I believe this was medical debts that were being resold to collection agencies, a process that sells debt for pennies on the dollar to "agencies" that are allowed to harass people to collect money that the original "lender" has already given up on. John Oliver forgave all of the debt in what may be the world's largest television give-away.
Lodhab summed it up pretty well. Debt isn’t worth its face value, wether it is credit cards or medical bills or even mortgages. Here’s an example: Your dead beat uncle owes you $200. You owe me $200. You say “hey man, you am just have my uncles money he owes me and we are even...” But: I have to track your uncle down. Make phone calls, send letters, I have to hound him and deal with excuses and deal with your mom and family being mad at me. Your uncle might never pay me. He might agree to pay me $5 a month for 40 months. Bad enough- but then he might stop paying after $15. I might need to follow him for 10 years to get my money, or I might never get all or even some.
So when you owe a bank or credit card company or whatever- there is going to be a real cost, how many hours you’ll need to pay to people to find the person, stamps and letters and phone calls and the hours paid to employees to do all those things. On top of that- after so many years, unpaid debt no longer shows up on a credit report, and bankruptcy and other legal means can erase debt. So after awhile a person has no reason to pay other then “honor.” If you have to go to court that’s thousands of dollars or more- especially if they fight it, and potentially years or more before you see any money. A judge might throw out or reduce the debt on top of that.
So even if you owe $5,000 or more- there comes a point where the person you owe says they probably won’t get the money, or the money would cost more to get back than it is worth. They want to “bad” debt off their accounting, but they don’t want to lose ALL the money. So a bank might trade or sell that debt to another bank, or a company might sell that debt to debt collectors or someone else. The seller of the debt was looking at walking away with nothing, so a percentage of the debt even a couple hundred dollars is better than nothing. The person buying the debt is usually someone in a position to recover the debt for less expense- a specialist or the like. They are gambling that what they paid and the cost to recover money will be less than what they ar sable to recover
not really? Its fairly simply, at least the part relevent to the post.
person A owes person B 500 bucks. Person C offers person B 50 bucks to transfer the debt to him so that person a owes person C the 500 dollars instead.
now a completely seperate function of american debt system, Person D owes person E 200 bucks. Person E says he no longer wants person D to pay that, so legally person D no longer owes person E 200 bucks.
All that happened is those to basic functions of debt that have existed nearly since debt has existed on earth were used one after another.
I dont know why you're down-voting him tho, the fact that medical expenses and education expenses are through the roof doesn't mean the DEBT system is fucked.
Being able to forgive debt is an obvious concept, and the other concept is just "a penny now is better than the promiss of 1 dollar next month. So it makes sense that some compagnies would specialize in giving you that penny today, do they can make a dollar next month.
Modern economics and wether it is “fucked” is a question of physics vs math. Using math we can discuss abstract. We can create problems and solutions of imagination. That’s debt/credit. It’s internally logically consistent, as long as we agree on definitions it all works in theory. Physics (Newtonian or other “traditional” non theoretical) discusses reality. All concepts are tied to reality. What works in simulation doesn’t work in reality. Debt and credit aren’t tied to reality. They are intangibles. Value is an intangible. The “worth” of any item is relative- but money isn’t indexed in value to any finite resource and no finite resource is directly indexed to money. The equivalency is imaginary.
So- we have real property which money is used to purchase, water, gold, cars, land, whatever. These are tangible objects of finite nature. There are or an only be so many in the world total, and there is a practical maximum at any given time to what is available. Then we have money- which is not indexed to finite property and is by nature- infinite. Debt, credit- concepts that exist infinitely in imagination. On paper, using the rules of our financial system we can balance the equation, in reality however if you were asked to show the physical representation of that math- it doesn’t exist. People who have trouble with intangibles and abstracts have trouble with seemingly arbitrary rules of economics which exist so that on the whole- the numbers balance on paper.
wonder how the media found out about it? im sure he didn't tell any one i mean its not like he would do it for publicity. wait 60k wtf that's like me giving 5 dollar. and ok a collection agencies will make deals but 15 million for 60k this whole thing sounds fishy.
Dude he did it because they made a piece on debt and debt collection agencies. And yes, they do sell debt for pennies on the dollar.
And yes, they bought it for "entertainment" (not publicity), they're running a TV show, that's their business. Makes for a good show, makes for a good deed, brings attention to this phenomenon (which they are trying to do since, you know, theyre MAKING A PIECE ON IT), and now he gets to claim he made a bigger giveaway than Oprah giving away cars.
That's a win win win win.
Ike most things- we are benefited by understanding details. An AVERAGE cost for bad debt is $.04 on the dollar. $60k seems low by the math for $15 in debt. BUT, one debt isn’t worth the same as any other. That’s the point of debt buying. 4 months bad Student loan debt of a married 27 year old Dr. is worth more than car loan debt from a 64 year old unemployed man who is 12 months out and he car is under water (more owed that it is worth) even if the car is $200k and the student loan is $50k left.
Oliver bought mostly OLD debt. Debt that there is almost no hope to collect on, little or no legal or other pressure to use to compel a person to pay. After a certain time without payments- old debt falls off credit. That means that you can’t pressure a person by hurting their chances at loans or good interest. After a certain time you can’t take the debt to court. If there is no collateral (like a house or car) you don’t have a way to force them to pay if they don’t have any money or assets that can be liquidated etc.
Debt past a states statue of limitations can’t be taken from an estate when you die or inheritance. It can’t be sued for. Why is it worth anything? Well... you can “reactivate debt.” If you make a payment on an old debt, or promise to make payment- that “statue of limitations” comes alive again and starts from day one. So a debt collector can buy debt you may have forgotten about. They’ll call and use pressure ranging from legal, to unethical, to illegal (depending) to try and get you or the executor of an estate or a trustee etc. to either pay or say you’ll pay for a debt you don’t legally have to. Once you do that- you are once again liable and they CAN sue you or take assets as able.
It’s a gamble. For a real debt collector. Oliver mostly bought this kind of debt. $15 million from 9,000 people. If we just say 15m/9k that’s about $2k per person. Not a huge number- but more than $5.
Tl:dr- Oliver bought mostly old debt that wasn’t worth much because the odds and legal aid to recover it is almost nothing. On paper the amount owed was $15 million but the amount likely to actually be recovered is likely what he paid or less, minus costs to actually recover it. As poopun said- it was mostly for a segment for a tv show to expose people to the world of debt practices- which this thread shows many people know little or nothing about.
person A owes person B 500 bucks. Person C offers person B 50 bucks to transfer the debt to him so that person a owes person C the 500 dollars instead.
now a completely seperate function of american debt system, Person D owes person E 200 bucks. Person E says he no longer wants person D to pay that, so legally person D no longer owes person E 200 bucks.
All that happened is those to basic functions of debt that have existed nearly since debt has existed on earth were used one after another.
Being able to forgive debt is an obvious concept, and the other concept is just "a penny now is better than the promiss of 1 dollar next month. So it makes sense that some compagnies would specialize in giving you that penny today, do they can make a dollar next month.
And yes, they bought it for "entertainment" (not publicity), they're running a TV show, that's their business. Makes for a good show, makes for a good deed, brings attention to this phenomenon (which they are trying to do since, you know, theyre MAKING A PIECE ON IT), and now he gets to claim he made a bigger giveaway than Oprah giving away cars.
That's a win win win win.