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The “People’s Bailout” Was Just the Beginning: What’s Next for Strike Debt?

Thomas Gokey is one of the creators of Occupy’s Rolling Jubilee, which is preparing to purchase and cancel $9 million of ordinary people’s medical debt. Here, he speaks about the project’s origins, methods, and future.

Fabien: According to RollingJubilee.org, you've raised enough money to abolish about $8.7 million in debt. How much debt has been bought to date?

Thomas: This process takes some time. On November 12 or so, shortly before the telethon, we closed on our first debt purchase. We had raised $5,000, which we spent to purchase $100,000 worth of medical debt.

This debt is definitely collectible, ripe debt. And we're keeping money out of the hands of collection agencies when we abolish it.

We are in the process of lining up a bigger buy as we speak, but I don't know how long it's going to take. There's a certain due-diligence process that needs to take place, and a lot of research and reviewing different portfolios. We're in the middle of that now, and we'll act on that as soon as we possibly can.

In the future, we are going to be looking beyond medical debt, toward other kinds of debt. But as a conservative estimate, we should be able to abolish 20 times the amount of money we raised, even factoring in all of the associated costs of the process, like accounting and mailing letters to debtors informing them their debt has been abolished,.

We won't know for sure how much debt we can abolish until we actually abolish it, but 5 cents on the dollar is conservative. You can find out-of-statute debt that is being sold for one tenth of one penny on the dollar. This is debt that, technically, people no longer legally owe, but debt collectors buy it anyway because it's legal for them to trick former debtors into paying it.

And I see a lot of payday loans going for 2 or 3 percent of principal. We want to under-promise and over-deliver. But we believe—and our industry experts have assured us it’s possible—that we should be able to do the whole thing for under 5 percent of principal.

Thomas-Gallery-250.jpg

Gokey”s sculpture, "Total Amount of Money Rendered in Exchange for a Masters of Fine Arts Degree to the School of the Art Institute of Chicago, Pulped into Four Sheets of Paper." Photo courtesy Thomas Gokey.

Fabien: So, that is debt that creditors have little confidence they'll ever be able to call in?

Thomas: No. Actually, that's one of the biggest misconceptions we've seen out there.

People think that this is being sold so cheaply because people have given up collecting on it, but it's exactly the opposite. The banks are actually required by law to charge off defaulted debt after 180 days, meaning that before selling it, they claim it as a loss and receive a tax deduction. So this is like a mini-bailout every time they do it. The government has stepped in and mandated this process so that banks can keep their own balance sheets clean, rather than top-heavy with toxic debt that will inflate their receivables. Every time they charge off this debt, they actually get a tax cut—it's ridiculous. And then those same Wall Street banks lend large amounts of money to the biggest debt buyers so that they can, with lent money, buy all the toxic debt these banks have produced and make a ton of money collecting on it.

After 180 days, when it gets charged off and bought and sold, that's when the collection really starts. And because collectors are buying it for only pennies on the dollar, they only need to collect a small margin above it in order to be massively profitable.

The Rolling Jubilee isn't going to solve all of our problems. It's going to be a drop in the bucket, and we need to utilize it to build a movement that really can solve our problems.

So this debt is definitely collectible, ripe debt. And we're keeping money out of the hands of collection agencies when we abolish it. We're keeping more money in the pockets of people who don't have enough of it. The 26 largest debt buyers in New York City have extracted over a billion dollars of wealth out of the poorest people in New York, over a two-year period, and they did that by systematically breaking the law.

They've privatized the court system to turn the courts into a paper mill that allows them to dock people's wages in order to get paid, without due process. It's a violation of everyone's constitutional rights, the way they're doing it—arranging to dock wages without any sort of trial.

The Neighborhood Economic Development Agency Project, or NEDAP, is a group of lawyers who specialize in debt collection abuses. They’ve filed a class-action lawsuit to try to shut it down. And I hope they succeed, but this is going on other cities as well.

Fabien: Do you feel that Occupy has primed people to take a more empowered approach to these problems?

Thomas: Even within Occupy, I would say people are a little bit too excited about the Rolling Jubilee. They haven't quite glimpsed the way it fits into a debt resistance movement.

The Rolling Jubilee isn't going to solve all of our problems. It's going to be a drop in the bucket, and we need to utilize it to build a movement that really can solve our problems.

But I think Occupy has certainly primed me. Before Occupy, I had never attended a General Assembly. I didn't know about the consensus process. I tried to be a responsible citizen and I showed up to protests, but none of the protests felt like they went beyond the symbolic—you know, shaking your fist at the war.

One thing Strike Debt has that Occupy didn't have, is Occupy Wall Street. We've got a year of people who have been radicalized, who have been trained in direct action, who have gone to jail, many of us, and who have learned to not be so afraid.

And we've met each other. This kind of project wouldn't be possible with just one or two people working on it. It's an amazing network of talent and commitment. I'm continually astounded: when we have a need, somebody just emerges from the woodwork, who says, I've got 20 years of experience doing just that, and I'm willing to dedicate the next five months of my life to doing it for you. It's beautiful—it makes me tear up a little bit. And it's so hyper-organized, it's like a little ant farm.

I think Occupy is the most beautiful thing in the world.


Fabien Tepper wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Fabien is editorial assistant at YES! and blogs at sentientcincinnati.com.

 

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