What happens to you if you don’t repay your credit card debt and the bank, despite its best efforts to collect, writes you off? In many cases, the bank sells your debt for pennies on the dollar to a hedge fund or a collection agency. And if the new owner of your debt can’t collect? He sells it again. Your debt can go through several hands, each “dirtier” than the one before.

Jake Halpern’s Bad Paper: Chasing Debt from Wall Street to the Underworld (Farrar, Straus and Giroux), which came out last year but which I read only recently, is a page-turning exposé of the Wild West of buying, selling, and collecting debt, most of the practices absolutely legal.

Bad Paper: Chasing Debt from Wall Street to the Underworld
Bad Paper: Chasing Debt from Wall Street to the Underworld

Aaron Siegel and Brandon Wilson, the main characters in Halpern’s story, hail from radically different backgrounds. Siegel was born into lavish wealth, earned an M.B.A., and took a job at HSBC. But then he decided to launch his own fund, focused on distressed consumer debt. “Basically, he was interested in buying up the right to collect unpaid credit-card bills.” Wilson, a former armed robber who had spent ten years in jail, was Siegel’s debt broker, buying and selling portfolios on Siegel’s behalf. He was occasionally also the “fix-it” man.

In this underbelly of the financial world, spreadsheets are stolen and consumers are harassed, sometimes ripped off. The FTC, which had sole jurisdiction over debt collection before the creation of the Consumer Financial Protection Bureau, turned a blind eye to most of the complaints it received.

This past January the New York Department of Financial Services issued its final regulations on debt collection practices for third-party debt collectors and debt buyers. The CFPB is supposed to issue its own set of regulations in the not too distant future. After reading Halpern’s book, you’ll understand the need for regulation.

And you’ll make sure that you pay your credit card bill on time. You never want to deal with the folks in this book. They may not break your kneecaps, but they can make your life miserable.