This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why Nonprofits Should Be in the Debt Collection Business

NEW YORK (TheStreet) -- Nonprofit organizations are wonderful things. They do fabulous work to uplift and advocate for the less fortunate, fill their bellies and their souls and offer shelter when none is available. Nonprofits may be secular or religious but seek equally to improve quality of life for those for whom quality of life is low.

Thirty-nine million of our fellow citizens in debt, and debt collectors make billions of phone calls intended to annoy, embarrass and abuse them into giving up the rent money or even money for food to take care of that credit card debt or payday loan or unpaid medical bill. Debt collectors file 10 million lawsuits a year. Contrary to common belief, these debts almost always were not the result of poor decisions. Largely they are the result of a lost job or an illness in the family.

Those two activities -- doing good for society and collecting debt -- are poles apart, yet they really fit hand in glove. Nonprofits are in the business of helping people who need help, and consumers overwhelmed by debt certainly need lots of help but have no choices other than to just hunker down and struggle on.

At first blush, no nonprofit would say they wanted to become a debt collector and no debt collector would behave like a nonprofit. What changes this dynamic is an idea that opens a door for nonprofits to see themselves able to magnify their efforts and extend their outreach in ways not before possible. For every nonprofit, the limiting factor is not a shortage of people who need their help -- it is a lack of funding to meet those needs.

Both needs are solvable in a way that does not create a social welfare or giveaway program nor create a tax burden for government.

I have made proposals to the administration and consumer advocacy groups for the creation of a special tax credit program that would give banks incentives for donating delinquent consumer loans to nonprofit organizations. Those donated loans become the source of funding for expanding the programs and outreach for the nonprofit.

The nonprofits, operating under special rules and qualifications, would work with the consumer to restructure loans into payment terms that would truly fit the consumer's specific situation and generate a cash flow that the nonprofit uses to fund broader service needs. This new revenue source will allow nonprofits to extend their reach farther and faster.

Money corrupts. Even nonprofits can be corrupted. But controls would be in place to prevent these special nonprofits from growing into a different type of voracious and abusive debt collector that was merely exempt from paying taxes. The nonprofit is required to provide a range of financial literacy, social services and job search programs to the consumer with the delinquent loan. The nonprofit is forbidden to charge interest or to use any form of litigation against a consumer. The incentives are balanced in such a way that the consumer and the nonprofit, without friction, meet in the middle with a solution that allows the consumer to get back on their feet and allows the nonprofit to do good things for more people in more ways.

The further genius of this special tax credit is that there are so many winners. The banks win because of the tax credit. The consumers win because they get out from under an impossible debt overhang. The nonprofits win because they have more resources to fulfill their core mission. The government wins because unemployment is reduced and the attendant cost of unemployment compensation and food stamps falls by billions of dollars. Our courts win because the rate of bankruptcy is cut in half and the number of debt collection lawsuits falls by 80%.

There is only one loser in this process: the traditional debt collector and the lawyers who work for them. None of us are going to lose much sleep over that outcome.

Bill Bartmann is the CEO of debt advisory firm, Bartmann Enterprises, and the CEO of CFS II, a debt collection company. Bartmann is the author of Bailout Riches! How Everyday Investors Can Make a Fortune Buying Bad Loans for Pennies on the Dollar. His recently published book, Out of Control: Cases of Debt-Collection Abuse in America and What We Can Do About It, documents clear patterns of abusive tactics used by unethical collectors.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,959.28 -124.52 -0.73%
S&P 500 1,978.67 -9.31 -0.47%
NASDAQ 4,445.7350 -26.3730 -0.59%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs