A Brief History of Debt Collection - The Law Office of Michael A. Ziegler, P.L.

A Brief History of Debt Collection


January 2, 2017

Debt collector methods have changed over the years, but debt collection is a tale as old as time. Here’s a brief history of debt collection and debt collection harassment law.

Debt Collection Harassment Law Evolved Over Centuries

As far back as 3000 BC, we have the first recorded history of debt collection. In the ancient civilization of Sumer, a debtor who was unable to pay a debt would become debt slaves, along with their family and servants. They would be forced to work for the creditor until the physical labor had repaid the debt. This could take years and even be passed on to future generations. This practice actually became popular among ancient civilizations. In fact, Greek and Roman Empires also use this practice.

In the Middle Ages, laws were introduced to deal with debt collection in Europe. If one was incapable of settling a debt, the creditor could take them to court. The bailiff would be instructed by the court to go to the debtor’s home and collect goods in the amount of the debt, if the debt was found to be owed.

In the Victorian age, debt recovery was dealt with by locking them up. You could actually easily find yourself in prison for failing to pay a debt. These prisoners were not punished, simply held until the debt could be paid. There was also an opportunity for inmates to work and return for payment towards their debt, although it could not be paid this way in full.

In more modern times, creditors would collect debts on their own with the law behind them. Once debtors prisons were done away with, things started to change. If there was collateral, debt was easily settled, as the creditor could take the property to pay the debt. In fact, during the Great Depression, there was a massive amount of foreclosures and Banks took back the homes to make up for the debt. However, the homes were never occupied or sold since no one could afford them.

This of course gave creditors a bad reputation, but their actions were limited due to people not being able to repay the debt. Hence the development of the credit score, which was designed to specifically measure an individual’s ability and history of repaying debt so that debtors could vet potential borrowers.

During the 1980’s, there was another huge amount of foreclosures and written-off accounts. Eventually, some Financial pioneers decided to buy delinquent accounts and attempt to collect part of the amount due. They purchased the accounts from the original lenders for a smaller amount, and turn a profit by collecting a fraction of the debt. This is how modern-day collection agencies came into existence.

Since the creation of collection agencies, we have developed debt collection harassment law over time to protect the consumer from harassment from these agencies. Because they have already bought the debt they can be very aggressive. If you believe you are a victim of debt collection harassment, you should seek legal counsel immediately.

Source: FTC

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