It’s Time to Reform Debt Buying and Debt Collection
Last night on Last Week Tonight, John Oliver made television history for the largest giveaway by a TV show, easily surpassing Oprah’s “You get a car! You get a car! Everybody gets a car!” moment. The thing that Oliver was giving away was not as sexy as new cars, but it was much more life-changing: he forgave $14 million in medical debt. At twenty minutes, this video is long by internet standards (and it’s riddled with swears so if you’re at work you should put your headphones in) but it’s very worth it.
If you don’t have the capacity to watch videos right now, here’s a short recap: American households carry over twelve trillion dollars in debt. Nearly 450 billion of that debt is over ninety days overdue. That 450 billion is likely to be sold for a fraction of the cost by banks and other financial institutions to collection companies, which then often use smarmy methods to try to collect on the debt. Oliver’s show spent $50 to incorporate as a collection company, and within a matter of days, his corporation was offered just shy of $15,000,000 of medical debt information for nine thousand people, which they then bought for less than $60,000. The information consisted of a bare-bones spreadsheet with names, Social Security numbers, and addresses.
Ordinarily, that would be the point when the collection company would start shaking down the debtors with continuous phone calls, legal threats, and other, potentially illegal methods (including calling friends, coworkers, and family of the debtors in an effort to publicly shame them) to get some of that money back. Instead, Oliver forgave the debt, thereby breaking Oprah’s record.
Obviously, debt collection reform is necessary. Look into the history of debt buying and you’ll see some small efforts to rein in debt buyers, like this, from last year:
Under consent orders, Encore Capital Group and Portfolio Recovery Associates will pay a combined $18 million in fines and provide $61 million in refunds, while also stopping collection on another $127 million in consumer accounts. The combined moves will give relief to tens of thousands of consumers being hounded by collectors or collection lawsuits, the CFPB said. The companies must also stop reselling debt they own to other companies.
But when you consider that Encore “collected more than $1.7 billion in 2015,” those consent orders look like small change in comparison. Real reform is happening on a state level—North Carolina and Maryland are leading the way, with good results—and hopefully this Last Week Tonight stunt will get the conversation going in other states and on a federal level.
