Nearly everyone has been pestered by a debt collector, and nearly everyone dislikes debt collectors.

But just as Dante noted at the gates of Hell that it, too, was created by divine love, so might we acknowledge that effective and proper third-party debt collection is necessary for a robust economy.

The continued ability to borrow money depends on loans being paid off.

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The more bad debt there is — loans written off as uncollectible and losses taken — the higher the costs to future borrowers. That means higher interest rates on loans and higher fees.

Such bad-debt costs are passed along in the form of higher prices for goods and services, says the New Jersey Association of Collection Agencies.

So, for example, the price of an automobile and/or the loan to buy it includes the cost of going after those who quit paying their auto loans, of repossessing vehicles from those who can’t or won’t pay, and of writing off whatever value can’t be recaptured.

So our attitude should be gratitude that third-party debt collectors exist and do a tough and largely thankless job — and may they never trouble us personally.

A study by Ernst & Young funded by the collection association quantified how much debt work there is to be done.

Nationwide, third-party debt collection recovered $55 billion in assets in 2010, charging commissions and fees of $10.3 billion, or nearly one dollar in five recovered. The services directly employed 148,272, the study found.

In New Jersey that year, $1.2 billion in assets was recovered by debt collectors — a 50th of the total and less than I expected, considering we’re 11th in population and second in income nationally. Maybe it’s harder to recover property and money from tough Garden State people.

We didn’t lack for debt collectors, with a few hundred more than our share at 3,338 industry employees in New Jersey in 2010.

ACA International, the Association of Credit and Collection Professionals, figures that debt collection saved households an average $396 in 2010 by keeping down the costs of goods and services.

The sore point for debt collection is that efforts to get people to pay up sometimes go beyond what’s legal, contributing a regular supply of bad publicity that is welcomed by those who dislike debt collectors.

Most debt collectors know the rules and stick to them, and the association wants consumers to know the rules, too, so they can help identify and weed out the bad operators.

To that end, the ACA has a code of ethics for members and offers a lot of consumer information at, including debtor rights, how to dispute a debt and a complaint-resolution process.

Claim settlements

Tens of thousands of properties were damaged by Hurricane Sandy and insurance claims have been filed, so property owners and insurance companies will have to reach an agreement on the extent of the covered damage and the amount paid.

To press their case, property owners can negotiate with the insurer themselves or hire a public adjustor to represent them — potentially putting someone with knowledge and experience about claims on their side.

Property owners unsatisfied with their settlement can also sue the insurer and show in court that a claim was improperly denied or insufficiently covered.

That, though, apparently isn’t enough potential work for lawyers, and especially the many lawyers who largely make up the state Legislature, where a proposed bill would allow property damage claimants to sue insurers for acting in bad faith if the company doesn’t settle a claim as quickly and fully as the owner wanted.

Most importantly to the lawyers, such bad-faith lawsuits would be eligible to collect punitive damages if the lawyer can show “the insurer’s acts or omissions demonstrate … willful disregard of any person who foreseeably might be harmed by the insurer’s acts or omissions.”

I foresee everyone buying property insurance being harmed, when rates go up to offset the awards handed out and the cost to insurers of paying more lawyers to defend against such subjective and easily imagined lawsuits.

The governors of New Jersey and New York announced a better approach recently. They’re establishing a mediation process to give consumers another way to dispute damage settlements without resorting to costly and time-consuming lawsuits.

That also will let residents rebuild their properties and lives more quickly, the governors said.

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