DTE Energy Facing Oversight of “Hardship-Inducing” Debt Collection Practices

by Sarah Alvarez, Outlier Media

This article was produced for ProPublica’s Local Reporting Network in partnership with Outlier Media. Sign up for Dispatches to get stories like this one as soon as they are published.

DTE Energy, Michigan’s largest utility, will be required to publicly disclose information about how often it sells struggling customers’ old debt to third-party collectors following revelations that it does so far more often than other utilities in the region.

The Michigan Public Service Commission this month ordered DTE to start reporting information about debt sales every year. The utility, however, fended off an effort to end the practice altogether, according to commission documents.

In response to the decision, Chris Lamphear, DTE’s head of corporate communications, said in an email, “We will share information with the Commission on the timetable they request, though we have no plans for a sale at this time.”

A 2022 investigation by Outlier Media and ProPublica detailed how DTE sold customer debt from closed accounts for pennies on the dollar over a period of nine years. Jefferson Capital Systems, a company that bought the debt, has sued Detroiters, garnished paychecks and income tax returns and put liens on homes. The last time DTE sold debt, Outlier and ProPublica found, was 2017.

The company’s debt sale practices were unusual, our investigation found. We surveyed the 11 other investor-owned electric utilities that each serve at least 400,000 customers in the Great Lakes states of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. All of them, including Consumers Energy, Michigan’s second-largest utility company, said they do not sell debt. Five of the utilities also said they do not directly sue their customers over debt. The ones that do said they do so only on rare occasions.

Commissionstaff then explored the issue while weighing a rate increase request from DTE, which provides power for Detroit and southeast Michigan. A brief submitted by commission staff in the rate case said the debt sales resulted in “hardship-inducing collection tactics” affecting the utility’s most financially vulnerable customers and suggested that DTE stop selling uncollectible accounts.

The staff was also concerned that DTE’s debt sales allowed for “double recovery.” In other words, according to the staff, some debt is recovered by the third party that buys it even as the utility factors uncollected debt into its calculations for rate increases affecting all customers.

DTE disputed that debt sales would allow for a double recovery, and an administrative law judge involved in the case only acted on one part of the staff request: the need for DTE to regularly report on any third-party debt collection.

The commission made the final decision and will now require annual reports from DTE on debt sales for the previous five years detailing the number of accounts sold to a third party for collection, the amount of debt associated with those accounts and how much money the company made from the sales.

Commission officials declined to comment. Spokesperson Matt Helms said by email the commission was “letting the order speak for it.”

Jackson Koeppel, the founder of an environmental justice organization called Soulardarity, which often testifies in DTE rate cases that go before the commission, said the reports are a “good start.” But Koeppel wants to see commissioners go further.

“The commission needs to put a nail in the coffin of this cruel practice,” he said. “We also need to talk about what is going to be done to help these people who are still dealing with the effects of the debt that has already been sold,” he said.

Jefferson Capital has not commented on its arrangement with DTE or its collection tactics despite numerous attempts by reporters to contact a spokesperson.

Iris Foster-Ray, a Detroit resident still struggling to pay off debt DTE sold to Jefferson Capital in 2017, is hoping no one else will have to go through the stressful, costly process she experienced.

Iris Foster-Ray is still struggling to pay off debt DTE sold to Jefferson Capital in 2017. (Nick Hagen for ProPublica)

Over the years, she has had her paychecks garnished. She said that she now has a payment plan where she owes Jefferson Capital $150 a month and that her income tax refund was garnished two years ago. There is a lien on her house as well.

“DTE shouldn’t have sold the account,” said Foster-Ray, who failed to pay her utility bill during a time when her family was dealing with high medical bills. “If you are behind on any utilities, there should be help because you need heat, and you need water to live.”

Stephanie Johnson testified in a 2022 DTE rate case about how Jefferson Capital came after her for about $5,000 in old debt she built up years ago when she fell behind on one of the utility’s shut-off protection payment plans. Jefferson Capital sued her during the height of the COVID-19 pandemic. The case was finally closed in October, according to court records.

“I am so grateful that I was able to lend my voice to this and share my experience and that it had an effect on DTE not selling people’s debt going forward,” Johnson said.

Most months, tens of thousands of DTE customers can’t afford their bills and have their electric accounts shut off by the company.

Some of those accounts remain closed and are written off by DTE as uncollectible debt. The utility disconnected 162,128 electric accounts for nonpayment through the end of September this year, the last month for which data collected by the MPSC is available. That number is about 30,000 less than for the same period last year.

“We perform significant outreach every day to connect our at-risk customers to financial aid and prevent an interruption of service, which is a last resort we always strive to avoid,” Lamphear said.

This content originally appeared on Articles and Investigations - ProPublica and was authored by by Sarah Alvarez, Outlier Media.