Hmmm. I… hmmmm.
This is brilliant, considering the goals of Occupy: use donations to buy customer debt for cents on the dollar, then just… forgive the debt. Then get the people whose debt is forgiven to donate to the Rolling Jubilee system (presumably in gratitude for no longer owing far more) and the cycle repeats.
This all depends on the pennies/dollars ratio that you can get, obviously, but by all accounts the collection agencies that buy consumer debt (and then harass the living daylights out of the debtor) pay a tiny fraction of the original debt. The Rolling Jubilee website is using a ratio of 0.05: a shiny nickel buys a dollar’s worth of debt, which is astounding.
A ginormous monkey wrench into the debt system would be to buy the debt, then sell it directly back to the debtor at the reduced rate.
The cycle of incentives this sets up is remarkably perverse, in a gleefully anarcho-screw-the-system kind of way, not to mention the moral hazard issues. It may very well be unsustainable in the long run, especially since pouring money into the debt purchasing pot will inevitably change the supply/demand ratio, raise the price of buying debt, making the solution less palatable… but think of the short run boost it could give the economy. Assuming of course the capital freed up by no longer servicing debt fees and interest is plowed straight back into the economic system, which if the focus is on the cheapest debt available (that with little hope of recovery) may be a stretch.
And at the same time, if this is a charity issue, that debt with little hope of recovery is in all probability the debtor that most needs charitable forgiveness. And here’s the kicker: the debt they are starting with is medical debt. Brilliant, since it sidesteps the moral hazard issue: it’s not like the people involved are going to run out and get butt implants now that the debt on grandpa’s bypass surgery has been forgiven. A disincentive to buy insurance? Possibly. But tie this to the Affordable Care Act’s requirements to buy health insurance, and that disappears too.
I love these people for thinking about this.
Now, if the goal of the movement is to achieve real change in the financial institutions, then this is particularly pointless. This is debt with little hope of recovery that the banks are already willing to sell for cents on the dollar to collectors, and technically they would be perfectly happy to sell it to someone else: no more skin off their back than they had lost already, and therefore it gives them zero incentive to change.
But still interesting. Lots of pros and cons to think about. That’s what the internet is for. What do you think?
- The People’s Bailout: Occupy is forgiving personal debt (kottke.org)
- Why Occupy’s plan to cancel consumer debts is money well spent | Charles Eisenstein (guardian.co.uk)
- Rolling Jubilee: Occupy raising money to buy up, and wipe out, debts (boingboing.net)
- Occupy to Buy Up and Relieve People’s Debt? (alternet.org)
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