"Bad Paper" by Jake Halpern reads quickly, has a number of colorful characters, and tells a depressing story of brokering debts and debt collection in the days before the Consumer Financial Protection Bureau issued new rules. It's not clear that CFPB will change the situation. Basically banks and others who make loans to consumers, auto loans, credit card debt, etc. would try to collect delinquent debt. Very quickly they would sell the obligations for cents on the dollar through brokers to debt collectors. The collectors would collect some of the debt and sell the unpaid obligations down the line. At each level the collectors operate closer to the legal line, using tougher tactics. Debt collecting turns out to be a good profession for ex-convicts whose criminal record keeps them out of other jobs. Halpern devotes little attention to the debtors, just enough to evoke sympathy.
One of the problems in the system is that what's sold seems to be spreadsheets of debtors on flash drives, which can easily be copied/stolen. The biggest problem is the whole system depends on trust and honesty but the reality is that the weak get the shaft.
Halpern uses the epilogue to argue that the Feds should implement a debt registry, which tracks a debt from issuance through resolution, no matter how many times ownership of the obligation changes hands. Makes sense to me.
Sidenote: I was surprised to learn that in a third of the states people can go to prison for unpaid debts.
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