Bad Paper by Jake Halpern

For those of you still paying off your holiday shopping, Jake Halpern has written a book about the state of debt collecting in the United States. It will  make you never want to carry a credit card balance. Americans owe $411.28 trillion. $831 billion is delinquent or unpaid. 30 million consumers owe an average of $1,458.

Banks, credit card companies and other debt holders bundle and sell off these IOU's they can't collect on. Companies then buy this debt for pennies on the dollar usually, try to collect on it and then keep what they collect. It can be very lucrative. Once they think they can't collect any more, they in turn sell it again - and so on down the line. Outside of the biggest debt collection companies, the business is a seedy one and is largely unregulated. The Consumer Financial Protection Bureau focuses on the largest 175 collection companies while thousands of smaller ones go unregulated.

This book is the story of Aaron Siegel who left his Wall Street job in 2005 to move back to Buffalo, NY. He took a job in private wealth management but since there is little private wealth in Buffalo (the debt collection capital of the U.S.) he was bored and decided to switch careers again. Using $125,000 of his own money he bought some "paper" and started trying to collect on it. He hired some veteran collectors to help him. Some of them were of an unsavory sort - ex-cons, drug addicts, con-men - so he hired a floor manager to deal with them. Aaron was making tons of money with 199% returns, 264% returns, 20% returns and on. When Aaron was done with the paper he sold it to Brandon, an ex-con with a decidedly ungentle approach to collecting on the debts.

This book deals with the seedy side of debt collections, not the debtors. It is full of characters, most of them people you hope you never meet, let alone have to do business with. I found this an interesting book about a subject I knew nothing about.

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