This time last year I heard about an intriguing idea from the Strike Debt action group, a spin-off from the Occupy Movement. The group was investigating the way that debts in default are sold off cheaply to debt collection agencies. If debt is for sale, couldn’t the campaign buy it too? And then instead of hounding the debtors for it, just write it off?
The bold and provocative Rolling Jubilee launched last November with a big fundraising event, and since it’s one of the most creative examples of practical activism I’ve seen in a long time, I wanted to mention what has happened since.
In the past year, the team has bought three tranches of anonymized debt. The first was a pilot, buying $100,000 worth of medical debts, at a cost of $5,000. They had no idea whose debts they were buying until they took delivery of the data. Forty-four people in New York State were then sent a gift-wrapped letter telling them that the debts were gone:
You no longer owe the balance of this debt. It is gone, a gift with no strings attached. You are no longer under any obligation to settle this account with the original creditor, the bill collector, or anyone else.
After that initial success, the campaign then bought a second bundle of a million dollars and cancelled that too. If, at this point, you find yourself tutting about the ‘moral hazard’ of writing to strangers and abolishing their debts, understand that this is medical debt. This second tranche was Accident and Emergency debt from Indiana and Kentucky – people who had accidents and needed emergency treatment, and then were landed with a bill for that care that they could not afford to pay. “We don’t believe that people should be forced to suffer twice” say Strike Debt, “first from illness and then from medical debt.”
Most countries of the developed world don’t do this to their citizens, so this is a distinctly American problem. And it’s a big one. 62% of bankruptcies have medical debt as a ‘contributing factor’.
From what I gather, the originators of the Rolling Jubilee had conceived the idea as an awareness raising measure as much as anything. The fundraising response was bigger than they expected though, and this month they announced their third debt buy: a grand $13.5 million, across 45 states. Among the debtors were individuals owing over $100,o0o, and others with debts as small as $50. So far, the campaign has found that they can buy debt at five cents on the dollar – that fundraising money buys 20 times its value in debt.
And that begs a vital question: if the companies who are originally owed the money are willing to write off 95% of the debt when they flog it to the collection agencies, why isn’t debt forgiveness much more common? The companies have shown themselves willing to give up 95%, so why not the extra 5%? Or if that 5% is somehow important, can’t the debtors buy it and settle up themselves? Instead, one in seven Americans in being pursued by a debt collection agency.
“We have shown that lenders are perfectly willing to write your debts off” say Strike Debt, “they’re just not willing to write them off to you.” There’s something very wrong with the system that creates and perpetuates these unjust debts, and a major imbalance of power between debtors and creditors. Shining a spotlight on this may be Rolling Jubilee’s most significant contribution.
They’re not done yet though. This week the campaigners have been celebrating their success in proving the concept of debt abolition, but they know that this current model isn’t a solution in itself. The $14 million written off so far is meaningless in the grand scheme of things, so the next project will be aimed at finding more long term solutions around debtor empowerment and collective bargaining. I will watch this space.