Debt Collectors Are Transforming the Business of State Courts

It got worse over time as the collection agencies sell bad debts at a discount, and the bottom feeders when the debt is close to aging out are awful.

Most defendants don't know anything about the case. They've been avoiding collection calls for years as agencies sell and resell their debt. Piles of unopened mail, etc.

For their part, the agencies tend towards sloppiness. Some debt sells at <5% of face value, and comes with virtually no information or documentation.

Thinking about this is a matter of justice is ridiculous. It's not a justice driven process, it's an economics driven process. The agencies do this as their business. They work repetitively, create a process and pursue cases as long as average revenue exceeds average court costs. If a defendant shows up and wins, it's a small cost. Most defendants don't show up, so they don't bother spending legal time making cases good.

And yes, it is the courts responsibility to put a stop to it. For one thing, resolving debt humanely (or not) has been a court function since ancient times and still is. Secondly, debt collectors have basically turned these courts into their own shady place of business. It reflects badly on the court, besides clogging it.

Debt collectors often don’t play by the rules, or don’t keep good records that are required to legally collect the debt. Even if they do, it’s not like the lawyers are likely to spend time tracking down the info for a single case to prove it.

“Win” means the debt is found invalid due to one of these reasons.

debtor: good lender: bad

I have empathy for the horrific stories author shares, but my logic was seeking the obvious topic that never came (in those two chapters). What if lenders decided to not lend? Wouldn't that leave those poor souls in Madagascar in even worse position?

The book is propaganda.

If people didn't have debt as a way to access these things, there might be more energy for addressing the income inequality and lack of class mobility we have, that's being obscured by the access to debt.

There are different levels of debt collection. The first level is generally done by the guarantor. Someone falls behind on a bill, service is shut off, and the company tries to get the consumer to pay the bill. The next level is when a company sends the bill to an outside collection agency to attempt to collect on it. The collection agency will get some commission on that if they manage to collect. The debt is maybe 6-12 months old at this time. If the first agency fails, sometimes it will get sent to a second or third agency to see if they have more luck. At some point in time the company will decide that the debt is unlikely to be collected and they will write it off. It’s at this point that debt may get sold. The debt is likely years old at this point. The company that buys it will buy for pennies on the dollar (it’s like any market, sometimes it’s more, sometimes it’s less). They are then the owner of the debt and any money they collect they get to keep. They’re able to settle for much lower amounts. If you have a $1000 debt that was bought for $50, you can settle for $250 and still make a profit. The consumer is able to clear the debt from their credit report for a fraction of what they owed (though it still shows they paid it to a collection agency and that still hurts their credit, but not as much as an unpaid debt).

Long answer to your question, but yes there can be good money in it, and there is probably an opportunity here to do some good.

A bankruptcy would simply automatically put all your assets up for a same-day auction. Any unlisted items would be auctioned as a lump, for anyone willing to research what you actually owned to play 'Storage Wars' with. Anyone could bid on those assets (including your friends buying your stuff to give back to you). All proceeds of auction would be claimable by anyone you owed a debt to in a fully automated manner.

In such a world, any time you woke up in the morning and decided the auction value of your assets was below your debts, you could text the number, re-buy things you really cared about for probably cents on the dollar (nobody wants your dirty laundry), and carry on your day worry free.

The only reason they change that much is due to the ability of loans.

Let's take your example of student loans. We can both agree that making student loans dischargeable in bankruptcy and not owed to the government would cause the student loan market to contract. What if you think that this kind of debt, being non-asset backed, is not just unethical but unsustainable inside a functioning free market? What if you think that many institutions have made use of debt inflation to bloat their bureaucracies, facilities and other non-academic investments via a bubble that can and should pop? What if an alternative financial product should exist that forced institutions to put skin in the game towards the permanent economic future of the students that they are ostensibly responsible for and selling a product towards advancing?

I think that we need to remember that debt is primarily a mechanism for moving around value, and that the intrinsic value (liquidity) that it provides is distinctly marginal. We as a society in America should question whether it is a robust long term strategy for the country's economic future to even allow for the option of selling an education with debt-based financing without some kind of a positive outcome guarantee. Otherwise, the incentives are almost guaranteed to result in bad actors exploiting the disenfranchised. Outside of the moral hazard here, the more unavoidable hazard is the market hazard of overleveraging assets whose intrinsic value cannot support the bonds they back, causing an unnecessary macroeconomic financial shock that could be avoided with foresight.

https://leginfo.legislature.ca.gov/faces/codes_displaySectio....

It's a two step process. First your get the default entered if they don't respond, then you ask for judgment for damages. Maybe that's where the confusion lies. The default is entered by request almost automatically if they don't respond. Getting your judgment for damages requires evidence to prove your case.

And I imagine most of us agree collection should be pursuant to due process.

I don't really see any other options.

Ill try a perhaps stupid example I guess..

If I agree to borrow my car to you I kinda want it back eventually? In bankruptcy it becomes a conversation about who needs my car more? uhh??

Others should learn from that not to allow anyone else to drive their car (even if they badly need it) and that having the keys mean you don't have to give it back.

Banks creating money out of thin air does change the topic a lot.

I'd like to see a [small] basic income that pulls a substantial number of people out of the paycheck-to-paycheck horror movie.

Even in a simple terms, it hurts people's sense ethical and societal obligations. Why should I deprive myself of consumption and be a responsible economic participant, when I can spend money I don't have and then have my debt forgiven?

It's both great to know "man, that dollar went a long way"... and still feels like a tiny drop in a very large bucket.

Compare the sheer toil of using food stamps vs using the mortgage tax deduction.