Must be nice not to have a job.
Back in 2011 I almost immediately dismissed the OSW group as a bunch of whiners. But I waited to see if they did accomplish anything of note in their platform areas of “undue influence of corporations on government” and “income inequality,” because I agree with these concerns. They did not, because who is going to peacefully compel the corporations stop funding the government, and the government to stop accepting it? I also remain skeptical because OSW and I have less in common than not. While I am likewise anti-consumerist to some extent, I am neither Canadian nor anarchist. For the record!
But a remarkable number of smart people that I like keep bringing up OSW. So I keep it in mind. Recently, someone shared on Facebook an article called “Occupy Wall Street activists buy $15m of Americans’ personal debt” so I checked it out. The activists bought the debts at a deep discount ($400K) through the secondary debt market, and then forgave the loans. A+ for humanitarianism, but I did not understand the message. The Rolling Jubilee’s “primary purpose was to spread information about the workings of this secondary debt market,” and the interviewed author noted that you can “have a different conversation with the debt collector.”
This sounds like a bunch of nonsense to me. The idea that you should feel empowered knowing that defaulted debts are bought at a fraction overlooks a couple of major problems.
First, obviously, defaulting on a loan harms your credit. That alone should convince people that doing so is a bad idea, unless you are one of these long-game debt nuts and figure collections clear after 7 years. They do, and you might also be a drug dealer by then if that rule is part of your personal financial planning.
Second, secondary debts are collected by collections agencies. Anyone who has dealt with one knows they are bad news. Sure, your defaulted debt which was originally $20K might be, say, $7K now. But is it worth it to have collections after you for it? Collectors are notorious for practices including demanding wrong amounts, collecting past the statute of limitations (noted above), and calling your workplace, all of which are against the law. But you probably wouldn’t know that (as many modern people are not aware of all of our many rights). And even if you did, pursuing justice could involve lawyers or at least your time and energy. It is not really the “empowerment through loan default” situation described in the article.
The bottom line in the article is that if you have defaulted on a loan and a collector comes after you for the full original amount, you can know to confront the collector about the new secondary balance and be legally relieved of the responsibility for some of your original balance (with ruined credit, though the article does not mention this). For people already in this situation, who fell on hard times, ok. But a more direct way to educate loan bearers about legal rights in secondary collection would be to provide comprehensive information on the Fair Debt Collection Practices Act. That a collector may try to collect on the full amount is just one example of illegal practices that collectors will try on the vulnerable.
The topic of the article is about strategy, not education. It troubles me that it basically suggests that it is advantageous for those with loans to default and make the bank absorb some of the loss. I do not think it is advantageous to the consumer with any common sense.
I am also rubbed the wrong way by the Rolling Jubilee’s stated position of “debt refusal.” According to the article, this is refusing your current debt and telling the bank to go screw. For me, debt refusal is refusing current debt by clearing it asap, and refusing future debt by making careful choices to avoid it.
And I agree with sticking it to the banks, but I want to do so by depriving the bank of the future interest it was counting on making off me (a $30K student loan at 6% paid over 25 years nearly doubles to $57K paid in total; the same loan paid over 2 years includes only $2K interest). I want to stick it to the banks by utilizing my subsequent wealth in the peer-to-peer lending market.
Paying off loans is no doubt the more difficult approach for many. But I do not understand why OSW preaches revenge rather than independence and optimism. Can someone tell me anything else about this group?