Blogs & Comment

Random acts of debt forgiveness

The Occupy movement tackles consumer debt with Strike Debt's "Rolling Jubilee."

If there was any criticism most routinely leveled at the Occupy movement during its Fall 2011 heyday it was that it was unfocused and proposed little or nothing in the way of solutions. This would usually come just before or after some hurled snark about chanting and drum circles. Well, critics, your prayers—or would they be more rightly labeled fears?—have been answered. Strike Debt, an offshoot of Occupy Wall Street, has a concrete and novel plan to do something for the 99%.

Buy consumer debt and forgive it. It’s called the “rolling jubilee.”

Or a random act of kindness, if you like.

The way it works is Strike Debt raises money via donations and then uses the proceeds to buy bad debts being sold at discount, typically pennies on the dollar. But unlike the collection agencies that normally buy this debt and then hound debtors for the money, Strike Debt simply declines to collect. The beauty of it is that as the debt’s owners Strike Debt is perfectly within its rights to do this.

As of November 22, Strike Debt has so far raised about US$412,368, good to redeem $8,252,175 of debt. Outstanding consumer debt (medical, mortgage, credit card, student, auto, etc. ) in the U.S. is well over $2 trillion, so this isn’t about erasing all debts, no matter how successful the jubilee is. Spokesperson Nicole Hala describes the effort as an “experiment” that is about empowering and educating people, resisting debt and creating an alternative economy that benefits, you guessed it, the 99%.

Strike Debt doesn’t buy individual debtor’s debts, but instead buys bundles of anonymous debt from banks through what it says are friends on the debt broker side (apparently, the banks won’t deal with anyone who isn’t established, and most brokers won’t sell to non-collections agencies because of liability issues).

The group, which is an offshoot of Occupy and was effectively started by an artist named Thomas Gokey, bought its first debt bundle on November 16. Hala says it was for about $100,000 of medical debt (student loan debt can’t be bought because it is federally insured).

While the idea is rather creatively subversive, it wasn’t necessarily smooth sailing. Internally, there was some dispute over whether or not this tactic was the right one to pursue. Hala says there were some in the movement who felt that by taking an approach of forgiveness the jubilee was in fact acknowledging these debts as legitimate despite the checkered history of the banking and debt collection industries. There was also the charge that the jubilee further legitimized the debt system by taking money from the 99% and giving it back to financial sector. Still others felt it was too symbolic and would make no material difference to most individual debtors. But Hala comes back to the goal of education, outreach and spreading goodwill. “[Debt buying] is not our long-term agenda. We don’t want to become a debt-buying NGO or anything like that. There’s people with different opinions about the financial industry and capitalism within our group. It’s a pretty big tent.”

And outside of the group there has been some grumbling among the public about “moral hazard” and debtors getting a free ride. However, that’s a non-issue, says professor Edward Waitzer, Jarislowsky Dimma Mooney Chair in Corporate Governance at Osgoode Hall. “It’s not going to help the debtor improve their credit position because their credit rating is not going to change.”

The debt buying segment of the financial industry probably doesn’t need to worry about Strike Debt eating its lunch. Mark Schiffman is VP public affairs, ACA international (Association of Credit & Collections Professionals) in the U.S. He says that while what Strike Debt is doing “runs counter” to the work of the debt industry, “it’s a nice gesture.” But because of the scale of the problem, he doubts it will have any noticeable effect on the industry. “Based on what they’re trying to do I think there needs to be some expectations about what really is happening. They are purchasing old debts. These are not people who are getting immediate relief from student loans or medical debts or the crushing debts of today. These are older debts that have been sold by whatever company or creditor that incurred them and so I don’t know what kind of impact they truly will be having.”

But it’s as much a function of symbolism as anything else and, as most people understand, symbolism can be a very powerful thing indeed. “This is not a solution to a problem,” says Waitzer. “This is an attempt to point to a systemic issue and potential systemic solutions.”

He says the symbolism is valid because it targets the “differential treatment of debt” and how money has influenced politics such that “big borrowers got their debt forgiven, small borrowers got their houses taken away from them.”

Waitzer, who is a former chair of the Ontario Securities Commission, says there’s no legal reason something like Strike Debt’s rolling jubilee can’t be done in Canada. Because the money is donated with no expectation of a return, it doesn’t run afoul of securities laws.

On a related note, it looks like this brand of populism—which essentially uses the system against itself—may be spreading with Strike Debt affiliates popping up in cities including Philadelphia, Detroit, Tucson and Phoenix, according to Hala. And way over in Ireland, which has been devastated by the financial crash and subsequent austerity, an organization called Debtoptions is taking the fight to the banks by suing them. Debtoptions was started this year by Claire Cullinane who maintains that the Irish are being unfairly hounded out of their homes and the economy destroyed as a result of having to pay for a crash primarily caused by the banks. The grassroots organization guides people for free about how to legally sue the banks for €1,000,000 as a means of forestalling mortgage foreclosure.