It’s time to explode the problematic debt
In May 2019, a golden Ford Transit exploded against the backdrop of Canary Wharf in London’s financial district, causing paper to float in the air. With this act, £ 1.2million of high interest debt carried by the people of east London was canceled.
Still, there was a bigger shock to come. These debts had been bought on the secondary market for just £ 20,000 – a tiny fraction of their face value – although the amounts for which debtors were being sued grew day by day.
This symbolic scene of Banking job was designed to blow up the way the debt industry works; “The WTF moment” that draws people in, enrages them and explodes the shameful secret of problematic debt into a national conversation piece, according to its creators.
His timing couldn’t be better. Scheduled for release later this year, the film’s currency has risen as the pandemic plunges millions more into financial hardship and policymakers wonder how to deal with the fallout.
Daniel Edelstyn and Hilary Powell, filmmaker and artist from Walthamstow, spent six years directing the film and accompanying book, chronicling a community response to the debt ravaging their region.
In 2018, the filmmakers took over a disused bank on their local Main Street, which they renamed Hoe Street Central Bank (or HSCB), assembled a team of volunteers, and began printing their own banknotes. These miniature works of art feature the unsung heroes who run local youth projects, a food bank and a kitchen for the homeless. Their sale raised £ 40,000 from supporters; half of the money went to the causes on the banknotes, and half went to the debt cancellation fund.
“Most of the team had their own stories of how debt had disrupted their lives and were motivated to join the protest because of it,” says Hilary.
With the help of a credit broker, they were able to redeem, write off and detonate a batch of “bad debts” made up of outstanding payday loans, credit cards and catalog debt linked to zip codes. local. Paying just £ 20,000 for overdue debts worth £ 1.2million, the low price reflected the growing likelihood that those debts would ever be repaid.
However, the buyers of trade debts reportedly continued to collect the full amount, issuing a new series of letters demanding payment – with another layer of fees, charges and interest on top.
Since the film’s first preview screening (check the Bank Job website for the next one), Dan and Hilary have been contacted by all kinds of people looking to donate and write off more debt, or set up a similar project in their own room. areas.
However, given the likely scale of Britain’s post-pandemic debt problems, they believe a much bigger solution will be needed.
“We spoke to the Financial Conduct Authority and applied to become debt buyers ourselves, but no one had ever applied to do so in order to write off debt,” Dan explains. The artists did not have the financial qualifications required by the regulator, so the process was abandoned.
“At the end of the day, we’re storytellers – we don’t want to buy debt forever, but we want to bring the issue to light and bring the film to the makers,” he adds.
There is growing hope that as a result of Covid-19 political leaders around the world will be more motivated to help those in debt and take a closer look at the issues within the debt industry itself.
The Bank Job project was inspired by Strike Debt, an American group famous for buying up medical and college debts for pennies on the dollar and writing them off.
Born out of the Occupy Wall Street protest movement, the idea of canceling tranches of US student debt is now so mainstream that even President Biden supports it. Pandemic debt relief on U.S. student loans expires at the end of this month, and economists believe the reduction in the burden could boost the U.S. economy, allowing more young people to buy homes, cars and other consumer goods.
In the UK, even before the pandemic hit, some 9 million people had serious debt problems – and debt call centers are bracing for a wave of defaults later this year so that the support measures and the payment holidays come to an end.
The government’s free Money Advice Service debt line is already getting a call every four minutes, securing an additional £ 38million in funding from the state to train an additional 550 debt counselors.
Yet there is an enormous amount of money in problematic debt, as I learned when I spent a day on one of the UK’s largest debt hotlines.
Most callers spend a year or more struggling with their payments before picking up the phone and asking for help. To use a phrase used by Debt Strike, at this point many are “borrowing from Visa to pay Mastercard,” their initial debts inflated by spiraling interest charges and penalties.
Late or missed payments also take a toll on your credit report and increase the cost of borrowing. Products intended for “bad credit” such as credit cards and secured loans can carry interest rates of 49%, and payday loans can be the equivalent of over 1,000%. In contrast, those with a good credit rating can switch to 0% interest rate transactions.
The final chapters of Dan and Hilary’s book explore the economic arguments for debt forgiveness or for governments to grant low or no interest loans, repayable over a long period of time as an antidote to debt defaults. massive payments that could be induced by the pandemic.
Does that sound so crazy, given the nature of the debt “solutions” that are peddled online?
Look for “debt advice” and sponsored ads from all kinds of introductory companies will appear offering debt repayment plans that freeze interest and fees.
The FT has previously highlighted the problem of the UK’s fastest growing debt solution – IVAs or individual voluntary agreements.
The cost of setting up the latter typically exceeds £ 1,000, which borrowers pay off first. However, if they do not meet the refunds, they may be held responsible for all of the original debt, with interest and frozen charges added in, leaving them worse off than they were at the start.
Charities emphasize that talking to an independent advisor, rather than a commercially motivated supplier, is the only way for individuals to find the best solution for their situation.
Yet this week, the Advertising Standards Authority banned online advertisements from IVA introducers whose names “misleadingly suggest associations” with genuine debt counseling charities.
Will it take the Covid-19 crisis to change the way society’s most indebted can be exploited? As the number of people with serious debt problems increases, more lasting solutions will be needed.
Claer Barrett is the FT’s consumer editor and a financial commentator on Eddie Mair’s LBC show, weekdays 4-7pm: email@example.com; Twitter @Claerb; Instagram @Claerb