Tags: Halpern | debt | collection | paper

Author Finds Financial Adventure in Buffalo

By    |   Friday, 24 October 2014 06:45 AM

Jake Halpern recently appeared on C-SPAN's After Words to talk about his new book, Bad Paper: Chasing Debt from Wall Street to the Underworld. Halpern was interviewed by Nomi Prins, a former managing director at Goldman Sachs who has turned to exposing the excesses of Wall Street through books like All the President's Bankers.

Readers and viewers can learn a surprising amount from this program about the workings of the debt collection business and its prominent role in the economy of Buffalo, N.Y., in the decades since the collapse of its industrial base was completed, roughly in 1979, and the local economy, like that of many other former industrial cities, was restructured around service industries, including financial services.

Halpern, who grew up in Buffalo but had been working in the Big Apple, had heard from his mother about the predatory practices of debt collectors like harassing people to pay debts they don't owe and buying packages of old debts for pennies on the dollar from banks and then proceeding to collect them from hapless borrowers. Allegedly Bank of America sold an extensive file of old debts of old people. Typically this "paper" would be in the form of Excel spreadsheets with only bare bones data stored on thumb drives. Buffalo had become something of a hotbed of this activity.

After his mother told him that she had been shaken down by debt collectors for debts she didn't owe, Halpern decided to look into it, and he successfully pitched a story to The New Yorker. Having committed to a deadline, Halpern was having a hard time finding anyone willing to talk until he was referred to a high school classmate who had fallen into this line of work.

Halpern also got a lead on a gentleman named Aaron Siegel who had built a lucrative business for his Wall Street investors out of buying debt packages from banks like his former employer Bank of America for $30,000 and turning them into $90,000 with little overhead. Halpern advised that the debt packages were not as respectable as one might think coming from BofA. (One is tempted to ask, who would think that?) Another source of product is Brandon, a former (hopefully) armed robber who specializes in dealing in "crap," debt as old as 10 or 15 years that people assume is worthless but is actually profitable for debt collectors.

As part of his field work on what Prins called the "underworld" of debt collection, Halpern explored how the business works in Las Vegas, where there are bound to be plenty of desperate debtors, and plenty of debt collectors attending the industry's annual convention in February where Aaron's debt bird dog Brandon would be looking for deals, including a large wholesale lot from an agency from California called Rincon that had been shut down and whose assets were being sold by the FDIC subject to a disclaimer as to any warranties of the validity of the debt.

In the end it turns out that many of the debt collectors lack the documentation to enforce their claims in court. All they have is "Bad Paper."

(Archived video can be found here.)

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In the end it turns out that many of the debt collectors lack the documentation to enforce their claims in court. All they have is "Bad Paper."
Halpern, debt, collection, paper
Friday, 24 October 2014 06:45 AM
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