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.
mathbabe 
Debt Resisters’ Operation Manual is useful even if you’re not a debtor. I had a hospital billing service fail to credit my account for a $90 lab fee that I paid the day after I got the bill. Even after I sent them proof in the form of a copy of my cleared check, they were relentless in hounding me (by mail, though, not by phone). It took almost a year and got so ridiculous — the billing agency threatened legal action to collect $90 — ha –that I finally turned to the Manual, borrowed language from its form letters, including threatening to report them to the Atty General for trying to collect a non-existent debt. Which worked, although when they finally credited my account, they didn’t back date the payment to the actual date the check cleared.
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I am sorry to hear about your experience.
Clearly, the financial and accounting systems used to run things now out-scale the human beings they were meant to serve. This is where my logic breaks down — clearly these tracking systems were created to serve legal entities, NOT human beings. We are, I think, an endangered species. There is no turning back.
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I choose to be more optimistic (most of the time). But your point about the lack of human-scale systems is well taken. My ordeal was minor, but imagine that happening to someone struggling to stay on top of basic living expenses, and paying their medical bill on time, who doesn’t have the time or other resources to respond to that ginormous bureaucracy. That person could have easily ended up with their account showing up in arrears, and been haunted by debt collectors over a $90 error.
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“ask for proof that they own the debt and how you spent it” — can I substitute “incurred” for “spent” here? Otherwise I don’t understand what’s meant here.
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Yeah, should have said “how you spent the money”. The point is they sometimes just have a super incomplete record, and you should test them on it.
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“scavengers living off rubbish piles”? would say thats half correct. more like “half-living carcasses”. there was recent news on this Americans In Debt: 35 Percent Have Unpaid Bills Reported To Collection Agencies…. the economic system is darwinian at times, sometimes even worse than darwinian. economists have not drawn many parallels to biology but maybe that is changing. and the study of parasites in biology seems somewhat in its early stages. for an amazing writer on that read Carl Zimmer.
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Federal Debt Collections Practice Act protects one. The relevant section of the FDCPA is section § 809 Validation of debts [15 USC 1692g]. It is reproduced here in full:
(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing —
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(a) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.
(b) The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
Demand a copy of the original billing, don’t just dispute the debt.
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