Bad Paper: Chasing Debt from Wall Street to the Underworld Hardcover – October 14, 2014

I received this in the early hours of the morning on the book's release day and stayed up all night and most of the next day to read it. It is both suspenseful and horrifying and everyone should read it - not just people who've ever dealt with collection agencies. I was immediately drawn into the tale of one man, Aaron Siegel, who came from a wealthy family. He deals in the business of buying bad debts, those which still need to be collected from people with unpaid credit card bills, auto loans, old utility bills, medical loans, etc.Aaron specializes in the business of collecting debts after banks, credit card, utility, and other companies have given up pursuing debtors and further success seems slim to none. So Aaron becomes the next rung down the ladder, paying pennies on the dollar to banks and others to get their list of debtors. At the start of the book, he's had a bumpy ride (partly due to the downturn in the economy) and owes $14 million dollars to his investors, those individuals or companies who bet that he and his company - Franklin Asset Management - could force enough people to pay on their debts to recoup their investment.Details of Aaron's life - and that of his associate Benny and others in the business -, are mixed in with plenty of shocking facts about how consumer debt affects the economy. For instance, Americans owe $11.28 trillion (yes, trillion) and $831 billion is delinquent. That's where Aaron enters the picture. All he has to do is collect 10 percent of what was originally owed to companies like Bank of America, Verizon, and others and he can make a fortune.But it's a rough, often shady, business with often cut throat competition and few ethics. Sometimes Aaron'a own employees will sell the debts to other companies, essentially stealing from under his nose. And sometimes people who are no longer liable for debts are still severely pressured to pay. The author describes some of those people. Perhaps they are unemployed or they've been impoverished by soaring medical costs (in spite of insurance).They are people like Joanna, someone who has struggled to find work and faces a day to day challenge to pay her bills. The reality is that debt collection is one of the largest sources of consumer complaints to the FTC and, according to the author, the FTC has done little to go after unethical debt collectors (and, of course, some debt collectors play fair). Author Jake Halpern even throws Abraham Lincoln into the mix. He actually was pursued by a debt collector for a promissory note he'd signed (online and other sources for this information are listed at the end of the book).Ironically, some of the debt collectors would have been poor and perhaps even owed money themselves - if they hadn't been hired to go other people who owed money. Sometimes debt collection agencies are the largest employers in a city with high unemployment. . The other companies, the creditors, had already written off the debts as losses. They've given up ever seeing a dime of the money owed them.This is highly recommended. It definitely deserves its recognition as an Amazon Best Book of the Month (October 2014). The book contains notes on the sources of statistics and information (such as the Federal Reserve Bank of New York) . There is also considerable supplementary material for those who wish to pursue such resources as an online link to the Personal Finances of Abraham Lincoln (who, as noted above, had his own experiences with debt collection), as well as detailed notes on each chapter.

Over the last 15 years of my legal career, I have handled a lot of bankruptcy and collection matters and the collection agents have always been this sort of faceless, nameless adversary. It has been a true love/hate relationship running the complete spectrum. For a period of time I had developed a good working relationship with a collections attorney where my truly destitute clients could get a fair shake. On the other end of the spectrum was the day I had had enough, and after telling the collection agent the current address of his basement operation, offered to catch a plane out to California and come visit him personally to discuss his repeated abuse of my staff. But none of these experiences gave me the behind the scenes view of the collection industry that Halpern has achieved with "Bad Paper".Halpern appears to have wrangled a level of access and trust from the insiders that seems unthinkable as the federal government threatens to expand the institutional creep of the CFPB. His unblinking portrayal of some of the individuals that have been on the other side of the table is unvarnished yet still surprising in some regards. In some instances, Halpern almost makes these human stories come alive with an unwelcome sympathy.Sometimes redundant, often a tad disorganized, Bad Paper may not be destined to become a lasting portrait of the Great Recession. At the risk of revealing my own bias, Halpern missed the opportunity to really plumb the plight of those who are hounded by the industry. It is however, a revealing and surprisingly interesting read. For those of us in the trenches, it is a fascinating journey into enemy territory.

This is one of those current event books that focuses on a very select niche - in this case the trading of consumer debt. While this type of debt started many decades ago, the buying and selling of that debt to third parties is more recent. The author explains how an inefficiency in the process - the inability for large banks to collect on small debts from millions of people after years of freely giving out credit - led to a new marketplace which at it's peak was an extremely lucrative venture. That market eventually led to "shadow markets" and a wild west mentality took hold. After an explosion of fraud and complaints, the government created new regulations and things have since calmed down some.The author takes us through the genesis and transformation of that new market as seen through the eyes of two key players who created a collection agency - one an entrepreneur from a wealthy family (the business owner) and the other a fast talking ex-con (the collector). They, as with many of these businesses, need each other and create an interesting juxtaposition on business and life. You also get a touch of what life is like in the more economically challenged neighborhoods of Buffalo, New York and how the less reputable collectors do things.The book is well written and edited, and includes interviews and research from the government to big banks to ordinary citizens who've gone through the pain of having their debt sold to third parties. I won't say that I "couldn't put this book down," but for a non-fiction read it's well put together from start to finish.

This is a factual report but it is also a great read. I read it in one weekend. It shows the brokenness of the financial system and the troubles it makes for the poor.