Bad Paper by Jake Halpern
Yesterday I finished Jake Halpern’s new book, Bad Paper: Chasing Debt From Wall Street To The Underground.
It’s an interesting series of close-up descriptions of the people who have been buying and selling revolving debt since the credit crisis, as well as the actual business of debt collecting. He talks about the very real problem, for debt collectors, of having no proof of debt, of having other people who have stolen on your debt trying to collect on it at the same time, and of course the fact that some debt collectors resort to illegal threats and misleading statements to get debtors – or possibly ex-debtors, it’s never entirely clear – to pay up or suffer the consequences. An arms race of quasi-legal and illegal cultural practices.
Halpern does a good job explaining the plight of the debt collectors, including the people hired for the call centers. It’s the poor pitted against the poorer here, a dirty fight where information asymmetry is absolutely essential to the profit margin of any given tier of the system.
Halpern outlines those tiers well, as well as the interesting lingo created by this subculture centered, at least until recently, in Buffalo, New York. People at the top are credit card companies themselves or hedge fund buyers from credit card companies; in other words, people who get “fresh debt” lists in the form of excel spreadsheets, where the people listed have recently stopped paying and might have some resources to pull. Then there are people who deal in older debt, which is harder to collect on. After that are people who have yet older debt which may or may not be stolen, so other collectors might simultaneously be picking over the carcasses. At the very bottom of the pile, from Halpern’s perspective, come the lawyers. They bring debtors to court and try to garnish wages.
Somewhat buried at very end of Halpern’s book is some quite useful information for the debtors. So for example, if you ever get dragged to court by a debt collection lawyer,
- definitely show up (or else they will just garnish your wages)
- ask for proof that they own the debt and how you spent it. They will likely not have such documentation and will dismiss your case.
Overall Bad Paper is a good book, and it explains a lot of interesting and useful information, but from my perspective, being firmly on the side of (most of) the debtors, everyone who gets a copy of the book should also get a copy of Strike Debt’s Debt Resistors’ Operation Manual, which has way more useful information, and even form letters, for the debtor.
As far as real solutions, we see the usual problems: underfunded and impotent regulators in the FTC, the CFPB, and the Attorney General’s office, as well as ridiculously small fines when actually caught that amount to fractions of the profit already made by illegal tactics. Everyone is feasting, even when they don’t find much meat on the bones.
Given how big a problem this is, and how many people are being pursued by debt collectors, you’d think they might set up a system of incentives so lawyers can make money by nailing illegal actions instead of just leveraging outdated information and trying to squeeze poor people out of their paychecks.
The bigger problem, once again, is that so many people are flat broke and largely go into debt for things like emergency expenses. And yes, of course there are people who buy a bunch of things they don’t need and then refuse to pay off their debts – Halpern profiles one such person – but the vast majority of the people we’re talking about are the struggling poor. It would be nice to see our country become a place where we don’t need so much damn debt in the first place, then the scavengers wouldn’t have so many rubbish piles to live off of.