When the Occupy Wall Street folks started to buy up debt to cancel I went on record as saying that I thought this was a damn good idea. Pretty sure I sent them a little cash as well.
The Guardian has a piece considering whether it would be possible to make this work in the UK. They think it would be:
Typically, these third-party debt-chasers pay 10p for every £1 of debt bought and expect to claw back about 20% of the debt. It’s a profitable business, worth around £800m a year and, largely, the banks only deal with big players who can buy up some of their toxic debt packages in one go.
The darkest corner of the debt market contains the bottom-fishers who buy the debt that the more visible and scrutinised players give up on. So the cycle of hassle begins yet again – from a firm the debtor has never heard of. In theory, a group of well-meaning individuals could at this point set up their own company, buy these debts and cancel them. Which means, finally, the indebted person would have the wolves called off – and the charitable group, such as Occupy Wall Street, could claim it is abolishing millions of pounds of debt for much much less.
Among the accounting and legal types who read this blog we probably have one or two who know more about the details of this market.
Interesting question would be how is the market sliced and diced? For example, are there separate markets for utilities debt, consumer debt and so on? Secondly, what’s the market size? £10k nominal? £1 million nominal?
I’m not sure that I’m being serious here but it might be rather fun to actually try and work this out. Possibly even to set up as a charity with the express intention of collecting money solely to pay off such defaulted debt. Quite possibly for no reason than just to have fun being the right wing capitalist bastards we are while doing it. You know, to cause the head asplodey reaction in the lefties.
“A Random Act of Kindness” has a ring to it as a charity name, doesn’t it?