God only knows how many debt-collection law firms around the country need to meet a similar fate. Williamette Week provided insight on the ugly incentives that lead so many debt collectors to violate the law:
To understand why a lawyer might cross the line in his efforts to collect, it helps to know a bit about how America's billion-dollar debt-collection industry works.
Credit-card companies sell their uncollected debts to debt-purchasing companies, who buy them by the thousands for up to 20 cents on the dollar.
Many of those debts are past time to collect. Others have been discharged under bankruptcy. But if the companies play hardball, they can collect enough to turn a profit. So they hire collection agencies and lawyers like McGavic, who can win a court order to raid bank accounts and garnish wages to pay off the debt. But there's risk for the lawyers as well. They get paid only 25 to 30 percent of what they collect--if they turn up nothing, there's no paycheck.
The lawyers file dozens of boilerplate lawsuits at a time, hoping a few pan out. Some debtors won't respond at all. Then the lawyer wins a default judgment and the right to collect--though the deadbeats, if they can be located, often have nothing left to take.
Even some lawyers are turned off by the ugliness in the debt-collection racket:
Portland debt lawyer David Schumacher says the work is typically a lawyer's last resort. "It's the necessary evil," he says. "If you do it right, you'll be successful at it. I'm just amazed at the rules that are broken out there. It just blows me away."
[Image: bizjournals.com]
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