Rolling Jubilee: Occupy raising money to buy up, and wipe out, debts

David "How to Sharpen Pencils" Rees describes the Rolling Jubilee, a project from Occupy Wall Street to buy up, and zero out, other peoples' debts:

Now OWS is launching the ROLLING JUBILEE, a program that has been in development for months. OWS is going to start buying distressed debt (medical bills, student loans, etc.) in order to forgive it. As a test run, we spent $500, which bought $14,000 of distressed debt. We then ERASED THAT DEBT. (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. We’re playing a different game. A MORE AWESOME GAME.)

This is a simple, powerful way to help folks in need — to free them from heavy debt loads so they can focus on being productive, happy and healthy. As you can see from our test run, the return on investment approaches 30:1. That’s a crazy bargain!

Now, after many consultations with attorneys, the IRS, and our moles in the debt-brokerage world, we are ready to take the Rolling Jubilee program LIVE and NATIONWIDE, buying debt in communities that have been struggling during the recession.

We’re kicking things off with a show called THE PEOPLE’S BAILOUT at Le Poisson Rouge on Thursday, November 15. It will also stream online, like a good ol’-fashioned telethon!

I just put in $100, which will erase $3000 worth of someone's debt.

The People’s Bailout

• [lysdexia]

  The comments section for the article are depressing as hell. 

  I don’t understand the attitude. I think this particular group of Occupy people are right in there with Pro-Life people who adopt crack babies: I may not agree with them on much of anything, but they are putting their money where their mouth is. It’s hurting no one, and may just help. That’s to be lauded in my book.

  • [ChickieD]

    Which article? All I saw was a link to a blog post and then a list of people who had shared the post on various social media.

    • [Joe Foster]

      http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9666748/Occupy-Wall-Street-campaigners-buy-up-debt-to-abolish-it.html

• [Dean Putney]

  I’m gonna go take out a big fat loan and buy my debt so I can turn into a financial ouroboros!

  • [mccrum]

    But if you spend $100 to pay off $3000, you’re soon going to be making money!

  • [Joshua Bardwell]

    This was my first thought. If the going rate on distressed debt is 20:1 to 30:1, why is it that typical debt-holders will only offer, at most, perhaps a 2:1 markdown to the actual debtor? But to a debt collector, they’ll let it go much cheaper? Why?

    • [heph]

      Because the collector is fluid and Pays up front.

      Normaly you make some red numbers if you are after debts like a student loans.If you are a bank its to much of an hazzle to follow these debts. Debt collectors do that stuff in bulk and on theyr own risk. Thus you have no employees to pay on this and the whole administration process. Another benefit is that you get some money back that you can reinvest.

      The debt-collector has the risk that none of his bought debts bears fruit but since they do it on bulk and people are guilable like hell (thus paying even if they dont have to or if they and theyr families are preasured in some way) they are zero-sum if one out of ten or so pays.

• [Matthew Lawlor]

  No, no, don’t do this.  Seriously, don’t do this.  Giving money to people who buy up large quantities of debt is contributing to the worst kind of vulture capitalists.  Worse, if this becomes popular it will drive up the price of this debt, and make the debt holders even richer.  
  This maybe makes some sense for student loan debt, which cannot be discharged through bankruptcy, but for everything else you are just giving more money to debt holders than they would expect to get before their victims go bankrupt.  Given the cheap, cheap price of the debt people are buying, the creditors are not expecting many of the debtors to pay up, so you are perhaps giving them an unexpected boon.  

  Also forgiven debt can be taxed as income! (not mortgages, in most cases)
  http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-

  • [Bryce Anderson]

    The way that the IRS learns of your cancelled debt is that the bank files a 1099-C.  According to the FAQ on the rollingjubilee website, they don’t have to file the 1099-C, because they’re not making any money off the debt cancellation. So in this case, no, it won’t be taxed as income.

    They can’t handle student loans, because there isn’t a secondary market for them.

    I’m not entirely sure how the secondary market for these debts works, but if they’re buying the debts fresh (that is, buying it from the hospitals rather than from debt collection agencies) then they’re padding the bottom lines of hospitals, not collectors.  I suspect that a lot of hospitals would rather sell the debt to something like RolJub rather than to the vultures, if they can get a similar price for it.  Hospitals are always strapped for cash.  They don’t have much choice but to sell these debts; an income stream is an income stream.

• [Jon Bakos]

  If this starts happening more, won’t the current debt-holders start jacking up the price that they’ll let it go for?  I’m glad this is being done, but it seems like a limited-time proposition, until the collectors realize they can still cash in.

  Looks like Matthew Lawlor was posting the same thing as I was, only more thought-out-like :)

  • [heph]

    It could bubble i think. As long as OWS buy debts they disturb the market. The debt get more expensive. At some point you break the break-even-point for the debt-collectors thus the “risk” behind the debt gets to high for its price.

    Its much like scratch lotery just the debt-collectors have the odds on theyr side atm.

    So if OWS buy now and stay long enough to appear as if they buy a debt for say 1.5 times of the professional collector. This means the collector cant compete any more since he actualy collects less then he pays for those debts. So the collector goes out of buisness. If now OWS stays long enought to push a significant amount of collectors out and then removes itself from the market you have to many debts for not enough collectors. The remaining ones wont have enough cash or other liquidities left (say Gold, ART, drugs …) to buy all of those.

    After a time a debt voids (atleast here if you dont send reminders etc. etc.) thus you could just void tons of debts if there arent enough debt-collectors with enough cash to buy those debts in time.

  • [Selkiechick]

     Even if it is a limited time proposition, and they can only clear some debt, and shine a light on the current banking practices, I still think it’s well worth doing.

• [foobar]

  This is symbolically interesting, but I think it’s actually counterproductive. The debt holders aren’t going to sell debt they think they can make a profit on, they’re going to sell the debt they’ve given up collecting.

  Wouldn’t it be more productive to hire intervenors who know the law to help hold collectors to the letter of the law? For example, forcing them to honour instructions not to contact debtors by phone or other illegal practices.

• [ZikZak]

  This approach can’t scale.  It may be nice for a tiny minority of people who win the debt cancellation lottery, but the claimed goal is to eliminate unfair debt on a widespread scale, and this strategy can’t deliver on that.

  The reason is that it accepts as a basic premise the legitimacy of the free market, and the framework of owning and trading other people’s debts. This framework itself needs to be abandoned, our only hope is for people to simply refuse to pay their loans, to unilaterally cancel their own debt.

  So here’s what would happen if this was deployed on a wide scale:  An increase in debt purchasers would drive up prices for debt.  At first, OWS would only buy the “bottom of the barrel” debts that nobody else wants (presumably because the debtor was never going to pay anyway, which is another reason to question this approach).  But once those are bought up, OWS needs to outbid actual debt collectors in order to continue cancelling debt.  This raises the price further, and the higher OWS is willing to bid and the more debts they buy, the higher the price gets.  And remember, the original owner of the debt (the bank or finance corporation) will only ever sell the debt at a price which they deem favorable.  Before long, OWS is paying huge, non-negligible sums of money to the very entities they oppose, at rates which those entities consider profitable.

  The worst part is that through the twisted logic of capitalism, buying up debt this way actually adds incentive for banks to create more debt, much like the original credit bubble did.  The more people are willing to buy the debt, the more debt the banks will want to have on hand to sell.

  Debt slavery and crony capitalism cannot be defeated through clever buying and selling.  It can only be defeated when we refuse to play by their rules altogether.  The game is stacked against us, pretending otherwise just gives them more power.

  • [PortlyDyke]

    While I agree that the best strategy (long-term) is to simply walk away from the debt/debtor structure, I think we have to face the fact that we are in a transitional phase, and there are people — RIGHT NOW — who are standing with a foot on both sides of the chasm. 

    If, as a movement, we cannot attend to the immediate needs of the immediately distressed while we continue to focus on the long-term strategy of departing the dysfunctional system altogether, my belief is that we would be practicing the same old same old that brought us to this spot.

    All truly functional systems address both long-term health and short-term health. 

    This may be a very short-term relief, if, as you say, the debt system simply gets savvy to this new twist and adjusts to work it to its advantage — on the other hand, the shift in consciousness of a small group of “relieved” debtors from the idea that “debt is inevitable” to “Hmmmm.  Debt is NOT inevitable — we could work together to make it irrelevant” — is not irrelevant.

    All great movements have begun with a mind-change that filters through the group consciousness.  This is a potential consciousness-changer.

  • [Ah El]

    I don’t see any problems with this. The professional debt collectors won’t fork out unlimited sums to buy debt, because contrary to what OWS wants, they actually plan to collect those debts, thus they have to keep in mind they might not be able to get back what they paid – simply because there might be debts which can not. be. collected. It sure depends on who folds first / runs out of money, but it makes this kind of deals surely less attractive.OWS, on the other hand, doesn’t care if they spend more than they get back – because no matter what they do, it’ll always be the case.Regarding the banks and their incentive to create more debt – nope. They never get as much money back through selling debts as they originally invested, that’s how these deals work. At most they might get back what they shelled out, without interest etc. But that’s not what they want, else they could throw away their business model.

  • [Bryce Anderson]

    I would say that it cannot scale because people won’t donate enough money to make a sizable dent in overall debt.  But if we take for granted that they could collect enough to influence the market, I don’t think that will be bad.

    The price for these debts will only rise to the point where the commercial debt collectors can’t compete.  Once there’s no other buyer on the market, the debt originators (hospitals, businesses, etc.) will presumably take whatever they can get.  Which is pretty darn low once the debt-holders have given up collecting on their own.I don’t think that buying up debt at pennies on the dollar gives the originators much incentive to create debt.  It’s a losing investment.

• [oasisob1]

  A quick glance looks like it was reblogged from wilwheaton more often than from howtosharpenpencils. Damn, that guy is influential!

• [Navin_Johnson]

  At the very least it shines a light on the dark scummy market for debt. That alone seems like a positive.

• [elialbert]

  for all chicago peeps, the ribcage is hosting a stream of the jubilee.

  http://www.facebook.com/events/430245497030636/?fref=ts 

• [cfsteak]

  Registered in Panama ?
  http://www.networksolutions.com/whois-search/rollingjubilee.org

  Like the idea, I  would like to make sure money goes where it’s suppose to go, 

  • [EH]

    I can’t tell what flavor of ad hominem you’re attempting to evoke here.

    • [cfsteak]

      I was thinking someone might have been trying to phish on with the occupy name ie. Panama registration but I now see I was mistaken, The strikedebt.org is NY registered and links to RJ.org ,a few days ago I was at the show announcement site and was kind of shocked they didn’t have a donation link 

• [Bokonon]

  Can anything be done once your student loan goes to the IRS

• [petr]

  I don’t know about the US but in Canada, there is a 6 year limitation on debt (the exception being debt to govt).

• [Thorzdad]

  How does one manage to get their debt in RJ’s sights? My son is steadily going downhill due to crippling student debt and would benefit greatly by this.

  • [cjporkchop]

     Unfortunately, RJ can’t target specific debts. It’s completely random which ones they buy.

    • [Bryce Anderson]

      I think I’d be happier with this program if they went straight to the hospitals and said, “Young Timmy, don’t sell that debt!  Call 1-800-ROLL-JUB instead!  You’ll get the same price for your deadbeats, without ruining lives!”  I don’t understand how this secondary market works at all, and I fear some of this money could improve the bottom lines of secondary debt collectors.  If someone has better information about how this works, I’m interested.

• [ocker3]

  An excellent start, however I would urge them to also work on funding income-management training for the people whose debt they’re forgiving. I’ve struggled with debt in the past, and at times family members have chipped in to help, but I haven’t gotten any serious debt/income management skills, so while I don’t struggle like I used to, I still have some debt that I could have paid off if I worked at it more/better. I bet many people who will be helped by this project would also benefit immeasurably by some classes/training/information on avoiding debt, living within their means/adjusting expectations about what kind of life they can afford to live.

• [LordBlagger]

  Take the UK. Rich country isn’t it? Er, no, its bankrupt.

  All the time you hear about government debt, they conviently omitted the big debts. 

  http://www.ons.gov.uk/ons/dcp171766_263808.pdf

  Page 4. 4.7 trillion alone for the state pensions. [Even that is a figure fiddled down]

  Your share, 250,000 pounds, plus your mortgage, plus university debts, plus your own pension and no doubt pay for debt forgiveness for others. 

  The state can’t pay, because we can’t pay. We won’t pay. Why pay vast taxes just to pay debts to other people? After all, taxes should be for services.

  So Thorzdad is correct. What about debt forgiveness for children in the UK? 

  Ah yes, we don’t do that. They are going to be forced to pay for the errors and frauds of the politicians. Just like the 3rd world. 

• [Robo-Design]

  I wonder if this could help people who have ruined their credit score/rating and help rebuild their credit. Also, isn’t it becoming more common for employers to check potential employee’s credit rating and thus discriminate against them in hiring. Maybe it could  help those folks? Maybe we should just abolish the credit rating agencies.

  • [Matt Grimm]

    I have a feeling that if the credit-rating agencies disappeared, the credit-extending agencies would shrivel up alongside them.  In which case one would need the cost of a house in their bank account in order to procure one.  I’m renting now, but I sure don’t want to still be renting until I have a few hundred-thousand dollars in my bank account~

• [Ryan Griffin]

  I simply ignore the debt collector vultures..but if Occupy wants to buy up, say, ACS (Account Collection Services) debts, start with G, please.

• [desdinova]

  I think we should contact Matt Inman and the Oatmeal crowd. They always seem game for fundraisers for great causes.

• [Paul McReynolds]

  Even if this works for distressed debt (and I agree with earlier commenters that it can’t on a large scale), for a debtor to benefit, their debt has to be distressed. That means they have to default and probably dodge collection for a long time. So this can only really help people who’ve already had their financial lives destroyed by debt and, as others have noted, only on a smallish scale.

• [Bryce Anderson]

  I do hope that when they cancel someone’s debt, they send that person a message that includes how much money it cost them.  It might help to get donations from the people who will benefit most from the program.