A bail out of the people by the people.
November 13, 2013 1:39 PM   Subscribe

Rolling Jubilee have spent just $400,000 to purchase $15 million of Americans' personal debt from banks before 'abolishing' it, freeing individuals from their bills.
Apart from The Guardian, HuffPo and Business Insider no one else seems very interested. Rolling Jubilee is a project of Strike Debt - slogan You are not a Loan. Previously - just on a year ago.
posted by adamvasco (82 comments total) 65 users marked this as a favorite
 
Statistic from the FAQ that jumped out at me: 15% of Americans are currently being pursued by a debt collector.
posted by box at 1:41 PM on November 13, 2013 [2 favorites]


this is incredibe - that the price was so low, that they just sent notes to people saying "you're free", that they were able to raise so much money. i can't even imagine being one of the benefactors of this, not knowing it's happening, and just learning that the weight has been lifted...
posted by nadawi at 1:43 PM on November 13, 2013 [15 favorites]


i like that their first stat was 65% of bankruptcies are due to medical costs. i did a paper on that college...about how medical bankruptcy is hidden because people use credit and mortgages to pay medical bills.

i am so happy this exists.

i hope it really helps some people.
posted by sio42 at 1:44 PM on November 13, 2013 [9 favorites]


A little worried people will think their own debt might realistically vanish (sort of like skewed perceptions of the lottery).
posted by miyabo at 1:48 PM on November 13, 2013 [2 favorites]


Clearly the takeaway isn't "OMG OWS-- take away my debt!" (though a lot of people are going to read it as that). Or even how great it was for the people who were "freed". The takeaway should be how willing creditors are to discharge debt for spare change on the dollar.

I doubt any of this applies to student loans, though it's the message I see tacked onto all the shares on Facebook.
posted by supercres at 1:52 PM on November 13, 2013 [1 favorite]


A little worried people will think their own debt might realistically vanish
Like a failed bank?
posted by fullerine at 1:53 PM on November 13, 2013 [12 favorites]


It's too bad there isn't an easy way to buy your own debt on the secondary market. It would be an easy payoff for a lot of people.
posted by michaelh at 1:54 PM on November 13, 2013 [38 favorites]


Tyler Cowen on the topic, titled "Inefficient forms of aid"
posted by Perplexity at 1:54 PM on November 13, 2013 [3 favorites]


i think that's what they're trying to show people - that when you work with a secondary creditor, there is no reason to offer them the full amount, that there is bargaining room - maybe not quite this cheap, but still a far sight cheaper than the secondary market wants them to believe.
posted by nadawi at 1:55 PM on November 13, 2013 [2 favorites]


tyler cowen seems to miss that aid wasn't the sole purpose.
posted by nadawi at 1:56 PM on November 13, 2013 [2 favorites]


It's too bad there isn't an easy way to buy your own debt on the secondary market. It would be an easy payoff for a lot of people.

No, but there's always negotiation with creditors to settle for a fraction of the debt. That's really the closest analogue.

Re: student debt: "Andrews says that while the group would like to target student debt, it is difficult as much of that debt is held by the government and not listed on secondary markets (the group are looking into ways to buy the smaller portion of student debt that is private)."
posted by supercres at 1:57 PM on November 13, 2013 [1 favorite]


I doubt any of this applies to student loans, though it's the message I see tacked onto all the shares on Facebook.

No - you wouldn't be able to buy student loan debt at such a big discount because its not dischargeable in bankruptcy.
posted by JPD at 1:57 PM on November 13, 2013 [8 favorites]



It's too bad there isn't an easy way to buy your own debt on the secondary market. It would be an easy payoff for a lot of people.
posted by michaelh at 1:54 PM on November 13 [+] [!]


Any one can do this. The bill collector bought your $300 doctors bill for 2 cents on the dollar or $6.00 is probably going to take a $10 offer as long you show no fear and tell him the other choice is zero.
posted by otto42 at 1:59 PM on November 13, 2013 [1 favorite]


"tyler cowen seems to miss that aid wasn't the sole purpose."

What was the other purpose? Reward holders of bad debt?
posted by pwnguin at 1:59 PM on November 13, 2013 [1 favorite]


Any one can do this. The bill collector bought your $300 doctors bill for 2 cents on the dollar or $6.00 is probably going to take a $10 offer as long you show no fear and tell him the other choice is zero.

If it's really that good, great. I figured that the cost of paperwork for retail borrowing puts a floor on the amount lenders want to collect but I have little experience with it.
posted by michaelh at 2:02 PM on November 13, 2013


The bill collector bought your $300 doctors bill for 2 cents on the dollar or $6.00 is probably going to take a $10 offer as long you show no fear and tell him the other choice is zero.

I have trouble believing that kind of settlement would be possible at a small scale. The achievement here was the rate, and it was possible through the large scale.
posted by supercres at 2:03 PM on November 13, 2013


What was the other purpose? Reward holders of bad debt?

from the first link :
"Our purpose in doing this, aside from helping some people along the way – there's certainly many, many people who are very thankful that their debts are abolished – our primary purpose was to spread information about the workings of this secondary debt market."

also, your framing of "rewarding holders of bad debt" is pretty shitty since a lot of the debt was medical. it's not like people went out and bought a giant tv and couldn't pay for it and now they get this reward (that they never asked for and never knew was coming) - people got sick and injured and were unable to pay those debts.
posted by nadawi at 2:09 PM on November 13, 2013 [21 favorites]


Wouldn't it be possible to buy up cheap debt and then sell it back at cost price? Then individuals, family, or wellwishers could discharge that debt for 2c in the dollar while the Rolling Jubilee would effectively earn back its money to buy up more debt. If there was enough participation to make the project sustainable, they could clear the whole secondary market this way.
posted by Thing at 2:09 PM on November 13, 2013 [37 favorites]


The near-complete nondischargeability of student loan debt is a fucking tragedy. I just don't know how you fix that problem without driving up interest on the loans though.
posted by Aizkolari at 2:11 PM on November 13, 2013 [5 favorites]


does student loan debt end at death or is it extended to the estate?
posted by nadawi at 2:12 PM on November 13, 2013


IANAL but I think it ends at death.
posted by Aizkolari at 2:13 PM on November 13, 2013 [2 favorites]


Not to rain too much on any parade, but I'm somewhat concerned about this, and have been, because the last debt buy? Happened in May. They're putting out financials, but I find it really weird that as of the end of September they were just sitting on over $200k--even though that evidently represents a very large chunk of debt that could have been bought off. Their fundraising has clearly slowed, and if they're going to really keep operating then I welcome the idea of bringing them more attention, but I don't feel like they're adequately addressing some of this.

That said, the notion of rewarding people for something they didn't earn? The point of the jubilee, Biblically, was to prevent a very small portion of the population from accumulating all the capital and using it to gain power over the rest of the population. Otherwise, someone would have a bad year and would end up permanently without land--there would be no way to escape it. I used to work at a courthouse processing collection cases. It was routine that companies would be suing for double what the last statement amount was, claiming the entire difference as "interest". What did those companies do to earn said interest? Nothing, they'd bought the debt from someone else for aforementioned pennies on the dollar. And yet they were trying to get judgments for the full amount from people, largely counting on those people to not have the resources to actually consult a bankruptcy attorney.

But going based on the difficulties those companies had with our requirements, I will say that I believe the reason not to sell it back at cost has to do with the fact that they'd probably burn a lot of their money in overhead trying to administrate such a scheme. Forgiving it is faster and cheaper.
posted by Sequence at 2:15 PM on November 13, 2013 [2 favorites]


Student loan debt ends at death IF you are the only person on the loan. If you have a cosigner, it goes to them. At least, that's how I understand it.
posted by starvingartist at 2:20 PM on November 13, 2013 [1 favorite]


basically i'm wondering if the student loans my parents took out when i was a baby, that they'll be paying on until they die, will pass to my siblings and me...
posted by nadawi at 2:23 PM on November 13, 2013


Because student loans are increasingly enormous, co-signing on student loans by parents is more often required. And even if those loans are forgiven after the student's death, which often is not required by loan contract or agreed to by the lender (and there have been tragic cases covered in the media), the co-signer is obligated to pay taxes on that discharge.

basically i'm wondering if the student loans my parents took out when i was a baby, that they'll be paying on until they die, will pass to my siblings and me...

Loans are not "inheritable," but when your parents' estates go through probate, they are offset against assets.
posted by miss tea at 2:27 PM on November 13, 2013 [3 favorites]


It's possible (though unlikely, every federal student loan agreement I've ever seen allows for forgiveness upon death, though I guess that's different when there is a co-signer) that unpaid creditors could go after your parent's estate, nadawi, but you won't be on the hook for their debts.
posted by skewed at 2:30 PM on November 13, 2013 [1 favorite]


Any one can do this. The bill collector bought your $300 doctors bill for 2 cents on the dollar or $6.00 is probably going to take a $10 offer as long you show no fear and tell him the other choice is zero.

If you are dealing with a bill collector, be sure to ask for "Pay For Delete" which means you negotiate an amount that they take as payment in full, plus they delete all records of the debt and the collections from your credit report.

But be careful and get it in writing. I was dealing with a collector over a debt that was totally bogus, but I was willing to pay a small amount to get it off my record. After we negotiated an amount, I insisted on a letter from them outlining the deal and then I would overnight them a check. Only they refused to do business through the US Mail (they claimed that was hopelessly old-fashioned and only an old woman like me would even think business was done on paper these days. They didn't know I was an old woman who had been a professional business programmer for nearly 40 years and knows exactly how business is done.) They also would not accept a check, a paypal, or any method where I controlled the amount transferred. They wanted my bank account number and they would initiate the transfer. So the deal broke down because I was NOT dumb enough to do that.

Doing research on them later, I found they are known for promising to accept a reduced amount, but once you given the info, they withdrew the full amount. If you didn't have enough money, they would drain what you had in your account and come back later to try to drain more. So be careful.
posted by pbrim at 2:31 PM on November 13, 2013 [39 favorites]


It's possible (though unlikely, every federal student loan agreement I've ever seen allows for forgiveness upon death, though I guess that's different when there is a co-signer) that unpaid creditors could go after your parent's estate, nadawi, but you won't be on the hook for their debts.

Yes, you're right as to the older student loan agreements, which of course would apply to your parents' debt. But I am not sure if that continues in the current agreements, even if they aren't cosigned. Thanks for the clarification, skewed.
posted by miss tea at 2:33 PM on November 13, 2013 [1 favorite]


The takeaway should be how willing creditors are to discharge debt for spare change on the dollar.

This, times 1,000,000. People slave and scrimp for years to pay off debts that are absolutely trivial to the lenders. Forget the Swiss plan to give everyone 10,000 every year or whatever it is. Discharge that much personal debt for each American and it will pay off multiply. I really think that as great as the OWS 99% message was and as badly bungled as it was in its delivery, this will truly make a real political statement and underline the hold that the 1% has on the rest.
posted by nevercalm at 2:35 PM on November 13, 2013 [11 favorites]


I'm curious how much of that $15 million worth of debt would ever have been collected anyway. If it was sold for $400k, one would think that it was that cheap because it was a compilation of debts that would be expensive or difficult to recover.

Imagine a for-profit investor considering whether this was good debt to invest in: If they could recover 10% of it, they'd gross $1.1 mil. That tells me that it's pretty unlikely that most of those debtors would ever have had to pay.
posted by MeanwhileBackAtTheRanch at 2:49 PM on November 13, 2013 [1 favorite]


Get rich scheme:

1. Borrow $1,000,000
2. Let it go to collections
3. Buy the debt via a 3rd party for $250,000
4. Enjoy $750,000 profit.
5. Repeat.

So, who wants to start a kickstarter?
posted by blue_beetle at 2:53 PM on November 13, 2013 [7 favorites]


MeanwhileBackAtTheRanch: Would they "have" to pay? Maybe not. Even if you got a judgment against them, it might well be that they'd have insufficient assets and income to collect any more than a tiny fraction of the total amount. But it doesn't matter if you ever come up with the cash; the amount continues to hang over your head for years afterwards. And because judgments can be extended in ways that a debt without judgment can't, if you take the person to court you can keep going after them for decades. Whatever filing fees are involved, you can continue to lump onto their amount due.

Not having the assets to pay is a very different thing than just deciding not to pay. It can mean years and years of evergreen ruined credit, of collection calls, of garnishments that every new employer finds out about. It doesn't mean much to the investment community, but it means a lot to the debtors.
posted by Sequence at 2:54 PM on November 13, 2013 [3 favorites]


Here's the thing about the credit companies.. they have oodles of cash because they create it (or, you, the debtor do) in the form of interest. So when you've been struggling to make even minimum payments on your credit card and have missed payments, a lot of the balance is not money that "cost" the credit companies.

Sure, they paid for your $80 The Gap[*] sweater, but they a) charged The Gap for the transaction (you could almost look like this as a discount Visa gains by guaranteeing enough people will use their card such that The Gap *wants* to give a discount (pay a fee) to ensure they get Visa business), and b) the $20 of interest on top of the $80 sweater that you've accrued is "free" money to the credit company.

This is why they will always take less on the dollar to get delinquent accounts off the books - it never cost them the total balance in the first place (forgetting the cost of accounting/maintaining the account, which has got to be a miniscule % of total cost).

If you are ever deep in it with the credit card companies, you owe it to yourself to negotiate a deal. Have two credit cards in deep? Play the two companies off each other: "Hey, it's either you guys or Discover Card and it comes down to who wants it more."

I have seen people pay between 30% to 50% of total balances in some cases to wipe the slate clean.

[*] I'm dating myself by using The Gap but I'm not cool enough anymore to know what the hip stores are these days.
posted by mbatch at 2:58 PM on November 13, 2013 [11 favorites]


Hey everybody, allow me:

[*] I'm dating myself by using The Gap but I'm not cool enough anymore to know what the hip stores are these days.

With that admission you're not so much dating yourself as you are outing yourself as never having been cool enough to know what the hip stores are.

[*] Yours is an interesting take on the consumer credit industry's business model, though.
posted by notyou at 3:36 PM on November 13, 2013


Tyler Cowen on the topic, titled "Inefficient forms of aid"

For a second I thought that said Tyler Durden.
posted by homunculus at 3:42 PM on November 13, 2013 [1 favorite]


Wouldn't it be possible to buy up cheap debt and then sell it back at cost price?

My understanding, as someone who is internet pals with the Jubilee folks, is that you can't. They went through an awful lot of legal machinations and paperwork to get this far and it's actually pretty tricky business and they're not totally sure they're out of the woods yet. It made a bold and useful statement, not only to the 3900+ people who had their debt forgiven, but to a lot of other people who have a hard time getting their head around America's debt culture.
posted by jessamyn at 3:49 PM on November 13, 2013 [5 favorites]


notyou, I'm pretty sure The Gap was hip for a few nano seconds in the early 90's, which happened to overlap perfectly with the first and last time I paid attention to fashion.
posted by mbatch at 3:52 PM on November 13, 2013 [4 favorites]


The near-complete nondischargeability of student loan debt is a fucking tragedy. I just don't know how you fix that problem without driving up interest on the loans though

You subsidize most or all of the tuition fees up front, like they do in civilization.
posted by mhoye at 4:22 PM on November 13, 2013 [23 favorites]


I think it's a great idea. Not just because it directly relieves peoples' debt, but also because it builds collective consciousness in the people whose debt Strikedebt paid. That's also a way of building political power. Good deal. Now if they could just organize a massive same day default, that would be spectacular in the best way.
posted by wuwei at 4:27 PM on November 13, 2013


Doesn't this then mean they have a massive tax bill instead?
posted by Carillon at 4:33 PM on November 13, 2013 [1 favorite]


If income-based repayment were easier to manage and it applied to absolutely all student loans, I wouldn't object to student loans nearly so much. If you can afford to pay, you pay; if you can't afford to pay, you don't. The complications of making that happen even when you qualify are ridiculous, though.

Carillon: Forgiven debt is technically taxable, but it's only taxable to the extent that you would have been able to actually pay for it if you'd felt like it, to vastly oversimplify things. But just as a general principle, the ordinary person who has debt that's gone to this level of collections is not sitting on a nice house and a healthy bank account and such. The people who actually settle themselves because they're sitting on some assets along with the debt, it's more likely to come up, although less often than people always think.
posted by Sequence at 4:37 PM on November 13, 2013


When my local Occupy group disbanded, we had a treasury of about $1000. I wanted to donate it to Strike Debt. The others wanted to send it to Occupy Sandy. They won.
posted by charlie don't surf at 4:40 PM on November 13, 2013


I've been following this since the beginning, and no one has ever explained to me why MeanwhileBackattheRanch's point is wrong. They're able to achieve these huge multipliers precisely because the debt is worthless to begin with. If anything, they're just propping up a market for these worthless assets and handing free money to bankers who were never going to get paid in the first place.
posted by gerryblog at 4:50 PM on November 13, 2013 [2 favorites]


Tell me about it: I have student loan debt (that jumped from 2% at graduation to nearly 6% and doesn't ever go away thanks to the Bush era), I was laid off from work, when insurance ran out before I found another job, I got a lung cancer and had major emergency surgery, MediCal DQ'd me (62 and not old enough to qualify), just evicted from a room I rented, moving into my car (don't qualify for "senior" housing or wait lists are 2-3 years). Selling everything I own (that doesn't fit in the trunk). Mounting debt, can't afford much of anything. I will need to live on $1k a month social security. No way I can pay off any of that debt.

Not blaming; that's just the way it is. I'm in so deep I don't think anyone could pull me out.

But yeah, good to hear there's at least a few positive things like this going on.
posted by CrowGoat at 4:52 PM on November 13, 2013 [2 favorites]


Any one can do this. The bill collector bought your $300 doctors bill for 2 cents on the dollar or $6.00 is probably going to take a $10 offer as long you show no fear and tell him the other choice is zero.

What gets me is that you can't just find out how much they bought it for so it becomes a stupid bluffing game. The original creditor has been paid off, the party that bought your debt got it for cents on the dollar, so your debt is no longer really what you thought it was, but you don't get to know how much that is.

If the collectors told people the number, the secondary market would collapse because they'd no longer make any money. Even if they told people that number + their overhead and a bit of a profit margin, the incentive is for everyone to let their debts slide into collections to pay them off cheap - and the credit rating agencies would have to start grading on a curve or the creditors would have to lower their standards because more and more people would rack up black marks. So we're stuck in a stupid, stupid collections system based on withheld information, a tiresome negotiation dance, and the people who don't know that they can negotiate or that take the threats and misinformation of debt collectors at face value are what's keeping the whole industry afloat.

If there was a real, widespread epidemic of education on the ins and outs of dealing with debt collectors the whole house of cards would, well, maybe not come down, but definitely start shaking.
posted by jason_steakums at 5:25 PM on November 13, 2013 [7 favorites]


nadawi: "also, your framing of "rewarding holders of bad debt" is pretty shitty since a lot of the debt was medical. it's not like people went out and bought a giant tv and couldn't pay for it and now they get this reward (that they never asked for and never knew was coming)"

No, you misunderstand. The "holders of bad debt" are not the debtors, they're the debt-collectors. Spending $400,000 on bad debt benefits the debt collectors, because if this organization hadn't come in with $400,000, they might have gotten nothing (which is not to say that it's necessarily a bad idea).
posted by alexei at 5:38 PM on November 13, 2013 [4 favorites]


You subsidize most or all of the tuition fees up front, like they do in civilization.

Yeah, duh, but I live in the US.
posted by Aizkolari at 5:39 PM on November 13, 2013 [1 favorite]


Any one can do this. The bill collector bought your $300 doctors bill for 2 cents on the dollar or $6.00 is probably going to take a $10 offer as long you show no fear and tell him the other choice is zero.

This is absolutely not true. I worked for a debt buyer. I wrote the client guide we sent to our firms, including the part about settlement parameters, and I knew what we paid for those debts.

I don't have experience with $300 debts, but $3000 is pretty close to the median account for us, so that's my hypothetical.

You have to consider that the notionally $3000 debt (at charge-off) is now $7000 with interest and you have to go 3 levels up the food chain from the collector until you reach someone with settlement authority high enough to get below that $3000. We didn't even let partners at the law firms settle for less than that $3000, plus court costs, if applicable; they had to call us up. The department head, the company operations director and I would review the file on the phone with the attorney.

There was one file I remember where the debtor had a motorcycle accident that left him severely brain damaged. He would need constant nursing care for the rest of his life. His family, out of a sincere but misguided attempt to wrap up his affairs, offered us $1000 on a $4000 charge-off. We had paid less than $200 for the account. We countered with a $2000 offer. The family was offended and we got nothing.
posted by [expletive deleted] at 5:56 PM on November 13, 2013 [13 favorites]


"I've been following this since the beginning, and no one has ever explained to me why MeanwhileBackattheRanch's point is wrong. They're able to achieve these huge multipliers precisely because the debt is worthless to begin with. If anything, they're just propping up a market for these worthless assets and handing free money to bankers who were never going to get paid in the first place."

Two things:

First, some amount greater than the purchase price is the likely value of those loans; no one would buy that paper if they thought they weren't getting paid at all. The debt isn't worthless.

Second, having debt like that and terrible credit can really fuck people's lives even if they're never really going to pay it back. The Jubilee removes that ongoing angst and allows people to move forward. That's a real value.
posted by klangklangston at 6:05 PM on November 13, 2013 [8 favorites]


I forgot to add that our settlement parameters were much more generous than the banks'. Often there would be records of rejected settlement offers to the original creditor for more than what we would eventually settle for, with 3 years of 25% interest in between.
posted by [expletive deleted] at 6:11 PM on November 13, 2013


otto42: "Any one can do this. The bill collector bought your $300 doctors bill for 2 cents on the dollar or $6.00 is probably going to take a $10 offer as long you show no fear and tell him the other choice is zero."

And then when they get your check for six bucks, they make it $60 because they're fucking scum. And they will have inflated the $300 to at least $600 with various fees and charges they're not actually legally allowed to charge, again, because debt collectors are fucking scum.

Better to pay an original creditor in full than to pay junk debt buyers a dime.
posted by wierdo at 6:24 PM on November 13, 2013 [4 favorites]


You can read the purchase agreements here. Boilerplate, they all look the same. I swear everybody uses the same couple of mail merge templates. It's embarrassing.

The devil is in the details, and what I'm not seeing is a demographic breakdown or buyback conditions. Likely the seller made them sign an NDA about those terms.

I can't say for sure, but it looks like they are paying around market rate.
posted by [expletive deleted] at 6:32 PM on November 13, 2013 [1 favorite]


If you are dealing with a bill collector, be sure to ask for "Pay For Delete" which means you negotiate an amount that they take as payment in full, plus they delete all records of the debt and the collections from your credit report.

This is illegal under Federal law. I'm not saying there aren't companies that will do it, but it is a clear violation of the FCRA.

Also, a collector or debt buyer has no way of getting the original creditor to remove their tradeline, and I have never heard of a bank or other major creditor accepting payment in exchange for deletion.
posted by [expletive deleted] at 6:41 PM on November 13, 2013 [2 favorites]


[expletive deleted]: "it is a clear violation of the FCRA."

Some 40% of all credit reports have at least one error on them. Most reporters could hardly care less about the FCRA, at least if you go by their error-riddled reporting.
posted by wierdo at 6:45 PM on November 13, 2013 [2 favorites]


Doesn't this then mean they have a massive tax bill instead?


RJ takes the position - and it's probably correct - that the discharge is a gift, and since gifts are excluded from income there's no tax consequence to the debtor.

it is an open question, I think, whether this is a permissible activity for a 501(c)(4), but that's a separate question.

re efficient form of aid: certainly the point of this is to generate PR, although one wonders if its an efficient way of generating PR. people that already thought Occupy was the bees knees are certainly excited about this, but I don't see it moving the public policy needle much. ie, its about as effective as occupy itself, which is to say not at all.
posted by jpe at 7:00 PM on November 13, 2013


People who have the kind of assets to settle their debts in lump sums sometimes have to worry abouttaxation on forgiven debt. From my experience with it, I believe that the vast majority of the holders of that kind of debt are insolvent, and if you're insolvent you don't end up paying tax on it. But that's in general; the notion of it being a gift rather than a business expense is also, I think, legit. I'm just mentioning because I find that people are usually way more paranoid about having to pay tax on old debts than is really warranted.
posted by Sequence at 8:39 PM on November 13, 2013


Get rich scheme:

1. Borrow $1,000,000
2. Let it go to collections
3. Buy the debt via a 3rd party for $250,000
4. Enjoy $750,000 profit.
5. Repeat.


Billionaire time-share mogul David Siegel has already used a similar tactic to his advantage:
"As Siegel tells it, he owes the bank $18.5 million, and he can't pay. But the bank won't write down the loan. So Siegel tapped a third-party to approach the bank about buying the loan, which they were able to do, for a mere $3.5 million. And then Siegel bought his $18.5 million loan back from the third-party at barely more than a sixth of its original value."
The basic concept is sort of a Saul Goodman kind of thing -- you have to know a guy who knows a guy.
posted by compartment at 8:49 PM on November 13, 2013 [6 favorites]


Why is legal for debts to change hands? I genuinely don't get it. I mean, I get how the concept works, but I don't get what the justification is.
posted by threeants at 11:30 PM on November 13, 2013 [1 favorite]


I wish more people understood their rights regarding debt collectors. They're scum and will lie lie lie all the live long day. My clinically depressed, some what recently suicidal uncle was bullied by one collector even though he was undergoing bankruptcy proceedings. They weaseled a check out of him, which bounced, then told him he would go to jail for the bounced check (Not true on checks written to debt collectors) But it scared him so bad the he called my mom, his sister, and she ended up paying it on her credit card. I found out all this after it happened, so I was no help. But the ease in which debt collectors lie is baffling. And while there may be legal ramifications, the most vulnerable people don't know them, so there is nothing to dissuade collectors from lying out their ass.

Medical collections are worse in many ways because the billing is so convoluted that you don't often know something is even owed until you get the collection notice. As someone with a lot of medical problems and frequent doctor visits, I have no idea if I'm paying this twice, in triplicate or not at all. I've caught a few attempts at double billing, but also had bills I swore were paid, but once the collection notice came, realize it was just so similar to another bill that I had no idea. Plus I'm on a payment plan, which will roll additional bills into the plan, but only if you call on each and every bill and ask them to.

So I hope this makes some headlines and educates people about the debt shell game going on. And maybe research a bit to find out what is and isn't allowed.
posted by [insert clever name here] at 1:20 AM on November 14, 2013 [2 favorites]




Thank you so much, odinsdream! Glad I wasn't the only one who found that very weird.

I'm not entirely content with their answer, among other things because they seem to be under the impression that the same CPA can both prepare their financials and audit them, which is, as someone who was in school during the Enron years, enough to make me go NO NO NO NO NO. But hopefully they're making progress in the right direction.

I do kinda feel like the main problem is that they had a big idea but were, like many startups, not really prepared for what that big idea was going to mean as far as logistics.
posted by Sequence at 6:13 AM on November 14, 2013


Why is legal for debts to change hands? I genuinely don't get it. I mean, I get how the concept works, but I don't get what the justification is.
posted by threeants at 11:30 PM on November 13 [1 favorite +] [!]


Well at a fundamental level all money is a kind of tradeable debt. So its actually a very very old idea that a debt could be bought and sold for a value other than the face value.
posted by mary8nne at 6:30 AM on November 14, 2013


pbrim: If you are dealing with a bill collector, be sure to ask for "Pay For Delete" which means you negotiate an amount that they take as payment in full, plus they delete all records of the debt and the collections from your credit report.
[expletive deleted]: This is illegal under Federal law. I'm not saying there aren't companies that will do it, but it is a clear violation of the FCRA.

Also, a collector or debt buyer has no way of getting the original creditor to remove their tradeline, and I have never heard of a bank or other major creditor accepting payment in exchange for deletion.

Wait, if you pay a collection agency and they don't remove it from your credit report, what is the incentive to ever pay them? Doesn't it drop off your report (or not count towards your score) after 7 years anyway? Why not wait it out? Asking hypothetically for a friend.
posted by desjardins at 7:08 AM on November 14, 2013 [2 favorites]


As odinsdream pointed out there are some pretty serious allegations against Rolling Jubilee ranging from outright scamming to utter incompetence, although it is a brilliant idea.

According to the NakedCapitalism article from Yves Smith which was also covered by The Billfold.

Rolling Jubilee’s Failure to Live Up to Its Plan of Action and Promises of Transparency

According to its website, Rolling Jubilee has raised nearly $617,000. It had hit the $500,000 mark by November 2012. Its main site declares (emphasis ours):

All contributions go to The Rolling Jubilee Fund, a non-profit 501(c) (4) organization with the exclusive mission of buying and abolishing debt. 100% of the money raised will go to the process of buying and abolishing debt (a process that includes some associated costs such as paperwork, accounting, and legal fees). The volunteers managing the fund receive no compensation. In the interest of transparency, a full accounting of funds received and spent will be reported on our website.


I guess if you want to be glass half-full about it, giving $400,000 out of over $600,000 towards the cause is better than nothing. I'm curious to see what happens when someone starts digging to figure out where the rest of this unaccounted-for money went.
posted by forkisbetter at 8:11 AM on November 14, 2013


Doesn't it drop off your report (or not count towards your score) after 7 years anyway? Why not wait it out?

The collection agency will generally sue before the statute of limitations expires. If you try to hide out or leave the country, the statute of limitations can be tolled until they find you again. A better idea would probably be to file for bankruptcy.
posted by bradf at 8:12 AM on November 14, 2013


I like the discussion here. Everybody's asking questions that I want answered.
posted by Jacob Knitig at 8:17 AM on November 14, 2013 [2 favorites]


I'm curious to see what happens when someone starts digging to figure out where the rest of this unaccounted-for money went.

They're still in the process of working that out but they do have more cash that is going to go to paying off debt. Naked Capitalism took some valid concerns (lack of website updates and forward-facing information) and some pretty cranky rants some of which weren't actually accurate and conflated them into that article. I should probably just leave this since the RJ folks are friends, but I don't find the Naked Capitalism attack to be a useful critique of RJs actions.
posted by jessamyn at 8:24 AM on November 14, 2013 [1 favorite]


I mean, more than 30% of the donations given (with the express promise from RJ that it would go 100% towards buying debt) are currently not accounted for either on the RJ website or in news stories covering the organization.

I don't see that as a cranky rant, but as an extremely valid question.
posted by forkisbetter at 8:37 AM on November 14, 2013


Wait, if you pay a collection agency and they don't remove it from your credit report, what is the incentive to ever pay them? Doesn't it drop off your report (or not count towards your score) after 7 years anyway? Why not wait it out? Asking hypothetically for a friend.

The status of the tradeline is updated from "COLL" (in collections) to either "SIF" (paid in full for less than full amount) or "PIF" (paid in full). This can have a very large impact on your credit score if this is your only open collections account. Also, per the FCRA, paying an account that is in collections will not re-age a tradeline unless you bring it current and subsequently default again, so a SIF/PIF falls off on the same timeframe.

Of course, if your debt is reduced to judgment, it becomes a public record, and the clock starts again.
posted by [expletive deleted] at 8:58 AM on November 14, 2013 [2 favorites]


I've looked over the agreement for the big May 2013 purchase.

The terms and price for this debt suggests to me that Strike Debt know what they are doing. The only terms of this purchase that are unfavorable to the purchaser are the availability of documentation--which only really matters when suing, and more importantly, the lack of a statute barred condition for the 90 day putback period. Given the age of the accounts as described in the summary, and the distribution across 45 states, I'd wager up to 25% of these accounts are already statute barred (I'm sure the seller concentrated this portfolio a little in short statute states, it wouldn't be so cheap otherwise), so the removal of the open collections tradeline would be the major effect of this relief. Good for someone with a 2 year old debt, but not as useful if the debt is 6 years old. The breakdown they posted is 16% around 1 year old and 84% 2-6. This leaves a lot of uncertainty in the distribution, but assuming the mean and median is around 3 years old, a $0.02 purchase price on the dollar is a good deal.

I don't doubt they are doing a tremendous amount of good with this money. Personally, I'm reminded of a call I listened to as a compliance officer, where the woman who's debt we had settled was crying because she could finally open a bank account.
posted by [expletive deleted] at 9:33 AM on November 14, 2013 [1 favorite]


Would it be possible to set up a nonprofit whose sole function was to purchase debt on the secondary market and turn around and offer it to the individual debtor at cost (with maybe a small markup to cover administrative stuff)? I realize it's complicated, but it seems plausible on the surface.
posted by that's candlepin at 11:44 AM on November 14, 2013 [1 favorite]


Isn't part of the problem the secondary market is a bit of a closed shop and they'll refuse to sell you the debt if they get a whiff of your real intentions.
I recollect reading you have to pretend to be a proper debt-collector in order to get your hands on the debt.
posted by fullerine at 11:48 AM on November 14, 2013


that's candlepin, just going from what I've seen, I don't think it'd be trivial to cover the administrative stuff. Finding people who've been hiding from debt collectors for a long time is easier said than done, to start with. Then, some portion of those people will not even have the cash to buy it from you at cost, so what do you do with those debts? Whether you forgive them or not, at that point, they go into the overhead. Then the accounting and processing payments and everything for a ton of individual account holders coming in one at a time instead of processing them all together as one big chunk. If it was that easy, then the companies would already be falling all over themselves to do it with just a slim markup and make their money on volume; their settlement offers don't go that low and there's a reason for that.

There's a lot of folks who, even if you offer to take their $10k worth of debt down to $100, they don't actually have $100 to give you, and you really can't go in and only buy the debts of people who have money.
posted by Sequence at 1:01 PM on November 14, 2013


That's candlepin, a savvy non-profit that ran really lean might cover administrative costs by marking up the debt 400% or so. Remember that this org would have to register as a debt collector in every state. They will need to post a large bond for most of these licenses. They will need to get general liability insurance. They would need to pay skiptracers, who will probably only find 80-90% of files. Of the ones found, 10% will be deceased or bankrupt. 2-5% will have SSN irregularities or evidence of fraud. Of the files that are left, there would still be people who would be unable or unwilling to pay. The people who pay would need to cover the cost of those accounts plus their share of the overhead. Forgiving the debt outright is the more practical option.

Fullerine, while original creditors might take umbrage at this, other debt buyers would be happy to skim the cream off the top and sell the rest to Rolling Jubilee. In fact, the purchase agreement I linked above shows that the seller knew Rolling Jubilee's intentions, and also that the seller is another debt buyer, making this a tertiary purchase. Section 11: Retrieval of Account Documents states that the seller will mark up fees for document requests 25%, making it clear that the debts are originated elsewhere. Also, under the next section titled REPRESENTATIONS AND WARRANTIES OF PURCHASER:
Purchaser represents and warrants that its sole and absolute business purpose is to provide a charitable relief to consumers across the United States of America by lawfully acquiring the unpaid legal obligations of consumers (“Debt” or “Debts”) and subsequently extinguishing those Debts owed by the consumer by eliminating any further obligation with respect to the specific Account purchased by the Purchaser.
posted by [expletive deleted] at 2:00 PM on November 14, 2013


Would it be possible to set up a nonprofit whose sole function was to purchase debt on the secondary market and turn around and offer it to the individual debtor at cost (with maybe a small markup to cover administrative stuff)?

I have a hard time seeing how this is charitable at all. The class "people that have debts in collection" may have large intersection with the class of indigent people, but I'm living proof that it's not a perfect intersection, and my hunch is that it's not even close to a majority intersection.

So the question becomes: is randomly throwing money at strangers charitable or for the social welfare? And it's hard to see how that can be answered in the affirmative. Or: IMHO, if Rolling Jubilee wants to throw money at people, fine, but they shouldn't be tax exempt.
posted by jpe at 2:59 PM on November 14, 2013


Charity is actually my middle name, it means helping those in need (who you're not obligated to help because they're your family or something). Need is a broad category. The 501(c)4 guidelines are really clear that organizations have to be committed to social welfare and guidelines are given. Furthering the common good by getting people out of debt that they've been unable to pay seems like a slam dunk "social improvement" to me. It may not be your thing (I have charities that I don't agree with from a "that seems like a stupid thing to do with money/time" perspective) but this seems in line with how the IRS requires that 501(c)4's act.
posted by jessamyn at 3:07 PM on November 14, 2013 [6 favorites]


Charity is actually my middle name...

Ooooo ice burnnnn.
posted by odinsdream at 4:08 PM on November 14, 2013 [1 favorite]


I have a hard time seeing how this is charitable at all. The class "people that have debts in collection" may have large intersection with the class of indigent people, but I'm living proof that it's not a perfect intersection, and my hunch is that it's not even close to a majority intersection.

So the question becomes: is randomly throwing money at strangers charitable or for the social welfare? And it's hard to see how that can be answered in the affirmative. Or: IMHO, if Rolling Jubilee wants to throw money at people, fine, but they shouldn't be tax exempt.


Well, this is a criticism of Rolling Jubilee fullstop, isn't it? How do they know those who have their debts written off are "deserving" rather than "undeserving"? I daresay, however, that the longrun goal is to undermine debt itself (or at least harmful debt with little social good, such as medical and consumer debt), and making that more sustainable would be worthwhile.

Though I understand from answer already given that it would be hard or could not be done.
posted by Thing at 8:21 PM on November 14, 2013


And then when they get your check for six bucks, they make it $60 because they're fucking scum. And they will have inflated the $300 to at least $600 with various fees and charges they're not actually legally allowed to charge, again, because debt collectors are fucking scum.

In the papers this morning half of Dutch debt collectors rip off debtors through illegal charges. (Dutch, obvs)
posted by MartinWisse at 11:34 PM on November 14, 2013


"It may not be your thing (I have charities that I don't agree with from a "that seems like a stupid thing to do with money/time" perspective) but this seems in line with how the IRS requires that 501(c)4's act."

Are they a c4 or c3? Donations to c4s aren't deductible anyway.
posted by klangklangston at 1:00 AM on November 15, 2013


Here's a piece that Astra Taylor wrote for Hazlitt about the process.

Are they a c4 or c3?

They're a c4.
posted by jessamyn at 9:35 AM on November 15, 2013


Well, this is a criticism of Rolling Jubilee fullstop, isn't it? How do they know those who have their debts written off are "deserving" rather than "undeserving"? I daresay, however, that the longrun goal is to undermine debt itself (or at least harmful debt with little social good, such as medical and consumer debt), and making that more sustainable would be worthwhile.

Though I understand from answer already given that it would be hard or could not be done.


I think there's been some confusion in the thread--my understanding is that when Rolling Jubilee buys debts, it's not buying individual accounts, but rather a whole portfolio full of whatever debts a lender is selling off to collectors (usually at this point, the bank has already written off the cost of the lost repayment.) So there's no practical way to use this method to target an individual's debt, or even a class of debts, as some have suggested (seriously and jokingly) in the thread.

But yeah, I think the bigger goal here is to raise awareness about how lending and debt work--at a certain point, the bank really doesn't care whether you can ever pay them back, and they've already absorbed the cost--but they have no qualms about selling your address to Hitter Steve's Collections Agency to make back a few pennies.
posted by kagredon at 4:58 PM on November 15, 2013


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