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Bad Paper: Chasing Debt from Wall Street to the Underworld Hardcover – Oct 14 2014
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“Bad Paper gives readers an intimate knowledge of the debt-collecting industry, but more important, it gives a comprehensive profile of the people in our country who live and die by the industry. This, ultimately, is the book's power and attraction.” ―Frank Tempone, Chicago Tribune
“[A] wonderful inquiry into the seamy, multilayered world of consumer debt collection . . . both an entertaining sociology of the debt-collecting fraternity and a picaresque romp through the industry's most unsavory byways.” ―Julia M. Klein, The Boston Globe
“An enjoyable and educational read, with stories that sound too good to be true and word-for-word conversations that a Hollywood screenwriter couldn't make up.” ―Jonathan Epstein, Buffalo News
“A dramatic rise-and-fall tale . . . Halpern brings unexpected literary heft to the world of debt collection.” ―Kirkus
“By fostering a greater understanding of the workings of debt collection, [Bad Paper] sheds enough light into the shadows to compel readers to push for change.” ―Publishers Weekly
“Bad Paper is nonfiction that reads like the finest thriller: suspenseful and frightening, eye-opening, and even, at times, funny. Jake Halpern's fascinating, fearless tour of the underworld of debt collections introduces us to a cast of characters--the (mostly) men behind the scary phone calls--who deserve to be the stars of the next great HBO drama.” ―Joseph Finder, bestselling author of Suspicion and Paranoia
“Bad Paper is a riveting tale, fast-paced and filled with unforgettable characters. It is also a deeply reported and powerful exploration of America's shadow economy.” ―David Grann, author of The Lost City of Z and staff writer for The New Yorker
“Jake Halpern knows how to follow the money. Only a consummate reporter could have achieved such an intimateview of the two debt collectors he chronicles here. And because he really knows how to tell a story, we can't take our eyes off this nasty business.” ―Anne Fadiman, National Book Critics Circle Award–winning author of The Spirit Catches You and You Fall Down
“Bad Paper is a terrific achievement--for the wonderful Ponzi-scheme absurdity of the story, for the outsized characters and the skeptical sympathy they elicit. It's a book that hangs out in that gray and widening zone where the civilization we take for granted starts to break down, and it reads like Michael Lewis with a sense of the abyss. It's about downward mobility and the subtle apocalypse and it feels important--important in the way few books ever are.” ―Gideon Lewis-Kraus, author of A Sense of Direction
“Jake Halpern's gripping tale provides an unprecedented view into the criminal underbelly of consumer finance. It's required reading not only for everybody with creditors on the line, but for anybody who cares about money or debt.” ―Felix Salmon, senior editor, Fusion
“The old homily ‘there is no place like home' has never been more poignantly and wittily revealed than by Jake Halpern in these lovely vignettes.” ―Studs Terkel with praise for Braving Home
“Strangely fascinating and endearing . . . In short, it's terrific.” ―Bill Bryson with praise for Braving Home
“Not for a long time have I read a book so good and so wise.” ―Robert Stone with praise for Braving Home
About the Author
Jake Halpern is a frequent contributor to The New Yorker and The New York Times Magazine, the author of Fame Junkies and Braving Home, and the coauthor of three young adult novels. He is a fellow of Morse College at Yale University. His hour-long radio story "Switched at Birth" is one of This American Life's eight most popular shows ever.
Most Helpful Customer Reviews on Amazon.com (beta)
Aaron specializes in the business of collecting debts after banks, credit card, utility, and other companies have given up pursuing debtors and further success seems slim to none. So Aaron becomes the next rung down the ladder, paying pennies on the dollar to banks and others to get their list of debtors. At the start of the book, he's had a bumpy ride (partly due to the downturn in the economy) and owes $14 million dollars to his investors, those individuals or companies who bet that he and his company - Franklin Asset Management - could force enough people to pay on their debts to recoup their investment.
Details of Aaron's life - and that of his associate Benny and others in the business -, are mixed in with plenty of shocking facts about how consumer debt affects the economy. For instance, Americans owe $11.28 trillion (yes, trillion) and $831 billion is delinquent. That's where Aaron enters the picture. All he has to do is collect 10 percent of what was originally owed to companies like Bank of America, Verizon, and others and he can make a fortune.
But it's a rough, often shady, business with often cut throat competition and few ethics. Sometimes Aaron'a own employees will sell the debts to other companies, essentially stealing from under his nose. And sometimes people who are no longer liable for debts are still severely pressured to pay. The author describes some of those people. Perhaps they are unemployed or they've been impoverished by soaring medical costs (in spite of insurance).They are people like Joanna, someone who has struggled to find work and faces a day to day challenge to pay her bills.
The reality is that debt collection is one of the largest sources of consumer complaints to the FTC and, according to the author, the FTC has done little to go after unethical debt collectors (and, of course, some debt collectors play fair). Author Jake Halpern even throws Abraham Lincoln into the mix. He actually was pursued by a debt collector for a promissory note he'd signed (online and other sources for this information are listed at the end of the book).
Ironically, some of the debt collectors would have been poor and perhaps even owed money themselves - if they hadn't been hired to go other people who owed money. Sometimes debt collection agencies are the largest employers in a city with high unemployment. . The other companies, the creditors, had already written off the debts as losses. They've given up ever seeing a dime of the money owed them.
This is highly recommended. It definitely deserves its recognition as an Amazon Best Book of the Month (October 2014). The book contains notes on the sources of statistics and information (such as the Federal Reserve Bank of New York) . There is also considerable supplementary material for those who wish to pursue such resources as an online link to the Personal Finances of Abraham Lincoln (who, as noted above, had his own experiences with debt collection), as well as detailed notes on each chapter.
Halpern appears to have wrangled a level of access and trust from the insiders that seems unthinkable as the federal government threatens to expand the institutional creep of the CFPB. His unblinking portrayal of some of the individuals that have been on the other side of the table is unvarnished yet still surprising in some regards. In some instances, Halpern almost makes these human stories come alive with an unwelcome sympathy.
Sometimes redundant, often a tad disorganized, Bad Paper may not be destined to become a lasting portrait of the Great Recession. At the risk of revealing my own bias, Halpern missed the opportunity to really plumb the plight of those who are hounded by the industry. It is however, a revealing and surprisingly interesting read. For those of us in the trenches, it is a fascinating journey into enemy territory.
Aaron Siegel, the lead protagonist in this story, had invested $14 million contributed by 8 others into $1.5 billion (face value) of bad debts, and then learned that some of his portfolio had been stolen - in the form of spreadsheets containing subscriber names, contact and other personal information, and balances. These stolen accounts were being worked by collection agencies in Buffalo, N.Y.
Calling the police was an option - but not likely to result in useful action prior to the paper having been wrung dry. The FTC also potentially offered relief - it had ranked 'debt collection' as the second-largest consumer complaint (88,190 complaints in 2009) since 2006, led only by identity theft. However, it brought just one 'enforcement action' against a company for collections violations in 2009, and done little more since then - three in 2010, four in 2011, six in 2012, and another six in 2013. The CFPB 2013 budget was less than 2% of JPMorgan Chase's for litigation.. A third potential option was the newly created Consumer Financial Protection Bureau - however, it only polices the largest 175 national debt collectors, allowing the thousands of others (like those in Buffalo) to escape scrutiny. So, Mr. Siegel opted to partner with a former armed robber turned debt collector - Brandon Wilson.
Mr. Wilson, not surprisingly, turns out to be not your ordinary debt collector. Early on his mother had him tested, and learned that his scores were at the highest levels. However, life with a single-parent in drug-infested low-income areas of Buffalo did not allow a Horatio Alger outcome for Brandon. Instead, Mr. Wilson took a ten-year detour into the state pen.
Brandon located the rogue Buffalo collectors by contacting one of the payers and getting the credit-card charge data, then calling the credit-card company to get the recipient's location. Turns out that one of Aaron's employees had sold the accounts for $10,000 - thumb drives are the usual mode of transfer. Brandon convinced the rogue agency owner to stop pursuing the accounts after showing his gunshot and knife scars and threatening to burn everything down. Thus, the 2,400 accounts were recovered.
Aaron also had bought $9 million of BofA accounts - the sample looked good, but he later realized it consisted mostly of seniors living on Social Security, many/most of whom had also lost most/all the equity in their homes in the Great Recession.
Per the Brandon Wilson school of skip tracing, one starts by identifying and calling a neighbor - asking them to ask the debtor to call Brandon's group. Finding an ex-spouse was best - they loved to cooperate. Brandon believed it was best to be civil to debtors, sometimes offering 'special deals' upon proof of specific adverse circumstances. At least get them to commit to a promise to eg. pay on the 15th. Once a debtor makes a payment on a debt already past the statute of limitations (eg. via moral obligation), it resets the clock - only litigating on accounts past the statute of limitations is prohibited, not simply requesting payment. A debtor who hung up was more likely to be left alone in the future than one who hung on and talked.
Ten-year old debts can be bought for a tenth of a cent/dollar or less. Investors with Brandon could get 50% return in 6 months.
Collectors would sometimes rework paper already paid by claiming the original payment was just for the principal - they still owed interest and fees. Some collectors pose as attorneys, law-enforcement agents - illegal.
Debtors can often have legal actions dismissed just by stating 'Prove your case.' A 2013 FTC study of six of the largest debt collectors found they had monthly itemized statements for only 6% of the accounts and original account applications for less than 1%. Another problem - many banks (eg. Chase) and collection agencies simply robo-signed affidavits. The collection industry is largely based on high charges and interest rates for the poor. Many debtors, on the other hand, never show up in court and often those that do sign a 'consent agreement' admitting they owe and promising to pay. When no one shows, plaintiffs generally are not required to put up evidence.
Most debt-settlement offerings are scams - eg. 85% of payments going to fees.