Thomas Jefferson had a passion for purchasing fine wine and foreign luxuries on credit. His insatiable wants, coupled with failed business speculation left him more than $107,000 in debt when he died. So, his large estate, which included 130 slaves, was auctioned off to pay his creditors.
The concepts of debt and debt collection are not new. In fact, based on early, recorded history, these issues have been around for quite some time.
In the Bible, in the book of Proverbs, it suggests “the borrower is servant to the lender.”
The first English bankruptcy laws on record occurred in 1543 and allowed the imprisonment of debtors. Later statutes in 1571, 1604, and 1623 called for punishment of those who provided aid to bankrupts.
The early Bankruptcy laws in Colonial America contained harsh punishments for debtors. In Colonial New York, for example, bankrupts were generally branded on the thumb with a “T” for “thief.” The Pennsylvania Bankruptcy Act of 1785 called for convicted bankrupts to be publically flogged and have an ear nailed to a pillory.
In 1842, John N. Bellows suggested the creditor was not just doing the debtor a favor by selling now and allowing him to pay later, because the creditor was as much interested to sell as the debtor was to buy. So, according to Bellows, the creditor must bear his share of the risk.
Out of economic thinking such as this was born the topic of debtor’s rights and the corresponding need for professional debt collectors who understood these rights.
In 1846 Hunt’s Merchant Magazine proposed the total dissolution of creditor rights. It proposed attachment remedies be used instead so that lenders would only lend what they were sure they could recover and borrowers would only borrow what they could absolutely afford to pay back. In case of error, the proposal suggested that the creditor write off the loss and the borrower be denied further credit. Many of the fundamental aspects of this original proposal are what guide the credit industry today.
So, how have the credit and debt collection industries evolved since the mid 1800s? Has concern over consumers taking on too much debt, originally expressed in 1857, gone away? Has the way we think about debt changed for the better? Is it easier than ever to get into debt? Do debt collectors still intimidate and bend the law?
The basic problems surrounding credit, debt, and debt collection haven’t changed much since the beginning of recorded history. However, our methods for remedy have evolved drastically – arguably into such a tangled cob that it is difficult to find fair and satisfactory relief as a debtor or creditor.
Creditors are left to predicting and managing debt assets with aid from professional collectors. Collectors scramble to develop competitive advantages in the form tactics, technologies, and efficiencies, complicated by laws and regulation, to minimize loss and maximize recovery. As a result, both creditors and collectors resort to pushing the proverbial envelope, at risk of violating the ever-growing mire of debtors’ rights.
Interestingly, none of these issues would exist if we could simply suppress the Thomas Jefferson within each of us.
This article was written by admin