Occupy’s plan to cancel consumer debt has been a big success so far
November 12 2013
By : Adam Taylor
One year ago, a fascinating plan emerged out of the Occupy movement — the group would crowd source money to buy consumer debt for "pennies on the dollar" on the secondary market, and then, once they owned the debt, they would cancel it.
The plan was called "Rolling Jubilee," because the hope was that the liberated debtors would then donate to the fund, "rolling" the jubilee forward.
The idea received a lot of buzz, but there were real doubts it could work — Felix Salmon wondered if lenders would really be happy to sell the debts to the Rolling Jubilee if they were just going to cancel it, and there were serious concerns that if debts were canceled it might be technically considered income for those for whom it had been repaid (and thus subject to taxation that would eclipse its benefits).
After 12 months, however, the concerns are beginning to fall by the wayside. The organization behind Rolling Jubilee, Strike Debt, announced this week that they have been able to buy and forgive $14.7 million of debt over four separate purchases, the most recent of which forgave $13.5 million of debt for 2,693 people across 45 states and Puerto Rico. According to the Guardian, the group has raised around $620,000 so far, though it has spent only $400,000.
By any measure, these figures sound like a success, though it has not come easily.
"It's a very complex and slow process, involves accountants and lawyers," Mike Andrews, a writer and editor who has been involved in Strike Debt from the start, told Business Insider in a phone interview. "It's why we've had four buys over the course of the year, with long time spans in between. It's a complex process which takes a lot of time."
At least one of the potential problems raised by critics has not appeared, Andrews says. Lenders have been happy to sell the group debt on the secondary market. "It hasn't been an issue at all," Andrews explains. "I'm not sure why. Maybe they aren't aware that Rolling Jubilee is buying their debt, or that we're buying their debt to abolish it, but maybe they're happy to get paid any amount for it, and they don't care what happens with it after it's bought."
The tax issue hasn't reared its head, at least not so far. However, Andrews admits that a lot of the debtors haven't got back in touch with the group yet (Rolling Jubilee knows little about the debtors' identities until after the purchase has been made but sends a letter to the individual informing them that their debt has been forgiven).
"Unfortunately, we haven't heard from a lot of folks whose debt we abolished, even though we send them letters announcing that the debt was bought," Andrews says. "I would guess that some of them are just kind of astonished that someone bought their debt and just canceled it. And some of them may not have heard of Strike Debt before. We haven't heard directly from many debtors, but we have heard from a couple and they seem incredibly enthusiastic."
Those who have got in touch have tended to be people in low-income communities. "They have to go to the emergency room, and they're uninsured, they decide to go to the emergency room and they incur this debt to the hospitals," Andrews says.
Of course, even if Rolling Jubilee is a success, in the grand scheme of things it isn't that big a success. Strike Debt concedes that $15 million is a tiny fraction of the secondary debt market, and so far the plan has been limited to medical debt — Andrews says that while the group would like to target student debt, it is difficult as much of that debt is held by the government and not listed on secondary markets (the group is looking into ways to buy the smaller portion of student debt that is private).
Even so, Rolling Jubilee's ability to create dialogue about debt marks it as perhaps the most successful legacy of the Occupy movement. The hope is that this dialogue can grow and help create real change.
"When we launched Rolling Jubilee we knew it would be temporary," Andrews says. "Of course we wanted to do some material good by actually abolishing peoples debt, but another major motivation was to just highlight the existence of this secondary debt market, and the fact that the original lenders are actually selling the debt for a very small amount of money, and unfortunately they won't do that to the actual debtor."