then he was really infinitely adaptable on everything else. so reagan in today's republican party i think would figure out where he needed to be but he would also be asking that same question that he was asking in 1964 and in 1966, which is, how do i get the republican nomination? talk to republicans in a way that is not going to alienate the rest of the country, and he is able to do that so effectively in the '60s because he has a deep confidence in himself and his conservatism, so i think one way that a conservative candidate could help to us emerge and to save the party from its problem ises to mirror the confidence to say to the people who come after them with litmus tests and proving their fealty to everything -- every cause of the right, i'm not going to sign

your pledges and you don't have at the right to explain to me what conservative is. i know what it is. there are passionate conservatives in the republican part who believe in it as a noble tradition who can have opinions on a myriad of different issues. and i think when -- if the country saw someone with that passion and that sort of ingenuity emerge and do that in a compelling fashion in the 2016 election, that's someone who could appeal to a lot of voters beyond the republican party. >> thank you so much. [applause] >> i'd like to off two-invitations. the first is, if our speakers will come back in 2064, to do the same kind of brilliant neal -- >> probably still be alive. >> as a second invitation is, please join news the four

freedoms room on the first floor. up next on booktv, after words with guest host, author naomi prince, this week, jake halpern and his latest book "bad paper. i: chasing debt." tells thester of a former bank executive and a former bank robber going into business together to collect unpaid bank debts by often questionable means. the program is an hour.

>> hi, and welcome. i'm naomi prins, here with the author of the fascinating and horrifying new book "bad paper: chasing debt from wall street to the underworld." jake, welcome. >> guest: thank you for having me. >> host: this book is incredible, and so is your story. and i think that to the two really mirror each other this tapes in buffalo, new york, and a lot of it and, you're from there. >> guest: that's right. i grew up there and midas and his wife still live there. guy back fairly often and that's how i find my way into this world. >> host: talk about a particular -- many unsavory characters that are scrabbling to make their own piece of the world and often have prison records and have been drug dealers and so forth. that's a fellow named jimmy that comes out here that seems to be one of the main characters of this nonfiction story.

can you talk about how you connected with him? >> guest: i talked to my mom and she was being hounded bay debt collector she says i don't owe the money he says i owe, but i think i'm going to pay him so he'll stop harassing me, which i mom is no lilting willy, and i thought it was biz star and started googling this and saw the was going on and the epicenter of debt collections in general in the united states was buffalo. one of the main hubs. so i had it in my head i would do a story actually from the check at the's perspective and what's it like to collect debt, the challenges you face, so i pitched the story to "the new yorker," saying, what do you think about this? i'm from beautifully. i could probably get minnesota somebody to talk to me. the editor said, great, 1,000 wordedded. and i panicked because i had

nothing. i went to buffalo once, and then no one would talk to me. i went a second time and still had nothing. so i started to panic because i was on the hook for this story. so i went on facebook and just sent messages to everyone i went to high school with, and then everyone my brother went to high school with, and i get one message back from this guy who is jimmy's brother, and i got jimmy on the phone, and jimmy said to me basically you better get down here quick if you want to talk to me because my business has been struggling and i don't know how much longer i'll be open. if you can show folks how hard my day-to-day life is i'll be satisfied. so i hopped to buffalo, shown up, and jimmy was one of these amazing characters, eloquent, and i'm driving around in his cars and going to churches and meeting with family and that is my entry point to this world. >> host: he had a struggle. you knew him growing up as well. you got to him through a set of

correspondences through facebook and so forth. tell me about your history in buffalo. just the atmosphere in buffalo, how it's changed from what you knew growing up and then your childhood, to the kind of place that it's one of the capitals of debt collection in the united states. how did that happen? >> guest: buffalo was once this big industrial powerhouse, all these steel mills and industry, and starting in the late '70s and '80s, when i was a kirked that starts to fall apart, and unemployment goes through the roof, and in place of a lot of ol' industrial jobs, collections kind of fills that void. someone told me that buffalo was so good at collections because even though the country has been in a great recession since 2008, buffalo has been in it since 1979 and people can connect with people having a hard time. so when i was kind of a teenager, even, this was starting to come in and take form. i don't think i really knew about it in -- and even though i

went to high school with jimmy, win to the same high school and it was supposed to be an integrated high school, we came from opposite sides of the street and i didn't have any sense of what really what life on the east side of buffalo was like or what jimmy was going through. woe could talk about having the same english teacher but it was like we came from different worlds and i learned when he was in high school, his father was a heroin addict, after getting out of high school he had become a cocaine dealer, had gone to jail on a gun possession and our lives couldn't have been more divergent. >> host: you said he was the entry point to the story and he has very interesting component of the story through something you call the package, which seems to be the crux of what the -- what you're chasing and what the debt collectors are chasing and involved in, in the book. can you talk about his relationship, what the package is and how that opened up the rest of this amazing story.

>> guest: so, the package is this one piece of debt that i follow through the book, and it's helpful to understand that when talk about debt being bought and sold, we're talking about an excel spreadsheet, so big banks try to collect, and when they can't they'll sell it off for pennies on the dollar to debt buyers, and those debt buyers collect whatever they and can then sell to the next and next. and they're selling the spreadsheet. >> host: information on customers, what kind of information. >> guest: the spreadsheet will have debtor's name, social security number, address, balance, date the account was opened, maybe one or two other fields but that's basically it. and they're just being bought and sold and e-mailed or sent the thumb drives and that's the paper, they call paper but that's really all it is.

and as you can imagine, it doesn't take much for something to go wrong. to get mixed up, amounts, debtor's names can get confused, or for someone to sell the same sheet to unsuspecting buyers, and i call the package, this one piece of debt, about $48 million and on face value but bought by pennies on the dollar bill a debt buyer named aaron siegel, and this gets stolen. somehow aaron finds out from his collectors, they start calling and saying, aaron, something weird is going on with these accounts. appears somebody else has accessed this information and is collecting the money from the debtors on this package before we get to them. so, at that point, he called his fixer, who is a guy named brandon wilson, kind of his unofficial partner, a former

bank robber, who has gotten into this business, helped him buy and sell debt and also helps him solve these problems and it's brandon who goes and tracks down the thieves that have gotten ahold of the diet, and it's -- debt, and it's a crazy showdown with guns and they get it back but the world he must go to, to retrieve that debt, that's the world that jimmy inhabits, this gray area of legality, underworld of buying and selling debt, and sketchy manner that exists in buffalo and other places. >> host: this underworld has hierarchy. you mentioned former thugs to large extent at the bottom level, getting some of this paper that has perhaps been sold and resold, and talk about lou paper has been stolen as well, and then you have the level up through aaron siegel and an

interesting character. tell me how you got to him through jimmy and the package, and also he wasn't a thug. he grew up on the good side of buffalo. he had a wealthy family upbringing, lived in a mansion. how did he come into the same business? >> guest: the story really started -- the way i tell the story in the book, starts with aaron siegel, and aaron grew up in a wealthy and very well-known and well-respected family in buffalo. goes to wall street for a while as a banker, and does some time in london but wants to come home and he ends up working at an office of bank of america in buffalo. around the time he comes back, what is happening is that throughout buffalo, entrepreneurs are buying some debt, buying this paper, and opening up a shop where they hire collectors, and the profit margin -- this is right before the great recession happened. this profit margins initially were through the roof. he is like buying a portfolio of

debt for 30 grand and in three months making 90 grand. so realizes he found this amazing little niche of the finance world, and the key to much of this success is he has this supplier who is supplying him with paper at a really great price and it's really luke lucrative. the buyer is brandon wilson, former armed robber who has done ten years in prison but recent vicinitied him office a debt broker who has a genius for finding paper that pays -- very collectible and isn't that expensive to buy. so aaron comes from this rare identified world and has this banking past, he understands this sector of the economy and it's not unusual to have shadier connections and guys rough around the edges. so he and bron don form this unlikely partnership and that's the starting point for the book.

>> host: talk about how when they're looking for the paper, aaron is looking for paper through brandon, he actually buys a portfolio from his old firm, from bank of america, that you talk about as being no so great a portfolio, for reasons other than the fact it's been stolen and moved around the block many times. >> guest: the key to making a profit margin in this world is getting good paper. everyone is hunting for good paper. and when he buys from his former employer, bank of america, you would think this would be a respectable dependable he fells it could be. he feels bank of america pulls a fast one on him. he spends millions of dollars buying this piece of debt and they're almost all senior citizens, which have the smallest amount of disposable income and he feels that bank of america failed him but the former armed robber, brandon, that he does bins with, comes

through for him in a way his former employer doesn't. >> host: what does he do? >> guest: heed behind the eight ball when he buys the bang of america paper and it's all senior? is and he feels he won't be able to turn a profit because he invested all this money. so he goes back to brandon, and brandon's specialty is finding what he calls crap, and that's old debt that everyone thinks is worthless, because it's been around the block a few times and been bought and sold a bunch, 10 to 15 years old, but it still pays because make it was sitting in a call center in brazil for five years and no one was working it, or comes from a debt buyer about to go under. so brandon would find deals on the paper so after aaron buys this stuff from bank of america, he turns to brandon and says, you have to come through for me and help me find these deals on this crap and other stuff you find, and the this package, this

piece of debt that gets stolen, the package is actually fantastic paper for aaron. he doesn't pay a lot for it. it's paying off for them, and then gets stolen, he is like, all right, brandon, fix this. >> host: and how does aaron come up with the money to buy the package? he did okay, had a banking job. went back to buffalo. who is behind the funding the initial purchases of these packages at the away level? >> guest: so, aaron's story is he is a banker, in new york, comes back to buffalo, sets up his own small collection agency, and with brandon's help he is getting paper that is paying huge dividends. so he -- like any good finance year thinks about what if i did this on a larger scale. so he makes a few phone calls and finds eight investors who give him $14 million to do a trial run. the thinking is, if he can do with this $14 million what is he

has done with his own money, the 300% returns and whatnot, then he'll do it even bigger for this 14 million and the 14 million -- do a second round with 40 million and bigger and bigger. the problem is that there's several problems, one of which the great recession occurs and people don't have money, and he encounters many problems, including the theft of some of this paper which i chronicle in the book. >> host: basically before that, while that is happening, he is in a hole. out some amount $14 million, has investors on the other side. they want their money back. you visited a couple of these investors. how are they feeling? what was their take on this and how much were the pressuring him and how much was -- was it's portion of their own money? how much do they even care about what happens really? >> guest: it's funny. i did want to meet investors and get a sense for what they're take on this was.

i weren't occupants to dinner with one of them. first thing you have to understand is there's this strange sequence of events. the debtors are owing brandon, who is collecting on it. brandon gets the money, he owes aaron who is organizing the fund, aaron then owes the investors who gave him the money so everyone is connected by this debt. so when aaron goes to meet one of these investors, fellow named joseph, he is totally anxious because he feels he is going to fail this guy and owe him money, and turns out joseph just sees this almost as -- he is just popping a million dollars, put money into tanning salons and bars, and for them aaron said he was hoping would pay off but almost like an amusement, and when we're having dinner with joseph, i said, do you ever think about basically the people whose debt your buying? and he says, no, why should i? they've made bad financial

choices. is it my fault for wantings to profit on it? he makes the analogy to a baseball game. if a pitcher pitches a bat pitch and the batter knocks a triple, is the batter somehow wrong for taking advantage of the bad pitch? and that as joseph's feeling about the whole situation. but it was kind of crazy to think that -- i met some of the debtors, and they're a poor single woman living in st. louis who is connected to this former armed robber from boston work is connected to aaron, connected to if the wealthy investor and all their lives are connected by this chain of debt but none of them know one another. that whole aspect fascinated me. >> host: the way you write bat it is so clear. it's like, we're there. in your writing. you're an excellent writer and are an on the ground journeys and that helps to bring alive the characters and the locations you're meeting people, you have gone to that top of the chain,

joseph down to the bottom of the chain, the individuals that get really hurt,, bowled over, and you talk about specific individuals that are just numbers in this package. they just represent numbers. they have real lives and you went and investigated them and spoke with some of them. you mentioned a woman named teresa and one named joanna who were taking out credit and paying it and then things happened and they got involved in this. what was that like? >> guest: you're absolutely right. what is being bought and sold here, it's easy to think of it as commodity or coffee shares because just looking at a string of numbers on sheets and there's thousands of them and this one paid and this one didn't. you pause and think this package of several thousand lines on this spreadsheet are basically several thousand stories of people whose lives for one reason or another have fallen into financial ruin. so i managed to get ahold of this spreadsheet for the package

that got stolen, and i was looking at and it thinking to myself, these are stories here. these names and these numbers represent something that happened. so, i started kind of reaching out to some of these people and explaining, i'm a journalist, looking into this particular piece of debt that i believe was stolen, and i want to hear you stories, and most people just hung up on me. a few who i profile on the book -- what they said, teresa, she was a former marine, she had -- she defies whatever stereo types you have of a debtor. he worked through high school, helping her parents pay off their mortgage, and her life comps apart after she gets out of the marine corps, she finds out her husband is cheating on her. she kicks him out and goes from two income to one income and is still on the hook for the vehicle payments and mortgage and she falls behind in her bills. at that point she stops -- the fees start kicking in on this washington mutual card, the card

connected to the package, late fees and over the limit fees and eventually she just can't pay anymore. so, unbeknownst to her, washington mutual sells off the debt to a debt buyer and ended up in aaron siegel's hand in buffalo and then ends up being stolen, and in the hands of these guys that don't actually own it. one day teresa didn't know about this. one day she gets a call and says, ma'am, you owe this money and you need to pay this right now or there's legal repercussions, and this is your chance to do it. the calls get increasingly threatening. teresa has a job as border control and if she doesn't have her credit in order it's hard to have a job like that because you can be back mailed or a liability. so she's thinking, i'm go to lose my job. i'm just going to pay these guys off. so the pays $2,700 off in several installments. she feels good about it, that she is getting on top of it.

when he makes at the last payment and is expecting a receipt for what she paid, there's nothing. and when she checked the credit reporting agencies there's no record of her paying. she has no idea -- she assumed she was paying people -- why use you assume otherwise? they head all her information but she paid people who stole her debt, and these are some of the people that aaron and brandon realize are paying the wrong guy. so, you're absolutely right. each one of these names on this package of debt that gets stolen are real people and the stakes couldn't be higher. >> host: seems like there's so few rules or ability for regulators to cover these. you talk about these individuals, moving back and forth, and people like teresa, don't -- they don't know what's going on. they're just afraid, they're just paying because of the phone call. what kind of tactics are comping from that other side of the phone call? almost a third of americans are

in debt right now are in collection. they may be getting phone calls from some of these people that you talk not your book. what is that like? what's their -- >> guest: you're right. a third of americans have a debt in collection, and when you're getting called by a debt collector, you get the talkoff, and the talkoff is the collector on one end trying to persuade you to open your wallet and pay your bill. so there's legal talkoff, there's illegal talkoff, and it's a gray area. the legal talkoff would be, just talking through, this is the information, you owe this amount, this is your social security number, how can we arrange this? the illegal tactics are when you're basically threatening and lying to consumers, saying, we're going to take legal action when that is not true. we're going to arrest you, we're going to seize your property. lies and kind of coercion and threats like that are not legal, and that happens a fair amount, and if you think about it, it

happens towards the bottom of the debt food chain. if you have this piece of debt the bank sells off to a fairly reputable debt buyer they don't need to do that to get their money. when that debt has been bought and sold six and seven times, what it's whittled down to are the folks that haven't paid any of the previous owners and the people that get that debt are the people at the bottom of the food chain, and that's where they almost feel they have to make these very threatening calls and these illegal tactic in order to squeeze the money out of folks. and there's often these are the small agencies that open up, they do and it then close back dune and open up somewhere else before they can be caught by the authorities. i want to make one other point, which is that there's not a lot of regulation some law enforcement -- it's changing. consumer financial protection bureau and in the state attorney generals are starting to get more into this but in the last

bunch of years there hasn't been much regulation, and that helps explain why a banker like aaron would team up with a former armed robber like brandon. brandon is basically offering him a service that regulators and law enforcement can't, which is when something goes wrong, i will solve this problem for you because calling the police and calling the state attorney general and calling the cfpb won't get it done. you need me,broken don wilson, to straighten it out, and i think aaron saw the truth in that. >> host: you make the comparison, you have desperate people on one side at the bottom of their food chain to collect debts and desperate individuals getting phone calls and are paying because it sounds scary, and you have very little regulation at the bottom 0 part of the chain. so what recourse do some of these individuals have or what can they do beside -- where do they pain? if they paid on a debt, but it's

gone to no one. gone to these people. >> guest: right. i was sitting in a shop, in jimmy's shop one day in buffalo, few years ago, and i was listening to the calls between the collectors and the debtors, and the guy gets on the phone and says you owe the ms. on a payday loan. the guy says i paid this off three months ago if paid $900. that was probably $300 loan. jimmy said can you send me written proof with a receipt from that agency showing you paid, and the guy said, never got that. and then jimmy said to hi matter of factly, sir, i'm afraid you still owe the money. and he turned to me and said, i'm -- this is the only way i know that the guy is telling the truth, if i just forgave every debtor that said they had paid i wouldn't be about independence but you got a sense of the franticness of the guy on the

other lined who sound fairly earnest he paid this off, and he didn't sound likely had much recourse. the calls will continue until you pay kind of thing. now, there are one or two things that are helpful for consumers to know. one is, know what the statute of limitations in your state is for when a debt is no longer legally enforceable. varies from three to six years. i if you're gifting a call on a dealt that is four years old and the statute of limitations in your state is three years old you have no legal obligation to repay that debt. and the other thing is, after seven years, most negative reporting falls off your credit report. the credit reporting agencies. >> host: is it safe to say -- that's very interesting information for anyone getting calls. is it safe to save if you get a call on any level of threaten after five or six years, is it safe to say you should ignore that call? >> guest: you may feel you have a moral obligation repay but i would probably think twice about

repaying it if i know in a year it's going off my credit report rating because it's been seven years, or if there's no legal recourse because it's on out of -- beyond the statute of limitations. the other thing is i would want to make sure the person on the other end of the phone actually owns the debt. i want to -- the problem is there's not an easy way to figure that out. you could get the name of the company, check them out on be better business bureau web site and get a sense if this seems like a reputable company or not. >> host: you actually were on a call as part of your research for the book, actually in a collection center and you got on the phone to sort of feel like what it was to be a debt collector and how that conversation with the person at the other end of the phone. what was that like? >> guest: i was at brandon wilson's collection agency in maine, and i was just observing, and he said to me, get on the phone. you can observe all you want but you're not going to actually

understand what this job is like unless you collect. and i was kind of reluctant for a few reasons, one of which i didn't want to hound people. but the other collectors who work for him started kind of haranguing me and saying you have to try this, and i said, all right. so i got on -- give me a head set. i sat in front of a terminal and you they had it an auto dialer whose debtor's information was routed to me and it was a woman who owed $450 on her cell phone bill. and i said something like, ma'am, i see you owe this $900 now with interest, but we can give you a reduced rate. would you consider paying this? and i heard myself saying and i thought i wouldn't pay me. that's such a weak opening gambit. and evenly we're talking -- brandon says you have to marry the debtor, what goes ago been if you in your life, you're

working, and that we'll have some sort of connection that she'll feel like she can open up and trust me, and i'm trying to do this, and at one point she says main i could write you a check, and -- but i don't like seize on that right away because i'm trying to marry her, and then she hangs up and brandon is behind me playing coach and he is like, look, you failed at this not because you didn't collect. you failed on her because at the moment she offered to make that check, you should have said, okay, i'm going to -- so you're going 0 send me that check? yes. send the middle of the month? yes, because in brandons psychology the minute she promised to make that payment, we had kind of gotten her because she had committed to this, and now we could use that the next time we called her. so there's a few calls like that. i was a very bad collector, but i realized i could afford to be

a bad collector. i'm married to a doctor. i make a decent leveling as a writer. if i were dress separate -- desperate i would have gotten wise. >> host: they're desperate. they're like sharks. that's what you have depicted here in a very clear manner. >> guest: there's some collectors that do well for themes and work at more of these kind of white glove customer service type places but a lot of collectors are desperate. i was at one of agency, one gay made $115, another guy made 85 tuesday, -- are -- $85 and thats poor.

>> you talk about this underworld in buffalo and going up to bangor, maine, and getting top phones and dealing with that set of characters. you also talk about another pillar of debt collection world, which is las vegas. and you went there to do investigation there and to deal with individuals and discover new things there. what was that like? >> guest: so, i wanted to see how brandon wilson was buying this debt. brandon is the former armed robber who worked for aaron and is find these deals on paper, and those deals are key to making the profit margin. so, in the course of talk can to brandon about where he hunted or searched for paper, he says las vegas. every february there's debt

buyer convention and i hunt for deals. i ask him if i can tag along and she said sure. so in february 2013 i flew out to vegas, spent several day with brandon as he was on at the prowl for these deals, buckets of debt he called them so he could bring home to work at his own collection agency or he could then flip and sell to other folks. and it was interesting because when we arrived there that year, the market for debt was changing for two reasons. one was the regulators were finally starting to crack down a little bit and that was making some of the banks nervous about who was getting ahold of their debt. the other thing is that during the credit boom of the 2000s, everyone was getting a loan and now after the recession people are -- creditors are becoming careful who the issue credit to, which means the cost of buying these bad accounts that no one collects on goes up.

all this meant that brandon had to work that much harder to find these deals, and when he was there he was hunting for this paper that he called the ring come paper. want me to tell you about that. >> host: that's an interesting story. >> guest: when he gets there the word kind of on at the street or the hotel lobby is that there's a parcel of debt that everyone is calling the ringcon paper and it's debt that belonged to an agency in california known as ringcon that the federal trade commission shut down because they were doing illegal stuff in terms of collecting and threatening, and after they shut down this agency, its assets went into accurate-appointed receiver. the same way you seize a drug dealer's car and auction it off to raise revenue. the same thing happened but the assets of this ringcon company were largely they're -- their

paper. so this receiver was auctionings off this paper. and everybody was trying to figure out, how much is this worth, big piece of debt. so i'm going along with brandon and he is doing his intelligence, talking to folks. what is the word on this paper? would you pay one penny on the dollar, tenth of a penny? and i'm with him one day when he meets this woman who is another debt broker, and she -- brandon wants to talk to her because she used to sell debt to ringcon and was intimately familiar with the workings of the company, and she said, don't buy it. and brandon says, i kind -- i had a bad feel. why? she said, well, i have reliable information from the people at ringcon that some 0 the debt was stolen after the offices were shot done, and what is more, that some of the chains of title proving legitimate ownership of this debt is not there.

and i have this information she claimed directly from people inside ringcon and if you buy that debt, you're going to be in a world of trouble because particularly if it was stolen, that means someone else could be working the same paper that you own. so i eventually called up someone at the federal trade commission and said is it possible some of this paper was stolen after the offices were shut down and they basically said, i can't tell you for 100% certainty some employee didn't walk out the door with the paper before we shirt it down. so i did omore digging and looked at the terms of sale of the court. if you want to buy this paper this is the agreement you have to -- the contract you have to agree to, and the contract said, in pretty clear lange, we're making no warranties or guarantees about the accuracy or the validity of this paper being sold. so basically you have a federal regulatory agency shutting down

a bad actor in the business, handing over its assets, its paper to a court appointed receiver and there's an auction, and they're selling off the paper and there's reason to believe that at least possibly they're selling paper that has been stolen, and it was kind of mind, boggling. these are people that are meant to be cracking down and solving problems, might be rating -- be creating problems, and the end brandon decides the doesn't want to make a bid on this ringcon paper. >> host: i fine that horrifying that the fbi -- the ftc is closing down a shop, taking up paper, not doing anything with respect to, i imagine, the debtors involved on the other side of the paper, because they don't know what's going on with their debt. they don't know what has been shut and going to somewhere else. and they could conceivably, which it's for that paper or other paper, be getting calls from collection agencies that

bought it, stole it, whatever, that it they've never heard of, never had a transaction with. you mentioned, for example, chase and washington mutual at two banks at the top of the food chain, had papers, different from the ringcopping con example. at some point chase stops selling its debt because of regulations that have come into effect after the financial crisis and with the dodd-frank act. >> guest: creek. >> host: how did that impact -- were there other motives, lawsuits they could have been dealing with and how did that impact the whole chain of other characters involved in debt collections? >> guest: right. so, the title of the book is "bad paper." and that's papers there's problems with and therefore makes it hard to collect, and there's a lot of bad paper out there because basically what these big creditors like washington mutual, now chase,

bank of america or whatever, for years, have just sold these spreadsheets out with an -- not a particularly careful or organized way, to debt buyers, and the contracts that these banks create when they sell it to the debt buyers clearly have crazy warranties saying they make no warranty about the accuracy of the information. and there's all kinds of problems with that. it saw that first hand people connected with the package. one quick example. there was a woman who was connected to this package whose debt, after going through the whole circus of what happened in buffalo, ends nip courts in georgia, and she is getting -- it appears on her credit report and she is in danger of being sued, and i meet with this woman and say, what's the story with this debt? she says i was hoping you could tell me. i don't recognize this washington mutual debt i supposedly owe. so i said, okay.

there's got to be an easy solution here. let's call chase bank, which now bought washington mutual and ask them directly, what is going on with this amount and with this debt that you don't recognize? i call the spokesman for chase and say i have this woman, named julie. she has this on her credit report but doesn't recognize the debt, the amount. can you help us clarify? because when this was sold off it appears maybe it was done in a kind of -- mistakes or whatever. the guy from chase calls me back and says, jake, we decided we're just going to write off julie's debt as fraud. and i said, well, why? he said, well, we don't have any of the underlying documentation that would give us confidence that this is in fact a valid and accurate debt. they had some statements but didn't have the original signed contract or proof of who was paying the debt. i said, what would you mean you don't have it? you're the bank. and he said, well, when chase acquired washington mutual, it

was very a very rapid process, and information was lost. now, when chase acquired washington mutual that is one to the largest financial acquisitions in recent history and/or talking about a pillar of the financial world, and they're basically saying we don't have this paperwork. so, the mistakes being made that makes this paper bad aren't just happening at the very bottom of the food chain, where you have street hustlers in buffalo. there's reason to believe it's happening at the highest level of finance and assumption going into there is that banks won't make mistakes is not a safe assumption. >> host: the writing is just so clear, you're cooking -- coming at it not from financial component but from the underworld ask the individuals and how people are impacted. the stories that surround the

washington mutual chase merger and everything that was happening during the financial crisis of 2008 have come into focus as being beside this sort of thing happening mostly with mortgages. with attachments to mortgage loans being lost, with -- you actually bring out this is going on -- had been going on and has been going on not just in mortgages but throughout this entire credit spectrum with credit cards and other types of debt as well. >> guest: that's right. i think at this point, people know that there is a lot of funny business going on with the way mortgages were i-ed, bought and sold, houses were foreclosed upon, and i think there's been a lot less attention given those idea of consumer debt, whether it's credit card debt or pay day loan but they're the same problems. and the way -- where you see this most strikingly is when we get to the courts, which is where we get towards the end of

the book. so, basically all those folks calling the debt correctors calling, saying you have to pay this, they're basically relying on the talkoff, convince you to pay. if they can't do that, then often it ended up in the hands of lawyers who then sue on that debt. and this is where it goes to the court, and many of the same issues they have had with robo signing, the mortgages, they having similar issues in court with credit cards because basically the lawyers that are suing on this debt, the evidence they have is fairly thin. it's these excel spreadsheets and there's problems with the spreadsheets, and what happens is there's a 90% no-show rate with consumers in court. so if you think about it, i'm a guy, jake, can't pay the credit card. a whole bunch of debt creekors call me up, they bought and sold my debt. i still can't pay it. eventually they bring in the lawyers and the lawyers sue me

for this amount. now most likely what they're saying, oh, much higher than the original principal balance, maybe three times higher. if i go to court i can challenge that and say do you have proof or what's the breakdown of interest and program. but 90% of americans don't show up in court. either don't understand what it means not to show up or they feel there's no pointen and what happens is these numbers on the excel spreadsheet that are highly suspect to begin with, then get stamped by the court and it becomes a judgment against you. and then your creditor can now garnish your wages. hey don't have to call you up and beg you to pay. they conclude right at your bank account and clean it out, get your monthly work check, and this happening -- there's a new tied out by npr that shows that 10% of americans between 35 and 45 are having their wages garnished every week. so, that's what is happening.

>> host: that's astonishing. you basically have given in this book, in this interview, two very important pieces of advice for consumers out there who are involved in this debt collection process. one, if someone calls about a debt that is over a certain period of time be suspect about the call and likely ignore it. and also, as you're mentioning, show up in court if you get summoned to court because you have a much better chance of writing -- righting whatever wrong than if you don't show up and it goes against you. >> guest: that's totally true. >> host: that in itself is -- the entire american public. so thank you for that. on behalf of the american public. you are in court in satisfy van nark georgia, and the history that georgia has in the the

doctors prison and the debtor's idea of re-institution and all sorts of things and you sully survived these people. >> guest: the history was that originally georgia was a few-topia that would rehabilitate debtors. they come from the debtors prisons in england and come to the new world and get a fresh start and kind of get out of the chains of debt and rebuild their lives. this is very upbeat, optimistic view of re-invention, but the irony is that that's really not the case in america these days. we hear about how americans declare bankruptcy and get out of their debts but there's lots of people who are just -- have horrible horrible credit ratings, therefore pay higher rates on loans. they're having their wages garnished, check accounts cleared out. it's quite a contrast to the utopian vision that original originally founded the state of

georgia. then the other part of your question, which is about going to court, and there is a fairly funny thing that happened to me which was that i wanted to actually see what this process was like, so i followed the packaging of debt i followed in the back and i went to one of the courthouses where some of the debtors connected to this package has been led to, and showed up to get a sense of it. i'm waiting outside the courtroom, and i start talking with this couple who is being sued over a credit card debt, and they don't recognize the people that claim to own the debt, that the creditor's name doesn't ring a bell, the amount doesn't make sense and there's no documentation about the breakdown of that amount. we're trying to figure it out. and this guy calls out their name, a young lawyer -- this is outside the courtroom and he calls out the their name and he says to them, i represent the people that own your debt. and let just settle this basically right now and we can work out an agreement and you can pay me and we don't need to

go before the judge. and then he retches into this brief case and pulls out a thank you. that looks almost like a credit card statement but like a mockup of a credit card statement. all it has is the amount they owe, their name, address, and then at the top in bold print, says, this is not an actual credit card statement. so they're kind of looking at this, and they start talking to this lawyer, and at some point along the way i pipe up and i say, do you have any documentation to prove that you do in fact own this debt? or any further information that gives a breakdown of the debt. she says are you a lawyer? i said no, i'm writing a book. he says you can't represent them. he says i'm going too take you in front of the judge. so i return to the courtroom with this couple, and the woman, who actually is on the hook for the debt, the judge calls her up and then the judge calls me up as well and we get sworn in together like we're codefendants

in this and it was like a kafka novel. so i'm sworn in and lawyer who is suing on the debt, says mr. halpern here is -- appears to be practicing law without a license and could you please tell him he could face criminal sanctions for doing this, and i say, your honor, i just asked a question. i'm trying to figure out the process with these folks that i met 15 minutes ago. so this goes on back and forth, and then finally the judge says to this lawyer, what do you want to do about the matter of this debt? and he says, let me consult with hi client. he makes a phone call and comes back and says, we're going to drop the case. so, at this point, me and the debtor are saying, what just happened? we're kind of scratching our heads, we walk into the hallway and there's a guy from georgia legal services and says to us, i'll tell you what just happened. you said the magic words and

those are, prove your case. in other words, this couple simply by showing up in court, and pressing back just a little bit, asking for the barest, thinnest amount of evidence of legitimate si of this debt and the detailed information of this debt was enough to make the person suing on it back off and the whole thing kind of just crumbled. and it was this moment where it was so funny, the whole book i have been chasing this package of debt through the streets of georgia and the moment it comes under the faintest bit of scrutiny, it vanishes into nothing. >> host: that's amazing. now, you mentioned earlier that the whole chasing of paper and the whole debt collection business got to a larger height during the great recession after the financial crisis because people just simply had less money to pay and more debts, and you talk about the term, the

shadow economy for these people, who i find interesting. when we use the term shadow banking, usually it's about hedge funds, about came mon island tax shelter. the shadow economy is different and it's something that you discuss with respect to the people on the bottom of this, and i want to know if you can just talk about where you think those people and how that has evolved from where we are now. >> guest: so, this happened -- the way i kind of stumbled into this, when i was in georgia looking to go lives of these debtors who had basically being -- were being sued in court. i wanted to get a since of what they're lives were luke and one of them told me that she bought her car from a special car dealership that offered -- that catered almost exclusively to people with bad credit. so i went to this dealership and what became clear was that they were paying an enormous premium

for their bad credit, and in the words of the car dealer, they're money was worth 70 cents on the dollar, and a car that was maybe -- should have coase $9,000 will cost $13,000, and in fact another debtor who i followed, he actually had his bank account cleaned out. he was one of those guys, judgment posed against him, they found him and cleaned out every crept he had, which was then caused him to default on his car payment. which then compromised his ability to get to work and in his situation he had a device, gps kind of device on the engine of his car so the moment he went into default on this car loan, which he was paying this premium on, boom, the engine would shut off and this car would be stuck at the side of the road. so this is the world that people inhabit who have really bad credit, and i went and stayed -- i visited this housing complex where it was basically all

people who had very bad credit, and they live in this world where they are paying the highest possible rates of interest, and there's basically no trust, creditors don't trust they're going to pay the bills so they get stuck with this. and on the one hand you can understand from the creditor's perspective. these are risky investments but hard to see people who are still poor having much of their income devoured by interest and they're the ones getting the most gouged by this. >> host: when you talk to the ftc or the consumer consumer protection board, have you about toen a sense this is an issue whatsoever at all they're trying to do something about? helping people on this side of the circus and just generally, the fact there are such heinous interest rates rates and payday,

way above usury level ill posed on people with the least ability to pay. you mentioned one instance which is very logical where one of the people in your book says, if i hadn't been hit with the extra charm, the extra rate, i would have been able to pay this. we could have negotiated. this all could have not beening this chain of shadowy underworld financial stuff. do you sense any understanding of trying to get to the root of this matter at the washington level? >> guest: i think the creating of the consumer financial protection bureau, the brain khyle of now senator elizabeth warren, was a good move, and they're starting to make a difference in the states. and they're going to have new rules coming out in a year that will affect debt collection, and they've been aggressive. it -- if i were in charge i would give them more funding. a lot of this is going to come down to how much resources do they have to kind of go after the bad actors?

so, the consumer financial protection bureau might have a budget of between 400 million and $500 million. to put that in spiff if you look at the amount of money that jp mortgage ban chase set aside for litigation reef serves in 2013, the money they putt -- put aside, the consumer financial protection bureau's budget is 2% of that. so you get the sense that they're doing good work, but they're kind of outgunned here. and i think that hopefully, if anything comes from the book, i hope it's a call to arms to give them a shot in the arm. i was on the phone with the justice department. they have initiative called operation choke point, and the idea is to -- it's hard to go after these payday lenders that do the worth stuff so what the justice depth started to do is go after the payment processors, so if i'm a payday collection

agency and i'm doing bad stuff, i still have to rely on a payment processer to take your debit card information and take the money, and the justice department started to say, hey, payment processor, if you are dealing with these unscrupulous pay day lender we are going after you. there's been push back because there is a strong payday loan lobbying presence that is pushing back, but i think you need initiatives like that, and on a larger scale, if you're going to see a change that needs to happen to clean up the industry. >> host: hopefully from your book, that chain is illuminated so well and hopefully that can be a catalyst to at least increase the funding and look at these sorts of things...