On behalf of Cascade Capital LLC Series A, Convergent Outsourcing Inc. sent me a letter telling me I had past-due balance of $455.86.
I had never heard of Convergent, or Cascade. But the notice got my attention, and that of my wife, who asked whether there was something I should tell her. No, sweetheart, its a scam.
Our client has advised us that they are willing to settle your account for 35 percent of your total balance due to settle your past balance, Convergents letter said, offering me a deal. Your settlement amount would be $159.55 to clear this account in full.
I called the 1-800 number, and a person named Lillian answered by informing me that the call was being recorded.
How can I assist you? Lillian asked politely. This is an attempt to collect a debt. She politely requested the last four digits of my Social Security number, my home address and my phone number. I politely told she must be joking.
There must be a mistake, I said, and asked to talk to Lillians supervisor. Oh, and Im taking notes in an attempt to write a newspaper column.
Bear with me one moment, Lillian said, placing me on hold. The supervisor is in a meeting at this time.
Please have her call, so we can resolve this, I said. Of course, Lillian said, and you have a great day, sir.
In 2011, debt collectors retrieved $55 billion in past-due debt, an amount that is rising as the economy improves and people buy more stuff. A report issued by the Urban Institute last week detailed by McClatchys Kevin G. Hall says a third of Americans have past-due debt.
The bulk of that is debt people owe, and presumably should pay. Then there is the netherworld I encountered of zombie debt. With massive thefts of credit card information, Social Security numbers and other personal details, were all at risk for identity theft and fraud. Debt, as I learned, can rise from the dead.
There is big money to be made in debt. In May, Silver Oak Services Partners, a private equity firm based in Illinois, sold its stake in Convergent and boasted that during the years when Silver Oak owned Convergent, Convergents business grew by 35 percent.
Conveniently, Convergents new owner, Account Control Technology Holdings Inc., services student loans, including debt in the name of one of my kids, meaning me. Convergent and other debt collectors business will only grow as more students struggle to repay five- and six-figure loans that collectively exceed $1 trillion.
Cerberus Capital Management, the giant private equity firm chaired by former Vice President Dan Quayle, helped finance ACTs takeover of Convergent. Cerberus has been in the news for orchestrating the $9.2 billion sale of Safeway to Albertsons, and in the past was in the news for having owned gunmaker Remington Arms. Guns, groceries and debt collection help make the world go round.
In 2011, Sen. Mark Leno, D-San Francisco, got the notion that the debt industry needed more regulation, and that collectors shouldnt be able to sue to collect debts from consumers who dont owe the money.
Leno heard many tales of woe as he carried his legislation. There was, for example, the story of the schmoe named Lou Correa who had run afoul of a debt collector in Orange County.
Then there is the Lou Correa who is Lenos seatmate. Probably the most conservative Democrat in the state Senate, Sen. Correa might have opposed Lenos bill. But the Senate staff told him that his wages were going to be garnished, and he became Lenos co-author. The moral: If youre a debt collector, chose your Lou Correas carefully.
In the 2 1/2 years between February 2011, when Leno introduced his first version of the bill, and July 2013, when Gov. Jerry Brown signed the bill into law, the California Association of Collectors and Encore Capital Group, the nations largest debt buyer, donated $258,283 to California campaigns.
The collectors and Encore contributed $148,900 in the three prior years, 2008, 2009 and 2010. The point: when lawmakers sought to impose greater regulation, the collections and debt-buying industry responded by donating at least $110,000 more to legislators campaigns. Collectors collect from us and legislators collect from collectors. Its all very symmetrical.
Back to the letter offering to settle a debt I dont owe. In 1995 or 1996, someone stole a credit receipt and used it to buy fancy sunglasses and ran up $455.86 in charges. My bank canceled the card and assured me that I owed nothing, and I forgot about it.
Every few years, however, the debt rises from the dead, and I get notices telling me to pay. Its called zombie debt. Finally, I decided to solve the mystery.
I never did hear back from Lillians supervisor. But I did chat with Tim Collins, a Seattle attorney who represents Convergent, and explained how it was that I received the letter requesting that I pay $455.86, or settle the debt for $159.55.
Banks and retailers outsource their debts by bundling them and selling them to debt buyers, such as Cascade.
Cascade, which is based in Petaluma, pools the money of investors seeking a return on their money and buys past-due debt for pennies on the dollar. To collect on the debt, it hires a debt collector, such as Convergent.
This seems to happen, Collins said. Accounts that shouldnt have been sold are being sold.
He stated the obvious: You should never pay a debt you do not owe. He noted that some people, not wanting the hassle of dealing with a dent on their credit reports, would write a check.
Cascade owner Lee Brockett told me the creditor doesnt know that a debt is bogus.
It is incumbent on the consumer to clarify, Brockett said.
In other words, Cascade and Convergent invaded my mailbox with a threatening notice about a debt I dont owe and claim its incumbent on me to tell Cascade to bug off.
And, he added, We usually want the dispute put in writing. Brockett said he would waive the requirement that I put my dispute in writing. But I insisted on writing. So here goes: People shouldnt buy things they cant afford. Nor should people steal credit information. Debt collectors should know the difference.
Follow Dan Morain on Twitter @danielmorain.