OWS begins random debt forgiveness

[Use it up, wear it out...]

Has anyone else seen this?

Seems to me like the main problem is - the debt forgiveness is random, and it seems quite likely many of these people will continue existing habits, and end up back in the same financial position.

[Erica/NWEdible]

Fascinating. It's a very clever solution to the problem, but I do wonder about the details...how do people *know* their debt has been forgiven if there is no name associated with the destroyed debt? Can banks withhold sales of debt to this organization if they become aware that the debt will be forgiven? Would banks have any incentive to do so? If there are really clearing houses where you can buy discounted debt for pennies on the dollar, why can't an individual buy back their *own* debt and forgive themselves? And perhaps most importantly, why is the entire website designed like one huge infographic?

[KGZotU]

how do people *know* their debt has been forgiven if there is no name associated with the destroyed debt? Can banks withhold sales of debt to this organization if they become aware that the debt will be forgiven? Would banks have any incentive to do so? If there are really clearing houses where you can buy discounted debt for pennies on the dollar, why can't an individual buy back their *own* debt and forgive themselves? And perhaps most importantly, why is the entire website designed like one huge infographic?

• AFAIK, there would be a name and address associated with the debt that would come with the purchase of debt. This organization would get all of the information that a debt collection agency would receive, and could send a letter notifying the debtor that they don't have to pay it back.
• Banks wouldn't withhold sale of debt to this organization maliciously. If the jubilee were to become notorious enough that it affected debtor's disposition to pay their creditors, I suspect those creditors would stop selling their debt at clearinghouse and start contracting it out to trusted collectors.
• You probably can't buy your own debt because you wouldn't see names until you purchase the debt.
• Infographics condense talking points. People come to the site with their minds already made, and the graphics quickly magnify the viewer's preconception.

I've heard that debt which sells for pennies on the dollar is really only worth pennies on the dollar; that $14,000 worth of debt forgiven was never going to be repaid in full. You can only buy distressed debt using this method. It is true that a competent collector would have collected more than the purchase price of $500. So in sum you are saving somebody some amount of repayment. Maybe your $100 buys $2000 worth of debt that someone would have otherwise paid $200 on? But of course there are emotional and psychological costs to consider too.

Owing consumer or medical debt to a collector only hinders you from acquiring more debt. With some uncommon exceptions, it doesn't have to affect your life in any other way.

[Nudelkopf]

Oh man, I had to google so much stuff before I realised what was going on.

What would be nice is if they could focus on medical expenses-related debt, and the like, rather than dumb debt.

[tooqk4u22]

In general I don't like the OWS movement - basically because they are a bunch of whiners and not really focused on the key elements of what the movement is about.  As somebody else said in on this forum - both OWS and Tea Party movements have some good points about things that need to be fixed but the execution of these groups hasn't been focused.

Setting that aside, I think this is a brilliant way to support the people of your platform, primarily because they are relying on private funds/contributions to make this happen.  If a lender wants to sell for pennies on the dollar then that is their choice (and probably means it was past due or they viewed it as uncollectable anyway) and again this is a private decision.  Technically an individual can buy back their own debt and foregive it - companies do it all the time, but banks don't have the administration to do it and if you have money to buy back a portion then why would they not want that and keep you obligated.  Typically when companies do it another company/investors is bringing the cash, which seems more like the OWS role. 

[destron]

I think this is a terrible idea for two reasons.

First, they do not know what kind of debt they are buying. Most likely, they are buying someone's credit card debt, debt that was leveraged to buy electronics, clothes, expensive trips to restaurants, luxury vehicles (indirectly), and other unnecessary junk. They are just clearing the way for new consumer debt.

Second, by the time the debt is priced this low, the debtor has been delinquent for a long time. They already weren't going to pay it off and their credit scores have already taken the hit. I don't see this helping the few people who hit the jackpot much.

[Roy]

As with every other coherent idea I have heard from the OWS-types, it sounds great...as long as you do not analyze any deeper than their soundbites.


This is being portrayed as "power to the people", but OWS has no power. They can't force the banks to sell debt on their terms, all they can do is bid against debt collection companies for the debt. By paying the banks for this bad debt, OWS is rewarding the banks for making loans to people who can't pay them back, giving the banks more reasons to continue this behavior.

When you settle a debt for less than 100% of face value, my understanding is that the unpaid difference counts as taxable income (I am not a tax expert!). By forgiving someone debt, OWS MIGHT be making them liable for the taxes in that "income". Or OWS could try to withhold the data from the IRS, resulting in hilarity for all.

I would think the lucky few who are rewarded with a forgiven debt would simply be encouraged to borrow more. Why should they learn anything except "my actions have no consequences, everything will somehow work itself out"?

Student loans: The upswing in student loan debt came as a result of the government guaranteeing student loans a few years ago. The banks will give student loans to just about anyone who asks, for any amount within reason, because they are not taking a risk. The banks are not going to sell recent student loan debt for less than 100% face value, they can get it from the government anyway.


I hope OWS spends every penny they have on this project. Better this than buying camping gear and stinking up our parks.

[strider3700]

someone from OWS was on the radio yesterday.  Their tax lawyers figure that them forgiving the loan qualifies as a gift and is therefore non taxable.

The banks love that someone is doing this.  Like was pointed out earlier it increases the competition to buy this total crap debt so they'll get a bit more.   The persons credit is destroyed already so this makes zero difference from that perspective.

The people will receive certified mail stating that their debt was forgiven.  On the initial round of them doing this they found that it's difficult to track down debtors,  and many of them thought it was a scam. They're hoping now that the movement is more well known new people will actually believe them when it happens.

The key thing to remember here is the size of the movement.  They have a couple hundred thousand dollars to put towards forgiving debt.   How many billion is the total consumer debt in the US?  THis will amount to nothing.

[sheepstache]

As with every other coherent idea I have heard from the OWS-types, it sounds great...as long as you do not analyze any deeper than their soundbites.


This is being portrayed as "power to the people", but OWS has no power. They can't force the banks to sell debt on their terms, all they can do is bid against debt collection companies for the debt. By paying the banks for this bad debt, OWS is rewarding the banks for making loans to people who can't pay them back, giving the banks more reasons to continue this behavior.

The banks love that someone is doing this.  Like was pointed out earlier it increases the competition to buy this total crap debt so they'll get a bit more. 

This and this.  I'm pretty good at coming up with rationalizations so I can imagine these folks trying to make some point about how negotiable debts are when it comes to countries and corporations but the debts of individuals tend to be considered absolute (there is some professor who made this point in a really eloquent way but I can't find the quote).  But the practical impact seems like it would be the opposite of what they want.

Disclosure: I know some people who are involved in local politics who were maddened by the attitude OWS had to residents of the financial district when it came to the day in and day out drum circle.  Now, everyone likes a good drum circle, but it was constant.  And the OWS folks refused to acknowledge that they could even negotiate with residents about possible limitations on the drumming because, you know, they don't have a central authority who could enforce a schedule or a central organizer who could even like represent them in a negotiation.  So I am a little pre-disposed to see actions of this movement in the light of their being less a power-to-the-people group and more of a stick-it-to-the-man group.

[kisserofsinners]

I was skeptical at first, but really i think *some* people will change their behavior and even if that is kicking the can down the road it's worth it. This idea is just the first step and i imagine if it goes well targeting education and medical debt will be easier.

The fact is that they pulled the word "jubilee" right outta the Bible. In all the history of debt there has been a way to forgive it. In the bible it was very 7 years and i believe that is why 7 year s is the limit on "stigma statuses" like bankruptcy, drunk driving, and felonies. It was pretty obvious that debt could lead to a type of slavery and people need options to get out and be forgiven.

Yes, people need to take responsibility for their action and i can totally see a place like this (where we are looking and and dealing with our own money drama) not being very compassionate with others who are still struggling to find a compass to direct them.

I would only caution against further judgement of people you have no way of ever meeting. Our fiscal environment is fraught with unfair advantages for the lenders, who profit off keeping people under water. It's despicable. If even just a few people learn from this blessing, it'd be worth it to me. :)

Peace

[chucklesmcgee]

They have a couple hundred thousand dollars to put towards forgiving debt.   How many billion is the total consumer debt in the US?  THis will amount to nothing.

I suppose in theory you could max out your credit cards to donate, then have them buy and forgive your debt for a small percent of your donation, then use the donated money as a collateral on an even bigger leveraged loan which they leverage again for an even bigger loan which is then used to purchase all available consumer debt...jk.

[PJ]

I was skeptical at first, but really i think *some* people will change their behavior and even if that is kicking the can down the road it's worth it. This idea is just the first step and i imagine if it goes well targeting education and medical debt will be easier.

The fact is that they pulled the word "jubilee" right outta the Bible. In all the history of debt there has been a way to forgive it. In the bible it was very 7 years and i believe that is why 7 year s is the limit on "stigma statuses" like bankruptcy, drunk driving, and felonies. It was pretty obvious that debt could lead to a type of slavery and people need options to get out and be forgiven.

Yes, people need to take responsibility for their action and i can totally see a place like this (where we are looking and and dealing with our own money drama) not being very compassionate with others who are still struggling to find a compass to direct them.

I would only caution against further judgement of people you have no way of ever meeting. Our fiscal environment is fraught with unfair advantages for the lenders, who profit off keeping people under water. It's despicable. If even just a few people learn from this blessing, it'd be worth it to me. :)

Peace

I liked your post, kisserofsinners.  There is a need for both taking more responsibility and forgiveness/compassion in our world.

[Jack]

I suppose in theory you could max out your credit cards to donate, then have them buy and forgive your debt for a small percent of your donation, then use the donated money as a collateral on an even bigger leveraged loan which they leverage again for an even bigger loan which is then used to purchase all available consumer debt...jk.

Well, why not actually do that? Banks are allowed to use fractional reserve banking to make leveraged loans; letting OWS make leveraged loan buyouts seems only fair.

[grantmeaname]

That's clearly specious.

[Jack]

That's clearly specious.

"Clearly specious" is an oxymoron.

[James]

That's clearly specious.

"Clearly specious" is an oxymoron.

No it's not.  Specious statements can appear normal until much closer examination, or some are more obviously specious without requiring additional attention.  The later would be clearly specious.

[Jack]

That's clearly specious.

"Clearly specious" is an oxymoron.

No it's not.  Specious statements can appear normal until much closer examination, or some are more obviously specious without requiring additional attention.  The later would be clearly specious.

   
specious /ˈspēSHəs/ (adjective):

• Superficially plausible, but actually wrong: "a specious argument".
• Misleading in appearance, esp. misleadingly attractive: "a specious appearance of novelty".

If it's obvious [that it's wrong], then it's not "superficially plausible" or "misleading in appearance;" ergo, it fails to be "specious."

[James]

The debt forgiveness appears to be a misguided stunt to me.  It benefits the very big businesses OWS is unhappy with, they wouldn't be selling the debt if they thought they would ever recover more than the selling price from the borrower.  I have no idea how this accomplishes what OWS seems to stand for, I think the money would be better spent on people in need and demonstrating willingness to change the problem lifestyle (which is what enables these big businesses in the first place), but that is hard.  This program is an "easy fix" to a very hard problem, and probably doesn't fix much of anything in the end.

[grantmeaname]

Time mentioned Strike Debt this week (12/3 issue), the organization buying and forgiving debt in collections. They're not officially affiliated with OWS (though official is the key word there). They've raised a total of $35,000, which leaves little after overhead, salaries, and processing. Ignoring all that and pretending they've done something, though:  the Time article said they're forgiving only medical debt. If so, that's an idea with much more potential than the concept as explained in this thread.