I found this deep-dive into the debt collection industry quite fascinating. But I must make two disclosures. I was a business reporter at a daily newspaper for several years, so I tend to eat up this kind of "stuff." Also, I'm a long-time resident of Buffalo, NY. "Bad Paper" is based in Western New York. I have a familiarity with some of the characters and venues that make up the narrative arc. Having said that, I'm convinced that anyone who has an interest in personal finance, credit-related issues, etc. would find this an entertaining and enlightening read. Halpern skillfully integrates insights into the debt collection industry with vivid character sketches of the key players. True, it does feel by the last quarter of the book that perhaps the tale could have been told with a bit more brevity. But for anyone who is interested debt collection, reading "Bad Paper" would be time well-spent. ( )

So when someone stops paying a debt, we all know what happens, right. They start getting notices and phone calls from the lender, and eventually that debt gets passed over to a collection agency, who tries to get at least some of the debt repaid. Halpern's book peels back the curtain to look at the process behind the phone calls and harassing letters to see a pretty ugly scene.

What really happens to a defaulted debt is pretty fascinating (ok, at least for me...). First the bank (usually a bank) sells a collection of delinquent accounts to one of the major collection agencies sometime within a few months of delinquency so that they can write off the loss. The collection agency will get what they can from that list of accounts, then will package up the accounts they couldn't collect for resale to another, lower tier collection agency. And by "package up", they mean make a spreadsheet with all account info for these accounts. This process keeps repeating with lower and lower tier collection agencies until they eventually wind up in the hands of a lawyer willing to sue in small claims court.

By "lower tier", of course, I mean less reputable. More willing to use questionable, or even illegal tactics to collect. More willing to sell to multiple agencies so that even if someone repays a debt, other agencies try to collect too. Interestingly, Halpern found many examples of former drug dealers in the collection business because it was essentially the same business (and use many of the same skills) without the risk of going to jail.

All in all, it's not a pretty thing. People on both sides of the interaction are mostly desperate - debtors who generally want to pay, and collection agents that are riding the hairy edge between survival and bankruptcy themselves. There's money to be had in collections, but only for those willing to lie and cheat the debtors and their fellow agents to get it. You can't really get a better example of an underground economy. But Halpern keeps the human face on all these people, showing how economic and societal pressures drive people to make the decisions they do, and the price paid for those decisions. And he does a really good job of talking about the changes happening because of post-recession changes in banking and financial regulation, which is likely to make much of this underground economy go away. ( )

Bad Paper is about a shadowy, dangerous, and sleazy corner of the financial sector, the market for bad debt, that has got little play in the financial press or literature, until now that is. While Michael Lewis has detailed the world of collateralized debt obligations and other esoteric financial instruments in The Big Short, no one really poked around much in this shady market. Halpern actually got to know many of the players, from the investors to the debt collectors, many of whom are concentrated in Buffalo, New York. I enjoyed this book more than I did The Big Short because Halpern does not get mired down in overly complex detail the way Lewis does. It's an easier read and focuses more on the interesting characters than the arcane functioning of the industry. ( )

The story of debt collectors in Buffalo, mostly struggling to get by on the backs of other people struggling to get by. Halpern talks to a few debtors—whose debt information, such as it was, was stolen and they were fooled into paying people with absolutely no title to the debt—whose bad luck or bad relationships have taken them from struggling to defaulting. But mostly he focuses on the collectors, including a wealthy guy who creates a hedge fund to invest in debt because it’s so profitable: buy defaulted accounts for fractions of pennies on the dollar; call up the debtors and inveigle them into paying; try to keep your employees’ violations of fair debt collection laws to a minimum (which is to say, try to keep them from lying about whether a court case is imminent; a reputable agency only has to fire people for this once in a while); lather, rinse, repeat.

At the end, Halpern goes even further to the bottom of the barrel—lawyers who buy the debt after the debt collectors have been at it, and really do sue, often obtaining judgments that allow them to seize bank accounts and garnish wages. Only trouble: the amounts they claim don’t necessarily have any relation to the amount owed at the time of default, with “fees and costs” added to double or triple the debt. And the debt collectors don’t actually have any underlying data about the accounts, just names and numbers on spreadsheets. It’s not worth it for banks to provide actual records, which might or might not still exist; every time debt is sold the seller makes the buyer contractually acknowledge that the seller isn’t making any promises about validity. (And then the buyers go to court with an affidavit swearing to the facts under penalty of perjury! These lawyers should be disbarred.) The court system only works because most people don’t appear and ask for the plaintiff to prove its case; they drop cases if the debtor shows up. This is how we roll in America today. ( )

Really so well written and fascinating!----a study of an incredibly huge industry I really knew zero about. ( )