The Consumer Financial Protection Bureau estimates that about 30 million Americans have debt under collection, which has been a controversial topic in recent months. In May, a coalition of Occupy Wall Streeters formed Strike Debt, an organization aimed at challenging the very notion of debt.
"We really started talking about how we can pivot the strategies from the movement to really focus on debt," says organizer Chris Casuccio. A number of strategies surfaced from these discussions. Among them is The Debt Resisters' Operations Manual, a 122-page document that instructs consumers on disputing debt and reducing medical bills. Another is the Rolling Jubilee, a project that plans to buy debt through the secondary market for pennies on the dollar and forgive that debt.
For its first debt buy, the Rolling Jubilee will focus on medical debt. In the Commonwealth Fund 2010 Biennial Health Insurance Survey, 73 million people reported problems paying their medical bills or reducing medical debt. Organizer Ann Larson, who was a member of the original Occupy Student Debt campaign, says Strike Debt chose to focus initially on medical debt because the organizers felt people should be "able to live where they want and work where they want and have children if they want" without having their choices limited by medical debt.
Students loans have been another controversial form of debt, but Casuccio isn't sure if the strategy would be as effective for type of debt since student loans are generally not available on the secondary market and cannot be discharged by a bankruptcy filing. "We are looking into more private or direct student debt," he says.
The Rolling Jubilee kicked off on November 15 with a live fundraising telethon that included celebrity appearances by Janeane Garofalo and Sonic Youth's Lee Ranaldo, among others. Casuccio says the initial goal was to raise $50,000, but thanks to a flurry of social media attention, they've raised more than $450,000. Medical debt can be purchased on the secondary market for less than its face value, so Strike Debt participants estimate they will cancel about 20 times the amount of money they raise.
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Although they cannot purchase the debt of specific individuals, Casuccio says they plan to send certified letters to all the borrowers whose debt will be forgiven and hope to remove the debt from their credit reports once it's erased. "It's very hard to find these people. A lot of them have been harassed by debt collectors for a long time," he says. "We do hope that some of these people will get in touch, but there are no strings attached."
The tax implications of the Rolling Jubilee are still unclear, as the strategy hasn't been used before in the United States. The IRS typically views forgiven debt as income, so beneficiaries of the Rolling Jubilee could face a higher-than-expected tax bill. However, based on the advice of Strike Debt's pro bono legal team, Larson says "we believe there will not be a tax obligation for the debtors" due to an exception.
Business and finance professors were skeptical about whether the concept would make an impact on the widespread consumer debt problem. "If you give somebody a gift without doing anything that might prevent that person from getting into that situation again, it's not clear if you've really helped them," says Mac Clouse, a professor of finance at the Daniels College of Business at the University of Denver. "What's clearly evident is a lot of people just don't understand debt." He stresses the importance of better education so that consumers better understand how debt works and how to protect themselves against predatory lending practices.
The irony of the Rolling Jubilee, Clouse adds, is that it may actually help the financial institutions that Strike Debt opposes. "The fact that they're willing to sell [this debt] suggests that they don't think they're expecting to get anything [from the borrower]," he says. "Regulators may force them to write it off but they're not forced to sell that loan, then someone comes along and says we're willing to buy that [debt]."
Timothy F. Kearney, assistant professor and chair of the department of business at Misericordia University in Dallas, Pa., says, "I doubt that the Strike Debt movement will make a dent that would matter in actual debt levels, as just mortgage debt and consumer credit alone total about $13 trillion."
However, Kearney adds, "Where this movement could have an impact is in opening a conversation," adding that the topic was absent during this year's political season. "It's important that groups like this are trying to start the conversation."
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That's what Strike Debt organizers hope will happen. "The Rolling Jubilee is just one tactic of Strike Debt," says Casuccio. "We are hoping to create a movement to fight against debt and open up some alternatives." In addition to the Rolling Jubilee, Strike Debt has sponsored lectures on debt around New York City and offers resources for organizers in other cities to start their own chapter.
As Larson points out: "This is not a solution. We like to say it's a spark, not the revolution."
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