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'Bad Paper' Explores The Underworld Of Debt Collection


This is FRESH AIR. I'm Terry Gross. If you've ever gotten a call from a collection agency and wondered if they were on the level, our guest Jake Halpern says you don't know the half of it. Halpern grew up in Buffalo, New York, which happens to be a national center of debt collection agencies. He writes that more than 5,000 people in the Buffalo area work in debt collection.

In his new book, Halpern takes a dive into the underworld of the debt collection industry, where having a criminal background is no barrier to entry and may sometimes be useful. He writes of a world in which batches of old, uncollected debts may be sold again and again to collection agencies and may end up being worked by two companies simultaneously. Jake Halpern is a contributor to The New Yorker and The New York Times magazine. His new book is called "Bad Paper: Chasing Debt From Wall Street To The Underworld." He spoke with FRESH AIR contributor Dave Davies. Dave asked Halpern why phone calls to people's homes to collect debts often come from agencies other than the companies those people originally owed money to.

JAKE HALPERN: Well, a lot of the debt that is being collected on in America is - as you say, it's not coming from the original creditor. What happens is you owe Bank of America, you know, $432, and Bank of America tries to collect on this money for 180 days, at which point, they basically give up on it or it's no longer an asset for the bank. and they tend to sell it off for pennies on the dollar. And that gets into the hands of debt buyers. And there's a food chain here, so the top debt buyers pay the most for this debt, and they try to collect on it. And any of the accounts that they can collect on, they keep that money, and whatever they can't collect on, they sell to the next debt buyer and so on and so forth. And so slowly your debt makes its way to the hands of - buying it for less and less and trying to get some money back on it.

DAVE DAVIES, BYLINE: Right, because it's harder and harder to collect, as various parties have tried and failed.

HALPERN: Exactly.

DAVIES: Now, you profile a guy Aaron Siegel who once worked on Wall Street but decides to come back to Buffalo. And he buys debt from, you know, parties that had it and couldn't collect on it...


DAVIES: ...And sets out about collecting it. Tell us about some of the people, you know, that he had to deal with when he opened his own agency.

HALPERN: Right, so Aaron moves back to Buffalo. He's a banker, and he kind of discovers that he's surrounded by all these folks that are working in the collection industry and that people are buying paper or buying this debt and opening shops. And it's lucrative - this is kind of pre-Great Recession, just before. So he says, I'll have a go at this.

So he buys some paper and opens up a small shop, and he's interviewing people to hire. And, you know, he's approaching this from a kind of a New York banking perspective, kind of looking for kind of, you know, button-up people who kind of look very presentable and trustworthy and whatnot. And he's hiring these people and realizing they are terrible at collecting. And he realizes what he needs are much kind of shadier characters - people who can hustle and have the gift of gab on the phone, and they may be rough around the edges, or they may not be entirely trustworthy, but they can convince the consumer on the other end of the call that they should open their wallet and part with their money.

DAVIES: All right, so this guy Aaron Siegel is now buying debt from people - this is, you know, debts that people haven't collected on - and then subcontracting out the work of getting that collected. And then he sometimes buys debt and then sells it to other people, hoping to make a profit just on the switch. He ends up developing an important relationship with a guy named Brandon Wilson. Tell us about him and what he brings to the relationship.

HALPERN: So Aaron starts buying paper from Brandon, and the first thing that he knows about Brandon is what Brandon tells everyone that he meets, which is that, look, you got to know I've got a criminal record. I did 10 years in the can for armed robbery, for larceny, for armed assaults but I've - I got out, you know, I changed my ways, and I'm now a debt collector and debt broker. And I will sell you the best paper you've ever had. And sure enough, the paper that Aaron starts purchasing from Brandon ends up being terrifically profitable. He's making - he's buying a portfolio of debt for $30,000 and making $90,000 in three months. And, you know, for a guy coming from Wall Street, you know, even for him who's seen kind of the drama of the market, this is kind of amazing. Brandon becomes this kind of go-to guy who he just relies upon to find this good paper.

DAVIES: All right, now this is a time where we might want to flesh out one piece of this. If I buy uncollected debt from somebody who's bought uncollected debt from somebody else, who may have bought it from somebody else, that means that a lot of people have tried to collect on this package of debt. And it can be thousands of individual debts, right?

HALPERN: Correct.

DAVIES: How do I evaluate the likelihood that I'm going to be able to get some collections out of that and make back what I've paid and then some?

HALPERN: That's the trick. I mean, there's no easy or quick way to put a price tag on this debt. And what Brandon's specialty was - and what he says is, I buy crap, is what he calls it. It's basically old debt. It can be as old as 10 or 15 years since it was charged up by the banks. But the key is, he tries to find debt that, based on his research on who he's buying it from, what the chain of title of the debt is, where the debtors live, that it hasn't been collected upon efficiently.

One example of this is, if you see a collection agency that's in trouble or it's being sold at a price that's lower than it should be - so if he can get wind that there's a collection agency in Ohio that's having a hard time and struggling, he will go out and try to buy out their inventory because they need the cash, and they'll lowball offer him what the debt is. And Brandon had this uncanny ability to do this - to time and time again, to find either an agency in that, out of desperation, needed to sell its debt off cheap. Or he would do his research and find, you know this portfolio of debt - he told me he found one that had been sitting idly in a call center in Brazil for five years. And he would just, you know - he knows everyone. He would work the phones. He would get the back story on the debt and then get a good price on it. And then he was able to pass it along to his buyers at a deal where he made money on the flip, but they made money also collecting.

DAVIES: So you could take a package of debts that were, you know, theoretically worth millions of dollars or tens of millions, and because you're not going to collect on most of it, you can get it for a few thousand or tens of thousands. But if you do well, you can make a few hundred thousand.

HALPERN: Yeah, it all depends on the debt. People think - and Brandon's the first to say this - people think that, oh, pennies on the dollar, how can I possibly go wrong? But it's just a matter of scale, and the difference between one penny on the dollar or two pennies on the dollar - I mean, that's twice your money, and that can mean the difference between you staying in business or not. And Brandon really prided himself on being able to kind of bear down on those crucial fractions of a cent that would make all the difference in his profit margin.

DAVIES: All right, so part of this is just being a smart analyst. Brandon has a criminal background, and he brings another element to the relationship. Talk about that.

HALPERN: Yeah, so, you know, I spent a fair amount of time with Brandon. And I would hear him when he was working as a debt broker, brokering a deal. And at the end of a call, he would often say, what I came to think of as the Brandon Wilson insurance program. And he would say to the person that was buying it - and he would say, look, if there's any problems with this purchase, if there's any funny business, if it turns out the debt that you're buying from me has any problems with it at all, I'm going to go down to the person that sold it to us and bust their teeth in, if need be to make sure I straighten this out. And then conversely, to the person who was selling the debt in the deal, he would say, listen, you know, I'm a perfectly reasonable guy, but if I find out that there's any problems with what you're selling me, if there's any funny business with this spreadsheet that you're passing along, I'm the worst guy in the world to deal with and you don't want to deal with me. And he has this kind of thick Boston accent that's - I can't really replicate, but that the whole feeling that you get from it is, wow, you don't want to cross this guy. And of course, - and we'll talk about this - in the industry, there are often problems with a debt that's being bought and sold. And also there's not a ton of regulation going on. So this insurance program that I think of it as this promise that Brandon made is meaningful because there are real problems, and there's not a lot of recourse, as far as the law, for people once they've gotten burned.

DAVIES: We're speaking and Jake Halpern. His new book is "Bad Paper: Chasing Debt From Wall Street To The Underworld." We'll talk some more after a short break. This is FRESH AIR.


DAVIES: This is FRESH AIR and if you're just joining us, our guest is writer Jake Halpern. He has a book about the debt collection industry. It's called "Bad Paper: Chasing Debt From Wall Street To The Underworld."

So you write about this interesting alliance between this former Wall Street banker, Aaron Siegel and this character Brandon Wilson, who's been in debt collection for a long time, has a criminal record for armed robbery and is a tough guy. Brandon buys a package of $47 million in debt but pays penny on the dollar because it's beat up - it's been worked a lot. People have tried and failed to collect all of it before. And I wanted to ask, when you buy a package of debt like that, what do you actually get? I mean, do you get a truckload full of documents and contracts? Do you get a spreadsheet with names, addresses and amounts?

HALPERN: You get astoundingly little, is what you get. In this case and most of the time what you're talking about essentially is just a spreadsheet with a list of the debtor's names, their addresses, their Social Security numbers, the balances on the accounts, maybe the date that it was opened and closed and that's about it. I mean, the Federal Trade Commission has done a study where they've shown that - they look at the large debt buyers - that only about 6 percent of the time do these purchases come with actual account statements. So you're not talking about much. He's buying an Excel spreadsheet, is really what he's buying.

DAVIES: Right. So who knows what exactly has happened before. Now, you write that when Brandon starts and his people start trying to collect on these debts, they cup into a couple of surprises. And you write about a couple of the folks on this list who supposedly owe money - Theresa and Joanna. Give us one of their stories.

HALPERN: So maybe we'll go with Theresa's story. So Theresa is one of the consumers who's on this package of debt that Brandon buys. And I should just add that this debt ends up being a great deal for Brandon because he finds an agency that's selling it off on the cheap 'cause they're desperate to raise cash. And initially, it proves to be quite profitable to Aaron's collectors.

So cut to one of these consumers. There's a woman named Theresa living in the Southwest. She's a former Marine. She is not - whatever you would think of a stereotypical debtor, she's not. She's been saving for her 401(k) since she was in the Marines. She worked a job and helped support her parents even when she was in high school.

And she - what really kind of starts her downward spiral is that her marriage falls apart. She finds out that her husband's cheating on her and she leaves - or, she kicks him out of the house. And suddenly she went from a double income to a single income and the bills start kind of piling up and she goes into some amount of debt. One of these debts is a Washington Mutual credit card debt and that's the one that Aaron and Brandon end up buying. So after the bank basically sells this off, some time passes and Theresa gets a call and says, you know, is this your name, this is your Social Security number, this is your address? Clearly, they know a great deal about her - well, you owe this debt and you need to pay us immediately and if you don't, there's going to be legal repercussions and we can maybe refer this to lawyers. And they spook her pretty well. And at the time, Theresa's actually apply for a job with Border Patrol and she's trying to clear up her credit because that's a key component to getting the job and keeping the job.

So kind of as these calls keep on coming in and getting scarier and scarier and more kind of insistent, she finally says, OK. They work out a deal where she's going to pay them $2,700, which is not a small amount to her. And they withdraw the money directly from her checking account in chunks of about 600 bucks. And she feels, OK, like I'm on the road to repairing my credit.

The problem is, is that when she makes her last payment, when they deduct it from her account for the last time, she can't get back in touch with the company that's taking her money away and she can't, therefore get any proof that she's paid this debt. And when she checks with the credit agencies there's no record on her credit report that she's paid. So here she's put $2,700 and it seems to have vanished into nothing.

DAVIES: So Theresa thinks she's paid this debt off and now Brandon - the collectors for Brandon, the guy we've been following - call her. And she says wait a minute, what debt? Right?

HALPERN: Right. So Aaron and Brandon's collectors start calling a number of these people on the package and they tell them the same thing. They say, hey we just paid this debt off to someone else. And Aaron's collectors are perplexed, like, how could that be, like, they are the rightful owners of this debt. Who else did you pay it out to? And this starts making its way back to Aaron and he gets spooked because it appears that someone else has gotten access to his debt - the information of all these consumers - is calling them, collecting from them and pocketing the money. And he's - he doesn't know what to do. I should say, he knows one thing - he knows that calling the local prosecutor or bringing a lawsuit is not going to get him what he wants because he's been burned in the past not in this particular way, but buying bad paper and he knows that a civil remedy is not going to get him the kind of immediate intervention he needs.

DAVIES: But he has another number to call and that's his buddy, Brandon, who's the tough guy.

HALPERN: Right, exactly. Call Brandon - he's the fixer.

DAVIES: And what does he do? What does Brandon do?

HALPERN: So Brandon basically gets on the phone with a few of these debtors and finds out who the processor was that was processing the credit cards. And then he calls the processor and says, there's fraud going on here. He actually pretends to be the debtor. He says, you know, this is fraud and I want to know who charged this. And by working backwards, he gets to the agency that actually pocketed the money. So he calls them up on the phone and the owner of this agency basically says that he can just buzz off, that he insists that he owns the debt and he's not going to entertain Brandon's call and you know, forget about it.

DAVIES: So the guy he calls - by the way, you ended up interviewing later right? His name is Bill. He's a pretty tough guy, too. And so how does Brandon deal with this?

HALPERN: Yeah. So Brandon is giving his kind of, you know, tough-guy South Boston or, you know, his kind of Boston-tough routine to - and Bill, who's the owner of the shop that's working the paper, is totally un-intimidated. He basically says, come down to Buffalo and we'll see what you're made of - like, I'm not backing off on this, I own this paper. And Brandon then decides that, you know, the phone is not going to solve this so he stands up in the collection agency and he says, we're going down to Buffalo to shut down a rogue agency. Who's with me?

HALPERN: And we should note that Brandon is in Bangor, Maine, right?

DAVIES: Right. He's in Bangor, Maine so it's like a 10-hour drive. So immediately, like four or five guys stand up, most of whom are ex-cons, almost all them were over 200 pounds. And they cram into this small Mercedes sports car and they're going to go down to Buffalo because Brandon needs to put a stop to these guys who are collecting on their debt.

DAVIES: And what happens when they get there?

HALPERN: They set out to this corner store, where they've tracked down Bill, the guy that owns this agency that's been collecting on Aaron's debt. Now, Bill is a big guy. He's well over six feet high, 200 pounds and Bill's got a gun behind the counter. And Bill's no, you know, softy. And they start having this back and forth about who owns this paper that's being collected upon.

And there was a real tough-guy show. Brandon is pulling up his shirt, saying, I got stabbed here, I got shot here - you're not going to intimidate me. I'll burn down your place.

But finally, they managed to reach an agreement and the agreement they reach - is kind of a truce, if you will - is that Bill will be able to keep all the money that he's collected on this paper, which is considerable, it's far more than he's paid for, but he will refrain from collecting on it in the future and kind of put it to rest.

So it was, I guess, a win-win. Bill was happy, he felt he made good money. Brandon had kind of stopped these collections on his paper. No one got shot and everyone saved a little bit of face so that the kind of great standoff was diffused.

DAVIES: And in this business dispute, nobody even gave a thought to, you know, calling the Better Business Bureau or the state attorney general or filing a lawsuit?

HALPERN: That's right. And this is an important point. That's a very important point. In some ways, all of this sounds so crazy, so far-fetched, so aboriginal. But this is perhaps the inevitable in the absence of regulation, in the absence of close policing. When a guy like Aaron has to call a guy like Brandon to protect his own assets because he feels that for a host of reasons, the authorities can't do it. And these guys, weirdly, as crazy as this whole dynamic is, in the absence of kind of a court officer or a regulator there, they work it out. And so this moment - and also in fact, the very relationship between Aaron and Brandon isn't as quirky and random as it seems. It's - as I said - it's what happens when you can't have a perfectly safe marketplace.

DAVIES: Yeah and you know, what strikes me is that's what's obviously missing here is some uniformed registry where when you owe a debt, that's on some one, unified database somewhere and so it can't be sold twice. You know, with houses I mean, there are deeds that are in county courthouses and the mortgages are public documents so there's no dispute as to who actually owns a piece of real estate. But in terms of a debt, it's like whoever - it's just so simple in a computer to copy a list of debtors' addresses and amounts. And so you can have multiple people collecting on the same debt.

HALPERN: It's true. And you have people - what they say selling, double selling, triple selling, quadruple selling the same file to multiple different buyers. This is especially common in the payday loan industry. But it creates this total sense of chaos. I mean, can you imagine the equivalent? Can you imagine if there was no Department of Motor Vehicles? There was no VIN number on cars, that every time you bought a car from someone, you were just buying it on faith that they really owned it? It would be insane. It would be total chaos, but that's basically the system that exists for consumer debt in America. It's funny 'cause just yesterday I was talking to some folks that I've been interviewing quite a bit that have - are trying to create a global debt registry, which would assign a - the equivalent of a VIN number on a vehicle to each debt to keep track of this. And it's a very common sense idea and it's kind of mind-boggling in some ways that it hasn't been implemented already.

GROSS: Jake Halpern will continue his conversation with FRESH AIR contributor Dave Davies in the second half of the show. Halpern's new book is called "Bad Paper: Chasing Debt From Wall Street To The Underworld."

I'm Terry Gross and this is FRESH AIR.


GROSS: This is FRESH AIR. I'm Terry Gross. Let's get back to the interview that FRESH AIR contributor Dave Davies recorded with Jake Halpern, author of a new book investigating the underworld of the debt collection industry, including the speculators who buy debt and hope to profit by selling it and call centers that contact the people who owe money. The book is called "Bad Paper: Chasing Debt From Wall Street To The Underworld."

DAVIES: So let's talk a little about how the actual collection of debts actually works. You visited a few of these places, and one of them was Brandon Wilson's shop in Bangor, Maine. Just describe the place, you know, what it's like...


DAVIES: ...Who works there.

HALPERN: So Brandon has set up shop in Bangor, in an old building that he says used to be a hotel. And on the first floor - it's a kind of beautiful old stone building in the downtown - and the first floor is kind of open cubicles. And then the floors above are the old hotel rooms. You can still see the kind of clawfoot bathtubs. And he - his deal is is he would allow his collectors to stay upstairs in the old hotel rooms for like 50 bucks a week, so it was kind of a collection agency/lot house if you will. And so they could live upstairs and then kind of come downstairs to work. And basically, the collecting - the act of collecting was a two-part process - find them and then collect. And the find them is called skip tracing. And that's basically - if you think about it - if Brandon's buying these old debts, that means that the contact information that's on these spreadsheets that he's getting a hold of can often be many years old, and people move. So the first step is to kind of play detective and use various databases and call neighbors and track them down. Brandon's thing is that the best person to find is the scorned ex-lover, who will then, you know, in vengeance say here's his mom's number, his sister's number, his work number, his cell number, and they would put it on mute and say we got a rat, you know, and that was their - so that was all part of the find them.

DAVIES: So then once you've located somebody, what happens then?

HALPERN: So once you've located them, two things - one, Brandon had this classification system. He would classify the debtors based on what he felt the chances of them paying were, and then he would engage in the talk-off. And the talk-off is the most fundamental part of the whole thing, which is what do I say to you that somehow convinces you to open your wallet? And Brandon's whole thing was you have to marry the debtor, like, you have to somehow start off so sympathetic and so kind of understanding, almost like a therapist over the line, kind of listening to their problems and kind of gaining their trust. And then there was this pivotal moment where you would kind of switch or segue from being this kind of empathic suitor to being a little bit more of a hard-edged collector, saying look, I get this and I'm going to work with you, but you've got to pay this and there's going to be consequences if you don't pay. And it was a real skill and kind of a gift of gab to be able to do it well.

DAVIES: He said you always be respectful and he believed most people want to pay.

HALPERN: Yeah. I mean, Brandon felt that when the debtor - when the consumer on the other end of the line would scream and yell and kind of get very agitated that you couldn't take it personally, that this was them vocalizing their powerlessness and their feeling of being broke and that they would pay if they could. He kind of had this magnanimous view of it, I guess. But he also knew how to kind of very artfully make a special arrangement with them that would take whatever $10 or $20 or $50 a month that they could offer.

DAVIES: Yeah, you describe a few of these conversations and somebody talks about her, you know, her crappy boyfriend or husband and he was off dealing drugs. And he says well, what kind of drugs? And they talk about it.

HALPERN: Yeah, he does. He gets this guy on the phone who's talking about how his girlfriend was a drug lord. And Brandon, you know, Brandon knows the streets. And he starts just, you know, shooting the bull - just kind of talking with this guy, like, what kind of drugs was she selling and where did she do time? And man, that must've been rough and, you know, and the guy - they're kind of having this moment together. And I'm realizing I could never have that moment.

DAVIES: Yeah, well, you got a chance to try.

HALPERN: Yeah, I mean, I can say that definitively because I then tried. He said you try it. And I said no, I'm really not going to be any good. He said no. You want to know what it's like, do it. So I said OK, and he puts the headset on me, and he's got it setup on an auto dialer, so that these are all people that he's already verified the address for. And you just hear the - you know, the phone ring and then all of a sudden, you're talking - or I'm talking - to the debtor.

DAVIES: Well, how did it go? What'd you say?

HALPERN: Right, so I get on the phone with this woman who tells me it's a - I can see that's an old cell phone bill. And she's telling that she's out of work, and I'm thinking to myself marry the debtor, marry the debtor and - which just seems so ridiculous in the moment. And I say that must be very hard being out of work. What job, you know, I'm trying to chat her up, and then I say well, look, can you - do you think you might be able to pay this? And I'm listening to my voice and I'm thinking like, you know, I wouldn't pay me. But she says well, I don't have a credit card, but I could - I could send you a check. And then eventually she hangs up on me. And Brandon is right there kind of on my shoulder kind of playing coach, and he immediately says you know, you missed your opportunity there.

The minute that she offered to write a check, you should've said OK, let's set up, you know, when are you going to send the check in? And I said yeah, but she hung up on me. And he said that doesn't matter. The minute that you could commit her to say I will send that check in is an important psychological moment because she's admitted that the debt is hers and she's promised to pay. And that promise makes the would-be debt more valuable, so I messed that up. And then there was another call with a woman I talked to who is - who told me she was bipolar and she was explaining that, you know, she had been in and out of hospitals and that she wasn't currently working. And I tried to get her to pay as well, just saying can we work something out? And then she eventually hung up. And again, Brandon was right by my shoulder and he said look, what you should have said is I've got 90-year-old grandmas on oxygen tanks paying 25 bucks a month, surely there's something you could put forward as a good-faith gesture of your intentions. You know, and I just kind of nodded my head sheepishly and thought yes, I probably should've said that if I was going to collect on it.

DAVIES: Now when you hear somebody say you know, I was bipolar, I've been through all this. Isn't part of you saying gosh, you've been through enough. Why am I harassing you for a cell phone debt?

HALPERN: Yeah. I mean, and honestly, there's two things that are going through my mind. One is I feel kind of wretched that I'm the guy that's hounding her to pay this bill, but part of me actually, I hate to say it, was also thinking, like, is this true what you're telling me? Now with her I felt it probably was true, but when you talk to some of these other folks, everyone has an excuse. And you understand how the collectors themselves start to feel jaded by it, especially when they know that their payment is dependent upon it. But the woman who was bipolar, she really did sound credible to me. Her voice sounded shaky, she - she sounded kind of like she was on the verge of breaking down. And, you know, I really just wanted to hang up the phone or tell her, like, don't worry about it, it's going be OK, which is, of course, not an option when you're a debt collector.

DAVIES: You know, a lot of the people that you describe in this book were people who'd had rough lives. A lot of people with criminal records and, you know, rough childhood histories. And for them, getting into debt collection was a singular route back to a somewhat respectable life - to have a paycheck and an honestly earned a living. And you kind of - these are sympathetic people. It's hard not to admire them. And then the other side of it is I think, you know, gosh, they're preying on these people, in some cases who probably don't even know that they're being charged with, or at least not as much as they're being charged with. And it seems like this kind of awful situation of the poor and unfortunate preying upon the poor and unfortunate.

HALPERN: It is. I mean, it would be convenient and easy to just kind of vilify the collectors as the kind of heartless player in this drama. But what was apparent was what you said, which is that a lot of these guys that are collecting are just a step or two beyond poverty or if they've done well themselves, they've worked very, very hard to pull themselves out of difficult situations. And yet they're collecting on these people that could be their neighbors or family members, and it's kind of - there are definitely times where it feels heartbreaking and just kind of depressing.

DAVIES: Jake Halpern's book is called "Bad Paper: Chasing Debt From Wall Street To The Underworld. We'll continue our conversation in a moment. This is FRESH AIR.


DAVIES: This is FRESH AIR. And if you're just joining us, we're speaking with writer Jake Halpern. His new book about the world of debt collection is called "Bad Paper: Chasing Debt From Wall Street To The Underworld."

So what were some of the things that debt collectors do that they're not supposed to do?

HALPERN: So, when a collector gets on a phone with the consumer there's the talk-off. You know, Brandon's strategy was to marry the debtor or whatnot. But there are much more aggressive talk-off's. And in one of the ones that I heard talked about was something called the shake. And the shake is, I call you up and I say that I am a process server and I'm getting ready to serve papers to your house that are a legal summons. Oh, what's this about? Well, I can tell you to call this number and then that number is actually a number at the collection agency. The person calls up nervously and says, I just got word that a process server is on their way to my house. And they say, well, it's over this matter of the debt. Why don't we clear this up right now, before you get dragged into court? So that...

DAVIES: All right, so it's a complete lie. There is nobody headed to their house, right?

HALPERN: Exactly, it's the lie. So there's the threat - that's a lot of it - it's the threat of legal action. But there's also the threat of seizure of property - there's uglier stuff too, threats of violence. And these threats have been on the rise. And if you think about it a kind of makes sense that this behavior would often occur at these shops at the very bottom of the debt food chain because the guys that are buying this directly from the bank, that paper is better. But every time it gets bought and sold and the harder to collect on accounts end up the ones getting passed along, by the time you get to the bottom these are accounts that no one else has been able to collect on. And that's where a lot of the worst behavior comes in. You have to almost up your talk-off aggressiveness in order to get the money.

DAVIES: Now, there are laws about debt collect, right? What are you - you're not allowed to threaten legal action unless you're an attorney, right?


DAVIES: And you're not allowed to threaten, to put them in jail, or any of this other stuff.

HALPERN: That's right and you can't threaten legal action if debt is beyond the statute of limitations. That often is no longer legally enforceable, depending on the state - three to six years or something like that. So you can't say, I'm going to sue you on this 1984 credit card. So there are rules and there's something called the Fair Debt Collection Practice Act, so there are rules of the books but it hasn't been enough, thus far, to kind of create a safe marketplace for the buying and selling and for the collecting of debt. We should note that the Consumer Financial Collection Bureau is about to unveils some new rules, probably in the next year.

DAVIES: Now, that's the agency that was created in the wake of the financial collapse to try and put some more stability and protection into this.

HALPERN: That's right. I mean this is Elizabeth Warren's baby, this is the idea that the consumers need to be protected from these predatory lenders and they been doing a good job. They have fairly limited resources in the big picture. I'll give you one quick example of that, so right now the Consumer Financial Protection Bureau, or the CFPB, is monitoring and policing 175 of the biggest debt collectors in the business. The catch is there are over 9,600 collection agencies in the United States, so in order for that enforcement to really cover the full scope of the industry it needs more resources. Right now, they're doing what they can and they're doing a pretty good job of it but, you know, it's not enough.

DAVIES: And so the chances of being one of these little corner store with a bunch of ex-cons - you know, not to be dismissive - the chance of them getting investigated, not so great.

HALPERN: That's right. Because of those 9,600 plus collection agencies in the United States, 42 percent of them are four people or smaller. That shows you just how difficult it is the police. And so these are shops, that if they get in trouble or they feel that trouble might be coming, they can shut down and then open back up.

DAVIES: Do the people who owe these debts really have to pay them? If they just dodge the calls and ignore it, will it go away?

HALPERN: It depends on how old the debts are. Now a lot of the debts that say, Brandon was collecting on or what they call out of stat or time-barred. That means they were older than the statute of limitations and that can be three to six years old. If your debt is beyond the statute limitations - particularly if you're in a state where it's just three years old, there's not a legal reason you should pay it in terms of any risk of being brought to court. The other issue is your credit report. So most major data about your credit history goes off your report after seven years. So if you have a debt that's five years old, six years old, it's either beyond the statute of limitations or it's about to go off your credit report. It doesn't necessarily make sense that you should take out all home-equity line of credit against your house or tell your kid they have to go to a state college or whatever, that's much cheaper, that you're not as happy about. I mean from a purely self-interest perspective, it may make sense not to pay it. I mean, the other reason that you might want to consider not paying the debt is the reason of - does the person on the other line of the phone even own the debt that they're calling me about? Because there's so much business with, you know, loans being doubled and tripled sold and you want to be very careful that you, you know, know that you're not being hustled in some sort of scam.

DAVIES: And is there any way for somebody on the other end of the phone line to know that? How do you check and see whether somebody has the right to collect the debt?

HALPERN: It's very hard. I mean, the issue is really - the biggest problem is in the payday business. But in the package - in the book I'm looking at in the package, that was credit card debt that was stolen. You can call up the original creditor. You know, say Chase or Bank of America and say hey, I'm getting a call from this agency claiming to represent this buyer, do they own it? And they may know. But they may - the banks sometimes will say, all we knew, is we sold it to this company in Toledo, Ohio. After that, we have no idea what happened to it. So this is a problem and this gets back to this idea there needs to be some sort of registry. And there is this - these guys have created something called the Global Debt Registry and the idea there is that there's a consumer portal, so if someone's calling you, you can go there, enter in your information and it will tell you who owns the debt and who should be collecting on it. But that doesn't exist right now, so the answer is no there's not an easy way to be absolutely certain that the people collecting on the debt are the rightful owners of it.

DAVIES: So when you say that these guys created the Global Debt Registry - they've created it but people haven't bought into it, so is not widely used.

HALPERN: It's not widely used. They have - some of the original creditors, some of the banks are starting to pay attention to this and use it but it's not on the, sort of, scale that would be necessary to truly make it useful to consumers.

DAVIES: One more thing - so if somebody does have a debt that's beyond the statute of limitations and so old it's not on their credit report, why would they give in to a skilled, you know, operator like Brandon? What's the psychological motive or whatever that makes them pay?

HALPERN: Two things - one is that some people feel that they have a moral obligation to replay a debt, that I borrowed this money and I want to pay it and I realize you're not the guy I originally borrowed from it but I want the peace of mind that I paid back what I borrowed. There are people like that. The other reason is that the collector would be so skillful at the talk-off, that they would create a sense of urgency and the person on the other and would just simply not realize that they weren't legally liable for this or that this wasn't reflected in the credit report because they were simply not well informed. So either of those two reasons could result in them paying this debt that, you know, technically they didn't have to pay.

DAVIES: And I guess you might just want the phone calls to stop.

HALPERN: Yeah, that's right. You might just want the phone calls to stop. That happened to my mother. She was actually being hounded over a debt that was wrong, it wasn't hers and she's no wilting lily, but she paid it because it was like a shakedown. And she just didn't want to be harassed anymore.

DAVIES: Jake Halpern, it's been interesting. Thanks so much for spending some time with us.

HALPERN: Oh, it's been my pleasure.

GROSS: Jake Halpern is the author of the new book "Bad Paper: Chasing Debt From Wall Street To The Underworld." He spoke with FRESH AIR contributor Dave Davies, who is also WHYY's senior reporter.

Coming up, Ken Tucker reviews Prince's two new albums. This is FRESH AIR. Transcript provided by NPR, Copyright NPR.

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