The Dignity Collectors, Colltales
If you’re an American resident, you may live in a household that owes $15K in credit card debt. If there’s a mortgage, its outstanding debt may be $150K. And if there’s one or more college students sharing your last name, then there’s another $33K each to be added to the bill.
Thus, without counting living expenses, just the fact that you live in the world’s richest country means that you’re also one of its most indebted human beings. No wonder that, amid a troubled economy, there’s a seemingly unbeatable business, reaping profits: debt collection agencies.
Now, the data above may be gathered via Internet under the grand total of 5 minutes or less. No need to add insult, reminding those who owe money how hard it is to even make it, either. There’s a crucial, invisible, component to this dire calculation, however, that most are unaware of.
And what average Americans don’t know about their own debt can actually ruin them, and it’s actually already doing it, stealthily. That is because, pinch your nose and hold your breath, no matter the amount that they owe, it has already being sold over for pennies on the dollar.
This devious aspect of consumer debt is the hidden side behind the moralistic rhetoric of Dickensian concepts such as ‘living within one’s means’ and ‘personal responsibility.’ For these are all sound and truthful only and for as long as those who owe money remain indebted.
The financial system, and in fact the entire economy, rest on the notion that debt is as much a factor of their liquidity as earned income and capital invested. But while for a government, the amount of debt is often an indication that it’s being used to build and provide infrastructure so to support the functioning of society, for an individual, such amount is indicative of his or her ability to receive more or less credit.
Contrary to concerns of the ultra-rich, it’s not a government’s highest priority to be debt-free, as long as it’s under a well-determined balance of spending and output. But for individuals, such condition is often the key to opportunities for material improvement and security. As it happens, unlike governments, one can’t issue debt to cover bills, so if you owe money, you need to pay it up, and fast.
Unfortunately, while a different set of rules applies to the wealthy, for the rest of us, falling into debt is often a condition that leads to even more indebtedness, and even social ruin. So we may struggle and skip meals to pay that bill on time, and not having to be burdened by higher rates.
That’s when that utterly non-productive but highly profitable industry comes into play: the collection business. Most people think that its job is to contact debtors on behalf of creditors, work some kind of plan, collect a commission for their service, and be on their way. Since there are plenty of people behind on their bill payment schedules, one would think that’s enough of a business. They’d be wrong, of course.
A debt collection agency’s main purpose is to purchase people’s debts, and they do so, legally, by pennies on the dollar. (To find out exactly how much less than the principal they’d pay for your debt is one of those Internet searches that will take way more than five minutes to know.)
But the moment they purchase your debt, you have, in practice, two creditors coming after you: that agency, and your original credit card company, or mortgage holder, or online gaming provider, or retailer of specialty bras, whoever you owe money to. While the agency may offer you a deal, your original creditor will most likely not, adding instead, a stiff rate and penalties for your non payment.
Now, at this point, while you scramble to sell stuff on eBay, or contact that distant relative/friend who owe you money, in order to come up with some to quench the monster, you debt is already on its way to change hands yet again. The agency that’s still sending you letters proposing you to settle, is also negotiating to sell that debt, again at a discount, to yet another agency, which may, you guessed it, come after you too.
You’d ask, how can this be possible, that one bill’s default has potentially generated two others, and you’re being charged the original amount even as third-parties are buying it at a discount? Well, it’s a loophole or it’s a way for the system to feed itself, even as it pressures you to stop feeding yourself, so to speak. Also, by now, you may be wisen up to the scheme and thinking, why can’t I buy my own debt for pennies too?
You can’t, as a matter of fact. Or you could, if you become, yourself, a licensed debt broker. We don’t know how are the job prospects on that market, so it’s up to you. But not all is greed and manipulation of people’s dignity by unseen forces in this world, and we can prove it.
Enter initiatives such as the Rolling Jubilee, a network of debtors that gathers donations and buys consumer debt the same way a collection agency would. Except that, instead of reselling that debt, while still pressuring the indebted to pay up, it turns around and abolishes it.
Debt forgiveness, in these hard-hearted times, may sound like a refreshing concept in the financial context, but it’s as ancient as the word jubilee itself. Christian and Judaic traditions already had a tradition to save a date, every 15 years, to forgive debt, free slaves, and generally be nice to god, who as everyone knows, was then as now prone to irrational, scorched-earth outbursts, which usually cost a, oh, but we digress.
The organization, one of the most practical ideas to come out of the Occupy Wall Street movement, is now approaching its second anniversary, and has abolished close to $15 million in mostly medical debt, which was purchased with less than 1 million in donations.
Of course, a non-profit initiative that’s supported by a network of volunteers and headed by an unpaid board of directors, has some gargantuan challenges to achieve its goals, not the least of them, fund raising and accounting. But there are other, even bigger obstacles to overcome too.
One is raising awareness and trust from a citizenry already pounded daily by collectors with dubious claims. Also, debt stats are daunting and it’d take hundreds of similar groups to deflate debt shared by 77% of households, or the approaching $1 trillion figure of college tuition fees.
Nothing compares though with the sheer power of the keepers of the status quo, in charge of making sure your debt is never redeemed but with yet more debt, and that your kids are on the hook for your defaults, and vice-versa, death be damned, unless you win the lotto or something.
Take student debt, for instance. What was meant to open doors of higher education to low income candidates has metastasized into the opposite of its original purpose. It’s now a cash cow manipulated at will by for-profit colleges. These multimillion dollar institutions, by the way, have de facto become the nightmarish overlord of contemporary American education, assuring that only those who can afford it gain access to quality education.
Rolling Jubilee’s stated purpose has always been to buy and abolish student loans, but their biggest chunk is government-guaranteed and not available for purchase. Private, unsecured student loans, however, are, and as the Rolling Jubilee set its sights on them, it also got in a collision course against the powerful lobby of the Apscu, the for-profit college’s trade group that’s been accused of unethical recruiting and advertising.
Speaking of powerful interests, Sallie Mae, the biggest private student loan corporation, manages close to $200 billion in debt for more than 10 million students, the bulk of it sold to debt buying companies. Naturally, one’d expected that it’d sell its loans to the Rolling Jubilee too, since it was created in the 1970s as a government-sponsored enterprise to boost demand for college education by American students.
But just as naturally, one would be dead wrong, for reasons that have little to do with the fact that, since 2004, it’s severed its ties to the government and it’s now publicly traded. Despite selling loans for as little as 15 cents on the dollar to two unnamed debt collection agencies, which as you now know, will gang up along with it on those students in default, Sallie Mae has officially refused to sell any of its portfolios to Rolling Jubilee.
Even if it had offered a clear rationale for its decision, it simply doesn’t make any sense even from a strictly business standpoint. Which is obviously besides the point: the very likely cause is, you guessed, Rolling Jubilee’s plans to abolish the debt.
Perhaps because of that, and other factors, Rolling Jubilee is searching for other ways to tackle the issue of crippling consumer debt that it’s mining hope of an entire generation to ever be in a position to contribute to this nation’s future. It says that ‘collective action is needed to address the systemic economic problems that force people into debt for basic needs like education,’ as reported by the Nation of Change paper.
At this juncture, one wonders what other organized forces in American society would be interested in joining the efforts to turn all 2 to 4-year public colleges free of tuition, as it’s the Rolling Jubilee’s intention, or fighting to reduce credit card fees, or mortgage rates and foreclosures. Certainly very little should be expected from the average millionaire Congress member. After all, this affects only 99% of the population.
But don’t be discouraged. While we’re not quite ready to unveil a homily on the virtues of debt forgiveness or a sermon on the irrevocable value of human dignity, we must add that no nation can prosper if it doesn’t give priority to the education and sheltering of its citizens.
The enslavement of an entire generation by ever compounding debt woes is not just deeply unfair and unsustainable: it makes as much sense as building a country full of millionaires who don’t feel obligated to build the infrastructure they rely upon to secure their wealth.
We were going to end this post with an ironic comment about the possible link between workers’ spending the least amount of vacation time, among industrialized nations, and our record levels of personal debt, but that may be in bad taste, considering that the majority of Americans simply have no time to relax and kick the wind. We leave you, instead, with the hope we can do something about it. Have a nice week. WC
It is amazing that half of our congress are millionaires. Who is standing for the other side these days?
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Our ability to vote and to speak up to power is still our strength to keep and the thing they fear the most. In the long run, though, only knowledge, critical thinking, education, shared compassion, will compensate for the uneven playing ground. Cheers
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The encouragement of debt by bankers, who actually expect everybody else to bail them out when their debts get too high, is leading the US, and Europe ever nearer to implosion, chaos and war.
Good post, Wesley, which everybody should read.