What Would The Debt Collector Do?

Michelle Miller is a CBS News correspondent based in New York.
Debt collection is big business.

And when the economy is down, it's really big.

That's because when cash is scarce, more people use credit to make ends meet. They need it to buy groceries, gas, you name it. And they ultimately fall further and further behind if they lose their job, fall victim to illness or suffer any other financial crisis beyond their control.

Mike Nowak knows this firsthand. After his divorce 20 years ago, he was left holding a large sack of credit card debt. He says it's what makes him the best debt collector in his shop at Northstar Companies. It's a collection agency in Buffalo, N.Y., a hub for the collection agency industry.

Northstar looks like any telemarketing firm, except plasma TVs blanket the walls featuring ESPN and NFL highlights. It's a diverse group of salesmen and -women pitching payment to consumers who're in debt.

Companies across the spectrum are hiring agencies to collect on debt, sometimes they'll hope to reap 50 cents for every dollar owed. In 2007, Nowak said his average monthly take was $40,000 to $50,000 from debtors. In the first few months of 2008, it nearly doubled.

According to the Federal Reserve, just over 4.5 percent of all bank credit card accounts were delinquent in the fourth quarter of 2007, up from 3.5 percent two years before.

The industry is growing so fast, Northstar has installed several more rows of calling cubicles to handle the business. They're empty now, but by summer's end, Northstar executives expect them to be filled with new agents. Northstar's chairman, Joel Castle, says business is going to get even better for him, (worse for consumers) this summer when the bottom falls out of the auto leasing market.

Nowak's advice to consumers? Answer his call. Own up to your debt, pay what you can and work out a schedule to clear your credit. Nowak says he's not the bad guy and neither are consumers, most of who have fallen on bad times.