Monday, June 6, 2016

John Oliver Started a Debt Collection Company to Relieve 9,000 People's Old Medical Debt

"Oliver and the Last Week Tonight team bought $14,922,261.76 worth of unpaid medical bills for $60,000 or less than half-a-cent on the dollar. He gave the portfolio of 9,000 debtors' personal information to RIP Medical Debt, a nonprofit that forgives medical debt with no tax consequences for the debtor... Oliver called the giveaway the 'largest one-time giveaway in television history.'"

Sunday's episode of Last Week Tonight With John Oliver featured a segment exploring the unparalleled scuzziness of the debt-collection industry, and overall it was pretty excellent. Oliver lays out the way that barely regulated agencies buy and sell old consumer debts in bulk and use all manner of (often illegal) intimidation tactics to scare people into paying up. There's lots of nuanced policy talk (of course). There's a surreal moment in which a collector threatens to eat somebody's dog. Aside from Jake Halpern's book Bad Paperpaper is the industry term for old debt—it's the best treatment of the subject I've seen.*

I need to quibble, however, with the segment's grand finale. At the end of the report, Oliver reveals that he and his staff went ahead and started their own debt-collection agency, just to demonstrate how trivially easy it is to get into the business with zero qualifications or oversight. “We called it Central Asset Recovery Professionals, or CARP, after the bottom-feeding fish,” the host quips. Within no time, CARP was able to purchase $15 million of unpaid medical bills for mere pennies on the dollar.

“I could legally have CARP take possession of that list and have CARP start calling people and turning their lives upside down,” Oliver explains. But, kind and decent soul that he is, the host announces that he's forgiving the debts as part of the "largest one-time giveaway in television history"—purportedly beating out Oprah's $7 million “you get a car!” extravaganza in 2004.

Here's the thing. Oliver is not actually forgiving $15 million of debt. Realistically, the figure is a lot lower.

How come? Debts get less valuable every time someone tries to collect on them. Large, semirespectable agencies purchase paper directly from banks, phone companies, hospitals, and such for something below face value. Whatever they fail to collect on, they then sell to smaller shops for an even bigger discount. As the cycle continues and the paper gets passed down the food chain, its market price drops. Once you're talking about debts selling for a penny or less on the dollar, it's paper that's probably proven almost impossible to collect on, either because the debtor has died, declared bankruptcy, or refused to pay for some other reason.

So while Oliver is certainly right that CARP could have started calling up the debtors on its list, chances are it could not have collected $15 million. The host says CARP paid around $60,000, or less than half-a-cent on the dollar, for its paper, which was “out-of-statute”—meaning the debts were so old that creditors technically couldn't even sue over them anymore. That suggests the seller thought the debts were worth no more than, well, $60,000.

Now, it's possible the seller was wrong. In general, distressed debt is hard to value, since you never really know how much of it can be collected. It's even hard to say that $60,000 is the “market value” for CARP's paper, since there's very little price transparency here; it's not like consumer paper sells on a public exchange where everybody can see what 10-year-old medical debts past their statutes of limitation are going for on a Tuesday at noon. Some buyers are also better equipped to collect on old paper than others. For instance, the bottom rung of the collections business is basically occupied by law firms that specialize in suing debtors, whether or not they really still owe the money. The lawyers bank on the fact that most people don't show up in court to defend themselves, and thus lose by default. (This works even with debts that are past their legal expiration date, because the defendant still has to show up and say the debt is out of statute. Which is why, if you are sued over an old debt, you absolutely should go to court and contest it.) But the chances that CARP's paper was worth a lot more than $60,000 are fairly slim.

With that all said, John Oliver likely just saved a whole lot of people some harassing phone calls and potential lawsuits. It was a wonderful gesture. He just didn't really one-up Oprah.

Whether Mr. Oliver is explaining the history of Donald J. Trump’s family by leading a campaign to change Mr. Trump’s surname to Drumpf or starting his own house of worship to better explain how tax-exempt megachurches work, “Last Week Tonight” is continuing to perfect the art of explaining by doing.

On the latest episode, Mr. Oliver said buying the debt was “absolutely terrifying, because it means if I wanted to, I could legally have CARP take possession of that list and have employees start calling people, turning their lives upside down over medical debt they no longer had to pay.”

“There would be absolutely nothing wrong with that except for the fact that absolutely everything is wrong with that,” he said.

"It seems to me the least we can do for debt I cannot fucking believe we're allowed to own is to give it away," Oliver said before joking, "Fuck you, Oprah. I am the new queen of daytime talk!"

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