(MintPress) – In New York, a 38-year-old man loses his job in the downward-spiraling economy. His wife is a cancer patient, and mounting medical bills put him and his family past the breaking point. Faced with foreclosure, he found himself sinking, surrounded by scam artists promising to help him, but seeking only to pick over his bones. A 41-year-old woman had emergency surgery to remove a kidney stone. She has no insurance and was forced to swallow more that $100,000 for the procedure and hospital stay. She is currently saving money so that she can go bankrupt.
In America, as of 2010, there was nearly $2.4 trillion in consumer debt outstanding, or roughly $7,800 for every man, woman and child living in the country. This excludes real estate debt, educational debt or medical debt. In 2004, the average college student was expected to carry more than $20,000 in student loans and $4,100 in credit card debt, according to Sallie Mae.
The United States has a serious problem with debt. In light of the housing crash and the resulting Wall Street bailout, many hard-working, honest Americans are being buried in debt and are losing faith in the financial industry and in government. In a list of the most unpopular jobs, stock trader ranked with politicians and traffic wardens on the top of the list. In this era of political bickering and corporate-first mentality, the average American feels overlooked and unwanted.
Enter the Occupy movement.
After a long period of inactivity, the Occupy movement returned to the public spotlight with its Occupy Sandy campaign, which was massively significant toward the restoration of businesses and livelihoods after the devastation inflicted by Hurricane Sandy on New Jersey and New York City. Now, the Occupy movement is taking on something bigger: debt in America.
Occupy’s Strike Debt Committee implemented a two-step plan to help fight the debt problem in this country. First, the committee has released the Debt Resistors’ Operations Manual, a free-to-download PDF that offers background information on the financial industry in the United States, how to properly use credit and practical (if not controversial) tips for getting out of debt. Second, the committee has launched it’s Rolling Jubilee — a massive crowdsourced initiative to buy back medical and consumer debt for the purpose of forgiving it. As Strike Debt puts it on their website:
“As individuals, families, and communities, most of us are drowning in debt to Wall Street for the basic things things we need to live, like housing, education, and health care. Even those of us who do not have personal debt are affected by predatory lending. Our essential public services are cut because our cities and towns are held hostage by the same big banks that have been bailed out by our government in recent years.
“We are not a loan. Strike Debt came from a coalition of Occupy groups looking to build popular resistance to all forms of debt imposed on us by the banks. Debt keeps us isolated, ashamed, and afraid. We are building a movement to challenge this system while creating alternatives and supporting each other. We want an economy where our debts are to our friends, families, and communities — and not to the 1%.”
As many have celebrated this seeming strike for the 99 percent, some are pointing out the flaws in Occupy’s logic and are suggesting that the group — for all of their good intentions — is making things worse.
Taking a look under the hood
The Rolling Jubilee is based off of Judaistic and ancient Christian tradition. Leviticus 25: 8-13 states:
“And thou shalt number seven sabbaths of years unto thee, seven times seven years; and the space of the seven sabbaths of years shall be unto thee forty and nine years. Then shalt thou cause the trumpet of the jubile to sound on the tenth day of the seventh month, in the day of atonement shall ye make the trumpet sound throughout all your land. And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubile unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family. A jubile shall that fiftieth year be unto you: ye shall not sow, neither reap that which groweth of itself in it, nor gather the grapes in it of thy vine undressed. For it is the jubile; it shall be holy unto you: ye shall eat the increase thereof out of the field. In the year of this jubile ye shall return every man unto his possession.”
A Jubilee is a ritual forgiveness in which old debts — have them be spiritual or material — are forgiven. The Strike Debt Committee started its initiative, the Rolling Jubilee, Nov. 15 with the People’s Bailout — a kick-off variety show and telethon — as a way of buying debt off of the secondary market and cancelling it anonymously. Many celebrities have lent their names and support to what appears to be a worthy cause. At the time of this article’s publication, Strike Debt collected $357,058 to purchase $7,145,980 of debt.
But, looks can be deceiving.
What the Rolling Jubilee is ultimately doing is bailing out the banks, and not necessarily the people. What the program is buying is debt that has been placed on the secondary market for purchase. When a person occurs a debt, the debtor has a statue of limitation to collect the debt. When that statute of limitation expires, or when the original debtor feels that the debt is junk — that is, payment to resolve the debt is impossible because the indebted party is unwilling or unable to pay down the debt — the debtor sells the debt to an outside party to recoup some of their losses. Because the debt is junk, the original debtor is typically willing to sell the debt at less than its market value — typically, much less (sometimes, as low as 4 percent of the original value). The debtor can then write off the debt and take the tax benefit, and the new debt owner can attempt to collect the debt at its full value, plus a collection fee. The Rolling Jubilee seeks to interject here, purchase the debts as secondary buyers and declare the debt paid in full.
The problem lies in the realization that secondary debt is not typically enforceable in the first place. If it was, the original owner of the debt would not sell it at a loss. Because the debt is junk, the original owner determined that there is no viability in collections, and the legal cost to service the debt exceeds the original value of the debt.
When a debt passes hands, it becomes the new owner’s responsibility to prove that the debt is valid by showing the original instrument of indebting (the signed credit card slip, the purchase contract, etc.). If they cannot produce this (and usually, they can’t), the debt is null and void — as far as the law is concerned, if you can’t prove it happened, it never happened.
This is why debt collectors use bully tactics; if the debt is challenged, the collector loses. So, they use intimidation to force the consumer to bow down without a fight. A secondary debt can only be collected on voluntarily unless the debt buyer takes the issue to court. Typically, the selling and servicing of a debt by a secondary owner negates the original credit contract, so secondary debt settled in court usually settles for pennies on the dollar. To avoid this, secondary buyers avoid court or use underhanded techniques — such as not serving the indebted party notice of a mandatory court appearance about the debt and getting the debt settled in default (which would legitimize the debt and make it serviceable).
Banks would see that the Occupy movement is buying junk debt and will market directly to them. The secondary price of the debt will rise with the increased demand, and the banks will ultimately pocket Occupy’s good will.
The other part of this is the taxes. While the Strike Debt Committee would be off the hook for taxes (they are not drawing a profit), those whose debt they paid off would not be. The money used to pay off the debts is considered received income by the IRS and would be taxable, raising the tax liability for individuals ill-equipped to handle the shock.
However, sometimes a gesture means more than the actual gift. In offering to pay down these outstanding debts, Occupy is infusing hope with those that gave up hope. Winston Churchill once said, “All the great things are simple, and many can be expressed in a single word: freedom, justice, honor, duty, mercy, hope.”
What does the future hold for Occupy?
At present, the Rolling Jubilee is focusing on consumer and certain types of medical debts. Governmentally-backed medical and educational debt is not sold on the secondary market and cannot be bought using Strike Debt’s scheme. However, the committee is looking into ways to purchase private lender educational debt.
One does not need to be clairvoyant to see that Occupy’s recent activities have raised enough press and awareness to return the once floundering organization to prominence. With the Occupy movement’s We Got This drive to help Hurricane Sandy’s victims, the group has received acclaim and laurels from some of the same people that, a year ago, were evicting them from public lands and arresting them. Because of the effectiveness of the group’s feet on the ground approach — go to the houses hit, find the survivors, ask them what they need, get them what they need — they have been asked to train the National Guard and representatives of the mayor.
The Occupy movement has not released an agenda or even plans beyond the next few months — when it all boils away, Occupy is still the same leaderless entity it was when demonstrators were protesting in Zuccotti Park. However, the movement has announced that it will be supporting the national Wal-Mart Black Friday strike. The movement also helps solidarity protests here in America and was present in Europe for the International Day of Solidarity against Austerity last week. The organization operates based on the responses of local general assemblies toward situations of importance happening locally or globally.