Many Florida borrowers dream of waking up one day to find that some anonymous donor has paid off their debt and set them free from years of interest payments and financial hardship. While this scenario is unlikely, the activists who participated in the Occupy Wall Street movement have developed their own version of that fairy tale. They have started a new group, called Strike Debt, which has begun raising money to buy delinquent debt the way that a collections agency would from the original lender. The debt that is sold to collections companies is bought for pennies on the dollar because it is so past due that the lender does not believe they can collect on it. Then the collections firm pursues a settlement with the borrower for a portion of the total value of the debt, making a profit.
The activists are planning to first purchase medical debt and then hope to move on to tuition and later credit card debt. Americans currently have a total of more than $11 trillion in debt as a whole.
The group wants to buy debt the way that a traditional collector would, but instead of pursuing the debt with the borrower they want to simply abolish it. They have held a fundraiser to finance the effort and so far have raised enough to buy $2.5 million worth of debt at the discounted rate. The lucky borrowers who are relieved of their debt through this effort will receive a letter in the mail.
While this all sounds exciting and uplifting, it’s also important to remember that borrowers could still encounter problems with the debt and with the payoff. For example, criminals could try to trick other borrowers into believing their debt has been purchased and could lure them into a fraudulent agreement. Borrowers who receive a notification about their debt that is from an unfamiliar party or that makes exciting promises about debt relief should contacted a trusted professional before relying on the information therein. Trusting unknown third parties with debt relief plans could have highly detrimental consequences.
Source: New York Times, “Occupy offshoot aims to erase people’s debts, ” Ariel Kaminer, Nov. 13, 2012