The Fight To Fix Our Broken Loan System From The Ground Up

A year later, Occupy is back, and it's faster, smarter, and a whole lot more organized. On the heels of the much-lauded Occupy Sandy hurricane relief effort, the Occupy offshoot Strike Debt has just raised over 350,000 for what they are calling The People's Bailout, enough to purchase and then cancel $7 million dollars worth of personal debt.

A year ago the anti-Wall Street movement in Zuccotti Park, with its protesting and camping and dancing to bongo drums, received lots of criticism that all the attention and goodwill that was being generated was for naught. Again and again we heard, "what do all these protesters want?" and "how on earth would this leaderless movement ever get organized enough to do anything?" I remember hearing a member of Occupy responding to the criticism with the line about this is just the beginning, that Zuccotti's function—beyond getting the mainstream media to acknowledge the existence of a radical left in the country—was simply a way to gather people, and the real work would only start after Zuccotti was over.

But he wasn't lying. In the wake of Hurricane Sandy, when residents and local leaders of some of the hardest-hit areas were complaining of inadequate response from FEMA and the Red Cross, Occupy Sandy emerged as one of the leaders in organizing volunteers and donations for helping storm victims on the ground. Taking advantage of social networks and new technologies, Occupy Sandy developed into a well-functioning dispersed and flexible relief effort, spurring the Huffington Post to call it "a relief organization for the 21st century." They even have an Amazon Wedding Registry for donations.

Strike Debt's plan shows a similar ingenuity. Through the Rolling Jubilee Fund, a 501c-4 non profit, the group is buying up packaged distressed debt—debt that is in default, which banks sell for pennies on the dollar because of the hassle of collecting on it—and then, as the new owners of this debt, canceling it. After an experiment where they spent $5,000 to buy up $100,000 worth of debt, 80 Americans formerly in default on their medical loans are now receiving letters from Strike Debt informing them that their debt, the part that Strike Debt has bought, has been annulled. The organization is keeping the names anonymous.

An even more guarded secret are the names of those buying the debt on the Rolling Jubillee's behalf. Why? First off, to help the plan work. Because, as Alex Hern points out, if banks know that you are buying debt just to forgive it, they will likely not sell it to you. He points to the banks' response to a similar plan started earlier this year by an organization called American Homeowner Preservation. To deal with distressed homeowner debt, they were buying foreclosed homes for cheap and then leasing them back to the homeowners until the homeowners could get a mortgage (with better terms this time) and buy their homes back. But the banks didn't go for it, as Felix Salmon explains:

While in the short term it's obviously economically profitable for banks to sell off the debt they can't collect on (no matter what the buyers do with it), in the long term, they can't afford to have debtors simply "forgiven." The entire banking system relies on the fact that everyone believes they must repay their debt, and that there are severe consequences for not doing so. Consequences that many claim are unjust (such as losing your home because you can't afford to pay your medical bills).

If people are allowed to default on their loans and escape the consequences, then suddenly the entire mindset that we are obligated to repay our debts comes into jeopardy. And if our belief in our obligation to the banks is disrupted, then enough of us might stop paying our debts. And if enough people stop paying their debts, well, the foreclosure crisis showed us what happens. The banks fail. Which brings us right back around to the slogan that could often be heard in Zuccotti: "The banks got bailed out, we got sold out."

I caught up with Yates McKee, a writer, lecturer and member of Strike Debt, to learn more about the People's Bailout, as well as understand what kind of alternatives they are proposing. As impressive as $7 million of canceled debt is— the organization was aiming to raise just $50,000 in order to cancel $1 million of debt—it's still a drop in the bucket compared to the trillions that Americans owe. So what's next? McKee told me that Strike Debt is not against debt, but against predatory lending practices by big banks, and that they are working to develop new community-based lending structures. The People's Bailout is starting by partnering with their sister organization, Occupy Sandy, to help hurricane victims avoid predatory lenders, and find community sources of support for the funds they need to rebuild their homes and businesses.

Motherboard: What is the goal of Strike Debt? It's not really a feasible way to wipe out a trillion dollars of debt, so is this more of a statement than an attempt to solve a problem?
Mckee: Strike Debt is an offshoot of Occupy Wall Street that aims to foster a nation-wide debt-resistance movement using a diversity of tactics. The Rolling Jubilee—which we launched with the People's Bailout Telethon last week—is only one tactic within a long-term movement-building effort including education and research—embodied by the Debt Resistors Operations Manual—direct actions, coalition-building, and the creation of alternative economies. The Rolling Jubilee both provides concrete relief for debtors, as well as opening a space for longer-term public discussion. To be clear: we do not consider the Rolling Jubilee a solution to the crisis of predatory debt; it is only one tactic, albeit one with the potential to create a tipping-point in terms of shifting the national discussion and galvanizing organizing efforts.

This action is strikingly different than the Occupy Wall Street in Zuccotti park. Why the Trojan Horse approach? Have you found it more or less effective?
While the tactic of the Rolling Jubilee is different than physically occupying a park, it emerges organically out of that experience. First off, from the beginning of OWS, the experience of drowning in debt has always been a motivating factor for many participants—if one looks at the famous 'We Are the 99%' tumblr set up in September 2011, you will find that many of the posts relate to the crippling effects of debt. We are extending that project right now with whystrikedebt.tumblr.com.

As for the actual tactic, you could say we are occupying the debt-system—we are tactically entering it and turning it against itself to a degree. The debt-buyers traffic in people's suffering—we pool our resources to abolish the debts, not further sell them to turn a profit. We operate at a loss in economic terms, but we create a bounty of collective relief and good will. This in turn relates to the principle of mutual aid that was so crucial to Zuccotti Park—think of the free kitchen or the energy-bikes. Those were not acts of charity, they were ways of supporting one another without relying on external authorities. We call the Rolling Jubilee a bailout of the people by the people. The symbolic narrative we are putting forth is as follows: "The banks got bailed out, what about us? We could not wait for the government—we had to do it ourselves." Like the self-organized People's Recovery we've seen with Occupy Sandy, the People's Bailout has touched a nerve and struck a chord—in a week we have raised 350,000 dollars—enough to abolish 6.5 million dollars in medical debt.

What kind of debt have you bought to date? Do you know who it belongs to? Have you had contact with them yet?
The kind of debt we have been able to purchase thus far based on our connections and capacity is medical debt. It also gets to the heart of why we are doing this—people are suffering under a system that requires us to go into debt for the basic things in life. People are forced to choose between taking care of their loved ones and putting food on the table. People are taking out multiple credit cards and working multiple jobs to make ends meet—a sudden illness can be a life-or-death disaster.

Our preliminary buy was $5,000, which enabled us to cancel around $100,000 worth. This first buy has already gone through; the paperwork is in hand. The debtors in question will be informed by certified mail in the coming weeks. We make these buys through anonymous contacts in the debt-buying market. The debt is bought in portfolios that bundle together debt from all over the place; once the purchase is made, the specific information on the debt and the debtors in question becomes available to the buyer.

Obviously we are being very protective over this information as we do not want either our contacts in the market or the debtors to be exposed. We hope that once the letters have gone out, some of the debtors in question will be interested in having a conversation with us, or perhaps even going public. But we have no expectations. The main point with this tactic is the conversation it can start in the public domain about the debt system overall, as well as the small bit of relief we can provide to folks by getting the collection agencies off their back.

Under the current system, debt is sold dirt cheap on a market, available to anyone but the person actually in that debt. Are you targeting bottom-feeder debt collectors with this plan?
When it comes to the debt-market, we are aiming to highlight the fact there is an entire industry that revolves around being and selling people's suffering, feeding like vultures on the unpaid debts cast off by the banks. But compared to the scale of the secondary debt-market, our efforts are a drop in the ocean and unlikely to have any actual economic impact on the market itself. In other words, raising the price of bad debt is not part of our strategy and is sort of a moot point.

How do you think this will change the current debt system? If this were to become a common practice—bail-outs and forgiveness—than credit rating organizations might change regulations such that getting bailed out by someone else leads to a negative mark. This has to stay small—and thus symbolic for most—otherwise won't the various industries fight back?
When it comes to how the debt-collecting and credit-rating industries try and respond, time will tell. But imagine the PR disaster for them—further penalizing debtors, and stigmatizing the efforts of people trying to help one another? That would highlight once again what kind of system we have been forced to tolerate. A similar question has been raised about the possibility of the IRS treating these cancellations as taxable income. While we feel confident in legal terms that this is not the case, imagine what that discussion would look like—thousands of people have pooled their resources to relieve the suffering of their compatriots, and now the beneficiaries are being made to suffer further.

Should we all just default and then buy each others debt?
To be clear, we are not calling for people to default, but the question of mass default—a debt strike—is indeed looming over the work of Strike Debt. This is somewhat separate from the specific tactic of the Rolling Jubilee. One point we like to make is that many people are already de facto on a debt strike insofar as they can't pay and probably will never pay their debts. They are an Invisible Army of Defaulters.

What would it mean for people to default in a deliberate, political way acting together in concert? We do not think the conditions are ripe for mass default right now, but a powerful thing to keep in mind is that the system revolves around our promise to pay up. But what if we didn't? If we did it together, and supported each other in the process against the threats and fear-mongering of the banks, it could make the entire system shake.

But again, we are at a very early stage, just opening the conversation about making debt a political issue, and pointing toward forms of mutual care and support. Insofar as it operates as primarily a media intervention and a form of random, small scale relief, the Rolling Jubilee in and of itself is not an adequate infrastructure for mass default. But the very fact that default is on people's minds shows that we have struck a chord and touched a nerve.

For people that want to buy some debt to forgive themselves, what pointers would you have?
We are not able to give anyone advice about operating in the debt market. It is a complicated business that relies heavily on personal connections and insider know-how. Our point right now is NOT to encourage people to try this for themselves, but rather to pool their resources with the massive national fund we have amassed and make this is collective project of relief and refusal that points the way to bigger things.

What's next for Strike Debt?
At the moment we are swamped with media inquiries and hundreds of emails a day from debtors all over the country based on the massive publicity of the Rolling Jubilee and the celebrity-studded Telethon we just had a few nights ago. Again, we have touched a nerve. Strike Debt affiliates are spring up across the country in cities like Detroit, Los Angeles, Philadelphia, Tucson, and we are working on building a national infrastructure to support and coordinate the different affiliates.

As part of that organizing drive, we have just released the Debt Resistors Organizing Kit, and we will be holding an open house for regional Strike Debt affiliates in New York in early December. Further down the line, we will be calling for a National Visioning Session on Martin Luther King Day. We hope to hold conversations around the country about how to move from an economy that revolves around debts to the 1 percent to one based on our debts to friends, families, and communities. Our ongoing dialogue with the faith community will be central to this, especially given the biblical origins of the concept of Jubilee.

In New York City specifically, we are working on getting a space to house our infrastructure, hold meetings, launch actions, and develop a culture around debt resistance. So, while our focus has been on pooling resources for the Rolling Jubilee fund, donations to strikedebt.org as equally critical to the longevity of the movement we are working to build.