>> guest: you are absolutely right. what is being bought and sold here you can think of it almost as some sort of fake commodity like coffee shares. you're just looking at the string of numbers on the sheets and there are thousands of them and this one paid in this one didn't pay. you think this package of several thousand lines on an excel spreadsheet or basically several thousand stories of people's lives who for one reason or another have fallen into financial ruin. i managed to get ahold of the spreadsheet in a package that got stolen and i was looking at it and think to myself these are stories here. these names in these numbers represent something that has happened. so i started kind of reaching out to some of these people and explaining i'm a journalist and looking into this particular piece of debt that i think was stolen and i want your story. most people just hung up on me but a few who i profile in the booktalk and what they said theresa's the woman you mention. she was a former marine.

she defies any stereotype we have of a debtor. she's helping her parents have for mortgage. her life falls apart after she gets out out of the marine corps. she finds out her husband is cheating on her. she kicks him out of the house and she is still on the hook for the vehicle payments in the mortgage and she falls behind on her bills. at that point the fees start kicking in on this washington mutual card which is the card connected to the package. over the limit fees and eventually she can't pay it anymore. unbeknownst to her washington mutual sells off this debt to it that pirated ends up getting into into aaron siegel phantom buffalo that it ends up being stolen in the hands of these guys that don't actually own it. so one day theresa gets a call and they say you owe this money and you need to pay this right now or there will be legal

repercussions and this is your chance to do it. the calls get increasingly threatening. meanwhile theresa got a job working as a border patrol in the southwest and she doesn't have her credit in order. it's hard to have a job like that because you can be blackmailed or there's liability. theresa says and is going to pay these guys off so she agrees to pay $2700 off in several installments. she feels good about it that she's getting it done but when she makes the last payment and she's expecting to get a receipt for what she paid there's nothing. when she checks the credit reporting agency there's no record of her pain. she assumed she was paying people and why would you assume otherwise? they had all the information but she was paying people who had stolen her debt. these are some of the people that aaron and branded realize are paying to the wrong guy. you are absolutely right, each of these names on this package of debt they get stolen are real

people and the stakes couldn't be much higher for their lives. >> host: seems like there so few rules or ability for regulators to cover these different point you talk about. people like theresa they don't know what's going on. they are just paying because of a phonecall. what kind of tactics are coming from the other side of the phonecall? almost a third of americans are in debt right now or in collection so they may be getting these phonecalls from some of these people you talk about in your book. >> guest: you are right. about one third of americans in debt collection and when you are called by a debt collector basically what you get is a talk off. the collector on one end trying to persuade you to open your wallet and pay your bill. so there's legal talk off and illegal talk often there's a gray area. illegal talk off would be

talking this is information and you owe this money and how can we arrange this? to illegal tactics are when basically they are threatening and lying to consumers saying we are going to take legal action and that is not true. we are going to arrest you. we are going to seize your property. lies and coercion and threats like that are not legal and that happens a fair amount. if you think about it that happens toward the bottom of the debt food chain. if you have this piece of debt that the banks fell off to a fairly reputable debt buyer they don't need to do that to get the money out of it fairly quickly but when that has been bought and sold six or seven times what it has whittled down to where the folks that haven't paid any of the previous six owners. the people that get that debt are usually the people at the bottom of the food chain. that's where they have to make these very threatening calls and

use illegal tactics to squeeze money out of folks. often these are the small agencies that open up and they close back down and open somewhere else before they get caught by the authorities. and i just want to make one other point which is that there's not a lot of regulation in law enforcement because it's changing. the financial protection bureau is starting to get more into the space but over the last bunch of years there hasn't been much regulation. that is help explain why a banker like aaron who teamed up with the former armed robber not only is branding getting good paper, brandon is offering him a service that regulators and law enforcement can't which is when something goes wrong i will solve a problem for you. calling the police in the state attorney general and calling for cfpb is not going to get it done. you need me brandon wilson to straighten it out. i think aaron saw the truth in

it. >> host: you make the comparison than that. you have debt from people on one side who are trying to collect data and desperate individuals who are getting these phonecalls and paying because it sounds scary. you have very little regulation particularly at the bottom part of the chain. so what recourse to some of these individuals have or what can they do? what can they do if they have paid on a debt but it's gone too no one? it's going to basically some of these people. >> guest: i was sitting in a shop sitting in jimmy shop in buffalo years ago and listening to the calls between the collectors and the debtors. the guy gets on the phone in jimmy is trying to to collect within many said hey you owe money on this payday loan. the guy said i just paid this payday loan off three months ago. $900 m. by the way is probably a

300-dollar loan. jimmy says can you send me written proof of a receipt from agency showing the proof in the guys that i never got that. jimmy said sir i'm afraid you still owe money. he turned to me and he said this is the only way i know that this guy is telling the truth. if i believe every debtor that said they paid i wouldn't be in business but you got a sense of frantic miss from a guy on on the other in the line who sounded in earnest like he pay it off and didn't sound like he had much recourse. i think the calls will continue until you pay kind of thing. there are one or two things that are helpful for consumers to know. one which is know the statute of limitations in your state for when a debt is no longer legally enforceable and it varies from three to six years. if you're getting a call on a debt that is four years old and the statute of limitations in your state is three years old then you have no legal output -- obligation to repay that debt.

after seven years most negative reporting falls off your credit report. >> host: is it safe to say that's interesting information for anyone out there getting a call. is it safe to say if you do get a call on any level of threat after five or six years is it safe to say you should ignore the call? >> guest: yeah i would be, if it were me i would think twice about repaying it if i knew any gear it's been seven years or there's no legal recourse. it's beyond the statute of limitations and the other thing i would say is i want to want to make sure the person on the other end of the phone is selling the debt. the problem is there's not an easy way to figure that out but you could get the name of the company and check them out on the better business bureau web site and get a sense for whether it seems like a rather the company or not.

>> host: you actually were on a call as part of the research for this book. you were in one of these collection centers and you've got on the phone to feel like what it was to be a debt collector and have a conversation with the person at the other end of the phone. what was that like? >> guest: i was at brandon wilson's collection agency and we were in bangor maine. he said to me look you've got to get on the phone. you can observe all you want but you are not going to understand what their job is like unless you collect. i was reluctant for a few reasons one of which was i didn't want to count people. the other collectors who worked for him started ringing me and saying you've got to try this. i said all right so i sat in front of one of these terminals. they had it on an auto-dialer so that debtors whose information has been verified is routed to me. the first call was a woman who

owed $450 on her cell phone bill. i said something like maam icu owe this $900 with interest. it if we give you a reduced rate would you consider paying this? i heard myself saying i wouldn't pay me with such an weak opening gambit. eventually we are talking and brandon is trying to -- i have to have such empathy like what's going on with you in your life? then we will have some sort of connection and she will feel like she can open up and trust me. i'm trying to do this at one point she says maybe i can write you a check but i don't seize on that right away. then she hangs up and brandon is right behind me playing coach and he's like look you fail that this not because you didn't collect. you failed because the moment she offered to make that check

you should have said okay so you are going to send me that check? and you will send it in the middle of the month of? es. branded psychology is the minute she promises to make that payment we had kind of gotten her because she committed to this. now he can use that the next time he calls her. anyways those there are few calls like that. i was a bad collector but i realized in the end i could afford to be a bad collector. i am married to a doctor and i make a decent living as a writer but if i were desperate like some of these collectors i would have gotten wise quick to what i would have had to to say and do to make folks pay. >> host: they are desperate. they are like sharks and that is basically what you depicted here in a very clear manner. >> guest: there are some collectors that do well for themselves and work for customer service type places but a lot of

collectors are pretty desperate. i was at one agency where at payday at the end of the week one guy made $102 the other guy made $85. that is poor. >> host: you talk about this underworld in buffalo and going to bangor maine and getting on the phone and dealing with a set of characters in the new also talk about another pillar of debt collection world which is las vegas. you went there to do an investigation there and deal

with individuals and discover new things. what was that like? >> guest: so i wanted to see how brandon wilson was buying this debt and you remember brandon was a former armed robber who works for aaron and his finding deals on paper. those deals are key to making a profit margin. in the course of talking to brandon about where he hunted our search for paper he said las vegas where there said that buyers can mention. i go out there and i asked if i could tag along. february 2013 i flew out to vegas and spent several days of brandon. he was on the prowl for these deals. he wanted to get this debt that he could bring with him to work at his own collection agency or that he could flip then sell to other folks. 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. that was making some of the banks nervous about who is getting a hold of their debt. the other thing is that during the credit boom of the 2000 everyone was getting along. now all of a sudden after the recession people are becoming, predators are more careful about who the issue credit to which means the cost of buying these bad accounts of non- bad accounts that no one collects bad accounts that no one collects on goes up. all this meant was that brandon had to work that much harder to find a deal. when he was there he was hunting for this paper that he called the rincon paper. you want me to tell you about that? >> host: that's a really interesting story. >> guest: when he gets there the word on the street or in the hotel lobby is that there's a parcel of debt that everyone is calling the rincon paper. it's debt but apple wants to an agency in california known as rincon that the federal trade

commission shut down because they were doing all kinds of illegal stuff collecting and threatening and abusing debtors. after they shut down as agency its assets went into a court-appointed procedure, the same way you would seize the drug dealers car and auction it off to raise revenue. the same thing happened but the assets to this rincon company were largely their paper the debt they were collecting on. so now basically this court was auctioning off this paper. everyone was trying to figure out how much is this work -- worth. branded as talking to folks. what do you know on this rincon paper sand would you pay 1 penny on the dollar or attempt of a penny on the dollar in that kind of thing. i was with him one day when he meets this woman who was another debt broker and brandon wants to talk to her because she used to

sell debt to rincon and she was intimately familiar with the workings of the company. she said don't buy it. brandon says i had a bad feeling about it but why do you think i shouldn't buy it quick she said well i have reliable information that some of that debt was stolen after the offices were shut down and what's more some of the chains proving legitimate ownership of the debt is not there. i have this information she said directly from people inside of rincon and if you buy that debt utopian world of trouble particular if it was stolen. that means someone else could be working the same paper the along. i eventually called up the federal trade commission and i said as a possible some of this paper was stolen and the office was shut down and they basically said i can tell you for 100% certainty that some employee didn't walk out the door some of that paper before we shut that

down. then i went and did more thinking and i looked at the terms of sale that the court was saying. if you want to buy this paper this is the contract you have to agree to. the contract said in pretty clear language we are making no warranties or guarantees about the accuracy or the validity of this paper is being sold. basically to sum this whole thing up you have a federal regulatory agency shutting down a bad actor in a business handing over its assets, this paper to a court-appointed receiver and there's an auction. they are selling off that paper and there's reason to believe that at least possibly they are selling paper that's been stolen. it was kind of mind-boggling. these are people that are meant to be cracking down and solving problems but inadvertently causing problems. in the end brandon decides he just doesn't want to make a bid on this rincon paper that's

owned and controlled by this court-appointed paper. >> host: now i find out again horrifying that the ftc is closing down shop, taking that paper not doing anything with respect to the debtors involved on the other side of that paper because they don't know what's going on with their debt. and they can conceivably whether it's that paper or other paper be getting calls from collection agencies that bought it or stole it that they have never heard of and they never had a transaction with. you mentioned for example chase washington mutual to banks at the top of the food chain who have papers different from rincon but at some point shakes off selling its debt because of regulations that have come into effect after the financial crisis and with the dodd-frank

act. how did that impact first of all what if they do it they do with? were their motives or lawsuits that they did want to deal with and how did that impact the chain of other characters involved in debt collection? >> guest: the title of the book is "bad paper" and that paper is paper that is a problem. there's a lot of bad paper up there because basically big creditors like washington mutual and now chase or bank of america whatever for years have just sent the spreadsheets out and not a particularly care for organized way to debt buyers. the contract that these banks create when they sell to debt buyers have these crazy warranties and they say we are making no guarantee about the accuracy of information. they're all kinds of problems with it and i saw that first-hand with some of the people that were connected to the package.

just to give you one quick example, there was a woman connected to this package whose debt as we are going to the circus of what happened in buffalo ends up in the courts in georgia and she is getting hits on her credit report and she's in danger of being sued over it. i meet with this woman and i say okay what's the story with is that? she said i was hoping you could tell me. i don't recognize this washington mutual debt that i supposedly owe. i said okay let's call chase bank which now bought washington mutual and we will ask them directly what's going on with this amount and the debt that you don't recognize. so i call up these folks at chase and i say i have this woman right here whose name is julie. she doesn't recognize the debt and the amount. can you help us clarify because when this was sold off it appears there were mistakes.

they call back and say jake we decided we are going to write off julie's dad as fraud. i said well why? they said 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 that they didn't have the original signed contract or proof they were paying the debt. i said what you mean you don't have a? you are the bank, shouldn't you have that? he said well when chase acquired washington mutual was a very rapid process and information was lost. when chase acquired washington mutual that was one of the largest acquisitions in financial history. you are talking about a pillar of the financial world basically saying you know what, we don't have the paperwork.

this has been going on notches with mortgages that a higher

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's a lot of funny business going on with a way that mortgages were issued where they were bought and sold and if the house was foreclosed upon. there is a lot less attention given to consumer debt whether credit card debt or payday loans but they are the same sorts of problems. where you see this in some ways the most striking is when we get to the course which is where we get towards the end of the book. basically all those folks that are calling saying you've got to pay this they are relying on the talk off to convince you to pay but if they can't do that often it ends up in the hands of lawyers who then sue on that debt. this is where it goes to the court and many the same issues they have had with robo-signing with mortgages they are having similar issues with credit cards. basically the lawyers that are suing on this debt the evidence

they have is fairly thin. if there are problems with the excel spreadsheet, what happens is there's a 90% no-show rate with consumers in court. if you think about it here, to make it simple i am a guy jake and i can't pay my credit card. a whole bunch of collectors call me up and they have bought bought and sold my dad and i still can't pay it. eventually they bring in a lawyer and the lawyer sues me for this amount. now most likely what they are charging is higher than the principle balance, three times higher because of a high interest rate. if i go to court i can challenge that and say where did you get this number? do you have proof that this is my debt or what is the breakdown of interest and principle? 90% of americans don't show up in court. they don't understand what it means not to show out there or they believe there's no point in what happens as the numbers on

excel spreadsheet that are highly suspect to begin with then gets stamped by the cord and it becomes a judgment against you. then the creditor can now garnish her wages. they don't have to call you up to pay. they can go right to your bank account and clean it out and get your monthly work check. this is happening, there's a new study out by propublica that shows a 10% of americans between 35 and 45 were having their wages garnished every week. so that's what happens. >> host: that's astonishing. you have given in this interview on "bad paper" two important pieces of advice for consumers involved in this debt collection process. one, if someone calls about a debt over certain period of time you should be very suspect about that call and likely ignore it and also as you mentioned you should show up in court if he gets summoned to court because you have a much better chance of

riding whatever wrong you have been involved in than if you simply don't show up. >> guest: that's totally true. >> host: that in itself the entire american public so thank you for that on behalf of the american public. you were in court in savannah georgia and the history that georgia has in the debtor's prison and the debtor's idea of free institution and you actually talk to some of these people. >> guest: interesting. originally georgia was conceived as a utopia to rehabilitate debtors that would come from a debtor's prison in england income to the new world and get a fresh start and get out of the chains of debt and rebuild their lives. it was this upbeat optimistic view of reinvention but they

irony is that that is really not the case in america these days. you hear a lot about how americans file for bankruptcy and get out of their debts but there are lots of people who just have horrible credit ratings and pay higher rates on all kinds of loans they take out. they are having their wages garnished in their checking accounts cleared out. it's quite a contrast to this utopian vision that originally founded in the state of georgia. the other part of the question which is about going to court and there's a funny thing that happened to me which was that i wanted to see what this process was like. i followed the package of debt that i follow in the book and i went to the courthouse worse some of the debtor's package had been through. showed up just to get a sense of it. i'm waiting outside of the courtroom and i start talking with this couple who is being

sued over credit card debt and they don't recognize the people that claim to own the debt and the creditor's name doesn't ring a bell and the amount doesn't make sense and there's no documentation about the breakdown of that amount. we are trying to figure it out and this guy calls up their name. a young lawyer calls up their name and they walk over there and he says to them i represent the people that on your debt. let's just settle this right now work out an agreement and you can pay me and we don't need to go before the judge. he reaches into his briefcase and pulled out this document that looks like a credit card statement but a mockup of a credit card statement. all it has is their name and address and a bold print it says this is not an actual credit card statement. so they're kind of looking at this and they start talking to this lawyer at some point along the way i piped up and i say do you have any documentation to

prove that you do in fact on this debt for any further information that gives a breakdown of the debt? he says to me are you a lawyer? i said no and is writing a book. he said he can't represent them and in fact it escalates. he says i'm going to take you in front of the judge pretty returned to the courtroom with this couple and the woman who is on the hook for the debt the judge calls her up and she calls me up as well. we are sworn in together like codefendants. we are sworn in and the lawyer who is suing on this debt says proceed with the opening argument says mr. halpern here is busy practicing law without a license and your honor can you tell him he can face criminal sanctions for doing so. i say your honor i just asked a question i'm trying to figure out the process with these folks that i've met 15 minutes ago. this goes back and forth for a little bit and finally the judge

says do this lawyer what do you want to do the matter of this debt that this woman knows? and he said let me consult with my client. he makes a phonecall and comes back and says your honor we are going to drop the case. at this point me in the debtor are like what happened and we are scratching our heads. we walk out of the hallway and there's a guy from legal services who says basically i will tell you what just happened to the bee you said the magic word in the magic words are prove your case. in other words this couple simply by showing up in court impressing back a little bit asking for the barest amount of evidence of legitimacy of this debt and information of this debt was enough to make the person suing back off the whole thing and crumbled. it was this moment where was so funny this excel spreadsheet in the course in georgiana moment