AVOIDING DEBT: Rolling Jubilee could offer many a new way to avoid money problems
“MOSTLY I’M up and stressing when other folks sleep. Believe me I know struggle and struggle knows me” – ‘Struggling’ by K’Naan, Dusty Foot Philosopher, 2005.
I remember it like it was yesterday. Circa Easter 1999, I sat in my room revising for my A-Levels and the door bell rang. I opened the front door to two twenty-something-stone-Phil ‘n’ Grant-heavies. They immediately shoved a document into my hand. It was from a debt collection agency.
The men said they were here to collect the debt for my mother’s eight-year-old parking ticket. The original fine was for £15, yet these two gentlemen claimed she now owed £256. I was confused, not least because my mother had never owned a car.
I asked them if I could go and speak to her about it. As I attempted to close the door Phil (or was it Grant?) put his foot in the way and pushed it wide open. Shocked, I asked him to excuse me so I could close the door. He responded that I had “lost the (expletive) right to close the door”.
I asked him to not swear. He responded, “ I’ll swear if I want to, so get in there, get a credit card out and pay me my (expletive) money or I’ll take whatever I want’. Over the next few hours these ‘men’ waged legitimised terror over us... all because of a lousy £15 parking ticket that probably never was.
I was immediately reminded of this episode when I read about the tragic plight of Toby Thorn, an Anglia Ruskin University student who committed suicide. An inquest found that Toby’s accrued debts of over £8,000 were a major contributory factor in his suicide. Toby actually wrote his last words on the back of a bank statement.
Perhaps it is just me but the feeling of distress I associate with being in a minor degree of debt is much greater than the elation which stems from being abundantly in credit. To be indebted is to be enslaved. It truly can be torturing, especially when whoever you owe the debt to decides to ramp up the pressure.
No one needs to be reminded that these are dire times. But dire times facilitate brilliant ideas. I’m sure there are many of these around but the one that captures my imagination is called the Rolling Jubilee – a debt relief plan for ordinary people.
In the same way large financial organisations were bailed out essentially by us – the Rolling Jubilee is an idea which will help us bail out each other. In order to understand the concept of the Rolling Jubilee you need to understand how defaulted debt works.
Hypothetically: you take out a loan for £100 from a bank and then default on it. The bank may try to retrieve the money from you for a while. After a period the bank will accept that you are either unwilling or unable to pay up.
At this stage, in order to salvage something from the debt (not to mention the fact that debt collection is a messy and potentially reputation-damaging business), the bank will sell your debt to a third party (a Hedge Fund for example) for, typically, 5p for each £1. So the bank has sold your original debt of £100 for £5.
Nevertheless, the third party who purchased your debt has bought the right to collect £100 from you. These third parties outsource the debt collection aspect to Debt Collection Agencies.
In order to maximise profits and pay off the Debt Collection Agency additional charges are added to your debt. This means your £100 could increase significantly. Any penny collected in excess of the original £5 is profit to the party who purchased your debt. The only benefit of paying is that the bad debt will be removed from your credit profile.
What the Rolling Jubilee will do is step in and purchase the defaulted debt from the bank, contact the debtors and inform them that their debt has been forgiven. And they will wipe their credit profiles of the debt. In America, where the Rolling Jubilee is in full swing, they rely wholly on donations. All of which goes to buying off bad debt. Britain eagerly needs an equivalent.
If we are indeed all in it together, then this is one way for us all to get out of it; together.