With a nod to Elmore Leonard, Bad Paper seeks a bit of love for certain bad or not-so-nice people—the hundreds of debt collectors, some of them ex-cons, who chase down little old ladies on Social Security to cough up their last pennies to pay off the money they borrowed from the likes of Bank of America or Chase. But the marks—who also include the jobless, the mentally ill, and, yes, sometimes, people like you and me—aren’t really paying off the banks. No, the banks long ago sold off these debts to debt buyers like the heroes of this picaresque nonfiction yarn: Aaron Siegel, who is a buyer of old debt, and Brandon Wilson, the ex-con who is his best collector. Indeed, these lists of old debts—the bad paper—are often traded and bought and sold over and over, from Chase down to fairly civilized collectors like Siegel and Wilson, then on down to more thuggish types, and then all the way down to the only real villains of this book: America’s many, and very well-paid, collection lawyers.
As Halpern explains, these lists of old debts, even when worked over or “beat up” by previous collectors, can still be worth something. Since these are lists of real deadbeats, how is that possible? In many a list, however gnawed over, there is still “meat on the bone,” as Siegel puts it. And when the lists are sold off for next to nothing, debt buyers like Siegel and collectors like Wilson can still clean up. To take an example from Bad Paper, suppose you buy a list of more than eight thousand accounts with a face value of $47.5 million, but it’s been “beat up” at least once by another debt buyer and is sold off to you for a penny on the dollar. Now suppose you have collectors calling around the clock, and even if nearly everyone slams down the phone, you might still get a tiny fraction back, oh, say, $1,000,000 of that $47.5 million. But didn’t you buy it for a penny on the dollar? Then that gives you a return of two times the principal, in maybe just two or three months.
And so it goes—I mean the list, from one debt buyer to the next. It’s the point of Bad Paper to chase such a list, all the way to the collection court. But here I should admit my own interest as a lawyer who sometimes sues payday lenders and the like. I was at times more interested in the footnotes and side points that carry the public-policy argument of the book than in the lives of the collectors. For example, as I found out, in 2009 the Federal Trade Commission received 88,190 complaints about abusive debt-collection practices. How many enforcement actions did the FTC bring that year? One.
But that’s for policy wonks. Halpern, who is an excellent writer, is also out to entertain. So he hangs out with debt collectors from Maine down to Georgia, from Las Vegas to Buffalo, and lets his dramatis personae talk.
And the talk is entertaining, since in this particular patch of Elmore Leonard land, all of these guys have to live by their wits and worry about their day-to-day double- and triple-crossings of each other. Yes, despite what you might assume about the level of difficulty involved, one debt collector often does try to swindle another. After all, many of these lists come “as is,” with no guarantees, and may be replete with names of people who don’t owe anything at all. As the debt buyers prey, they are also preyed on. And it’s a little awkward for any of them to go to the feds to complain, since this is hardly an industry on the legit. So debt collectors have to use the same threats and mind games on each other that they employ to get the deadbeats to pay. Be patient, be diplomatic, and say things like “Do it again and I’ll break your fucking nose.” That’s why the more respectable debt buyers like Siegel can use the help of an ex-con like Wilson.
So does Halpern make us feel any compassion for these guys? Well, here’s one thing to say about this kind of bottom-feeding: It may be the last way in this country for a poor kid who starts out on the economic margins to work his way to the top. Try to think of any other business where an ex-con can end up being backed by a big hedge fund. Here’s what Wilson—who spent years in prison—tells the author: “The collections gig has been my salvation. When I was younger someone told me, ‘Put on a suit and you can rob anybody.’ Truth is, I haven’t changed much, but many people respect me now because I have a business and property. . . . If you can pay the right lawyer or have the right look, you are respectable. If you walk in with a ripped shirt and a public defender, you are an animal.”
Midway through the book, though, Halpern addresses the stomach-turning part: how collectors prey on hard-pressed debtors—the jobless, the brokenhearted, the mentally ill—to get them to pay money that they really don’t have.
Why do they pay up? In Wilson’s case—and I admit I came to like Wilson—it’s because he knows how to “marry the debtor.” He doesn’t threaten; he doesn’t talk about bringing a suit, much less raise the specter of incarceration. It’s true that’s all illegal under the Fair Debt Collection Practices Act. But the real point here is that such measures don’t get results. No, as Wilson notes, a good collector is even and caring. The good collector will say things like “It’s the right thing to do” and “You’ll feel better about yourself.”
Here’s what collectors know: People want to pay. It’s what Porfiry knows about Raskolnikov: He wants to confess. The good collector helps the debtors get out of their mental jails.
After explaining, Wilson’s collectors dare the author to make a call; for me, and perhaps for Halpern, it’s the most unsettling part of the book. This is not a writer who calls attention to himself unduly, so the encounter that prompts him to enter into the narrative stream of Bad Paper is significant. Halpern does try to marry the debtor. He tries to show empathy. He listens to the woman Wilson assigns him. She is not a deadbeat. She has been ill. She is bipolar, didn’t he know? But Halpern lets her go. He writes that he lacks a real collector’s rapport with people, together with Wilson’s “innate sense of when to segue from courtship back to the unpleasant matter of collecting.” But the real problem, he admits, is that he doesn’t have the drive. If he were desperate enough, if he had to do this for a living, if the alternative were to push dope out on the streets . . . well, he might be much readier to squeeze her. As he later quotes one collector, who happens to be African American, debt in America is the “white man’s dope.”
So a dealer can have only a certain amount of empathy. Or, as one collection manager tells the author: “You have to empathize with debtors but not have sympathy, because if you have sympathy you don’t get paid.”
Of course, that’s for the people who actually want to pay. Still, in the bigger picture, it’s all a numbers game. You have to call a whole lot of people to find the paying clients. And there are other motives in play beyond the comfort of a clearer conscience—above all, fixing up one’s credit score. But some pay even when they have no chance of getting into prime credit markets again—for one reason or another, they pay.
I wish Halpern had spent more time with the prey and less with the predators. Personally, I am a bigger fan of Charles Dickens than of Elmore Leonard. But that contrast is unfair to Halpern: I think that, like Dickens, he has a big heart, too. He does have compassion for the prey. It’s just that the predators are more colorful—and they have the better lines.
As Halpern makes clear, the golden age of debt collecting is over. The meltdown ended the good times. In 2008, according to a Federal Reserve Bank study, each consumer had an average of 3.5 credit cards; by 2013, it was down to 2.19. Banks also became more cautious about whom to lend to, and Chase even put restrictions on the recirculation of its bad-paper list. The lists that the debt buyers now get are crappier and crappier. The hedge funds are pulling out.
I can’t say I’m sorry, but when it came to at least some of the collectors, Halpern won me over. I did feel a bit of compassion for these guys. Halpern offers this epigraph at the outset of his book: “Be kind, for everyone you meet is fighting a hard battle.” It’s attributed to either Plato or Philo of Alexandria, whoever that is. As the pope said, Who am I to judge? Didn’t Jesus seek disciples among the tax collectors, who, back in the heyday of the Roman Empire, were guys just like Wilson, working with bad paper?
Thomas Geoghegan is a Chicago-based attorney and the author of the forthcoming book Only One Thing Can Save Us: Why America Needs a New Kind of Labor Movement (The New Press).
