the US for an answer. Across the Pacific, the practice of buying up debts for a fraction of what they’re worth and squeezing them dry has a long, storied history. In 1833, for instance, US President Abraham Lincoln bought a grocery store for $379.82 using a promissory note. When the business failed and the debt went unpaid, it was sold to a debt-buyer named Peter Van Bergen who sued Lincoln for his tools, saddle and bridle.

From these origins, the debt-buying business continued to take shape in the criminal underworld of 1930s New York. Lucky Luciano and those other financial innovators among the city’s mafia crime families not only refined the art of second-chance finance but began the first real debt-buying operations. How it worked was straight out of cinema: a mobster paid someone cents on the dollar for their outstanding debts and then went to collect under an implied threat of death or, at the very least, a severe beating.

It took Reagan’s America for the practice to move into the mainstream – thanks, in large part, to the US government.


This is an edited extract of Just Money by Royce Kurmelovs, out now from UQP.

Royce Kurmelovs

Royce Kurmelovs is a journalist and writer. He is the author of The Death of Holden, Rogue Nation and Boom and Bust. He worked as a media adviser to Nick Xenophon between 2015 and 2016.


Read on

Image of Jeremy Strong as Kendall Roy in HBO’s Succession season 3. Photograph by David Russell/HBO

Ties that bind: ‘Succession’ season three

Jeremy Strong’s performance in the HBO drama’s third season is masterful

Image of a tampon and a sanitary pad viewed from above

A bloody shame: Paid period leave should be law

Australia’s workplace laws must better accommodate the reproductive body

Image of Gladys Berejiklian appearing before an ICAC hearing in October 2020. Image via ABC News

The cult of Gladys Berejiklian

What explains the hero-worship of the former NSW premier?

Cover image of ‘Bodies of Light’

‘Bodies of Light’ by Jennifer Down

The Australian author’s latest novel, dissecting trauma, fails to realise its epic ambitions