The Occupy Wall Street movement has sustained many offshoots, including the high-level wonkery of Occupy the SEC and the direct-action foreclosure defense of Occupy Our Homes. Now another offshoot will attempt an innovative solution to the private debt crisis, which has been welling up in America for decades.
This campaign began back in September with Strike Debt, which started with activists handing out 5,000 copies of what they called the “Debt Resistor’s Operations Manual,” a guide for debtors on how to navigate the often-sleazy world of debt collection and credit reports and bankruptcy processes. Providing this knowledge gave power to those drowning in debt on how to resist.
The next wave of this is a program called the Rolling Jubilee. Here’s how they explain it at their site:
We buy debt for pennies on the dollar, but instead of collecting it, we abolish it. We cannot buy specific individuals’ debt – instead, we help liberate debtors at random through a campaign of mutual support, good will, and collective refusal.
The Jubilee begins November 15 with “The People’s Bailout,” a variety show and telethon in NYC. All proceeds will go directly to buying people’s debt and cancelling it.
Let’s just explain technically how this works. Most debt is not held by the lender, but securitized, as we see with mortgages. When that debt goes bad, whether it’s student debt or housing debt or credit card debt or medical debt, the purchasers of the security want to get whatever they can for it. So they sell the “distressed debt,” often to debt recovery specialists who then hassle and harass the debtors in an effort to try and make money on the debt they purchased. Distressed debt gets purchased for pennies on the dollar. So the plan here is to basically buy up this debt, and instead of trying to collect it, the Rolling Jubilee will just cancel it. David Rees, an author and organizer with the Rolling Jubilee, explains that in a test run, the group purchased $14,000 of distressed debt for $500 and forgave it. “If you’re a debt broker, once you own someone’s debt you can do whatever you want with it—traditionally, you hound debtors to their grave trying to collect,” Rees wrote. “We’re playing a different game. A MORE AWESOME GAME.”
Obviously you magnify the purchasing power when buying and canceling distressed debt. This certainly extends the benefit a charity-type program can provide. Obviously, even this 28:1 bang-for-the-duck won’t put a heavy dent in the trillions of dollars in private debt in the system. But it’s a decent enough way to begin the process.
One problem is that distressed debt only hits a particular segment of society, which could be the most vulnerable, but which could just be people who are really good at welching on debts. Rolling Jubilee really has no way of knowing; they’re just purchasing packaged debt. In fact, the individuals who get the debt relief will not actually know they have received it. They just won’t get the harassing calls from debt collection agencies.
One salutary side benefit here is that it will give competition to the debt collection agencies on the purchase of debt. These are some of the worst companies in the world, profiting off frightening and harassing people. The Consumer Financial Protection Agency has been investigating the practices of debt collectors. They deserve to have some stress on their business model.