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About. DRoMStrike Debt advocates a just and sustainable economy, based on common goods, mutual aid, and public affluence. |
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Written by a network of activists, writers, and academics from Strike Debt, The Debt Resisters’ Operations Manual reveals how the predatory debt system works to increase inequality, undermine democracy, and ruin lives. It provides detailed strategies for fighting common forms of debt and lays out an expansive vision for a societal movement of debt resistance. The full text of the manual is available here for free.
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introduction
debt Rules Everything Around ME
debt Rules Everything Around ME
Everyone is affected by debt, from people taking out payday loans at 400% interest to cover basic living costs, to recent graduates paying hundreds of dollars in interest on their students loans every month, to working families bankrupted by medical bills, to elders living in “underwater” homes, to the teachers and firefighters forced to take pay cuts because their cities are broke, to people in the global South suffering due to their countries being pushed into austerity and poverty by structural adjustment programs. Everyone seems to owe something, and most of us are in so deep it’ll be years before we have any chance of getting out—if we have any chance at all. But few of us are asking, “Who do we all owe this money to, anyway?” and “Where did they get the money they lent?” MORE
Chapter one
Credit scores and consumer reporting agencies: Surveillance and the Vicious Cycle of debt
Credit scores and consumer reporting agencies: Surveillance and the Vicious Cycle of debt
Imagine being tracked 24/7 by an invisible network, then classified and ranked according to a secret formula. Imagine your “file” was full of inaccurate and discrediting information, yet it was being sold to critical decision-makers and used to compute a numerical ranking which determined your ability to access the basic necessities of life—a roof over your head, basic utilities, even a job. Imagine this (low-ball) number turned out to be a self-fulfilling prophecy, sealing your fate in a financial caste system. MORE
orkers in the United States continue to be among the most productive in the world, yet median wages have barely increased over the past four decades. We’ve been working longer and harder, trying to keep up with the rising costs of living—housing, health care, education—yet we haven’t actually managed to keep up without plastic. In the early 1980s, U.S. household debt as a share of income was around 60%. By the time of the 2008 financial crisis, that share had grown to exceed 100%, and today it’s hovering around 112%. So despite the fact that productivity has gone up, we have relied more and more on credit as a means of subsistence. This, in turn, intricately weaves people into the complex debt system at the heart of modern capitalism. This process essentially ensures that we will be dependent on Wall Street to provide us with a “lifeline” of credit. These “lifelines” of credit don’t really solve our problems, though. Instead, they only make things worse in the long run. MORE
Chapter three
Medical Debt: America’s Sick Creation
Medical Debt: America’s Sick Creation
If you’re having trouble paying medical bills, you are certainly not alone. About 62% of all personal bankruptcies in the United States are linked to medical bills, and three-quarters of those bankrupted had health insurance when they got sick. That’s about one medical bankruptcy every ninety seconds. This is not surprising when we consider that seventy-two million people in the United States have trouble paying medical bills. MORE
In the not-too-distant past, high school graduates in the United States seeking a meaningful college education could likely have received one from an in-state or city university at little to no cost. And it would have been reasonable for them to assume that the degree they earned would significantly increase life opportunities. Though that era was relatively short-lived here, many other countries have made access to free or low-cost higher education an enduring priority, insisting on it being a basic right and a good that benefits society as a whole. MORE
Many people struggle to find sympathy for those who have borrowed beyond their means to pay for something we all must provide for ourselves: housing. From the perspective of those who rent, have resisted taking on debt, or were fortunate enough to purchase and hold onto a home, it can be difficult to empathize with what appear to be bad choices. But when morality and debt intersect, appearances are often extremely misleading. The reality is that a great deal of what lenders, investors, and government agencies told the public about the housing market was never true. Decades of false promises, irresponsible practices, and collusion between banks and the government created a system in which lenders exploited the hopes and ambitions of people in the name of endless profit. MORE
Chapter six
Tax Debt: The Certainty of Debt and Taxes
Tax Debt: The Certainty of Debt and Taxes
The story we’re usually told goes like this: The tax system is paying for things that make society function, and paying them is a good thing, since we all want those things to function. Taxes redistribute money to those in need, so paying them is practically a duty. When you don’t pay taxes, you’re not only a disloyal citizen, but also subject to the long arm of the law in the form of IRS harassment. MORE
As James Baldwin once said, “Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.” This is true now more than ever. Some call it the “poverty tax”—the surcharge people pay for not having savings or access to “prime” credit and being consigned to “fringe finance.” Fringe finance refers to the array of “alternative” financial services (AFS) offered by providers that operate outside of federally insured banks. Gary Rivlin, author of Broke USA: From Pawnshops to Poverty, Inc., does the math; adding up the profits from the AFS sector and dividing by the forty million households that survive on $30,000 a year or less, the industry receives an average of $2,500 per year from every low-income household. That’s a “poverty tax” of around 10%, depleting the assets of low-income households. This chapter and the next chapter break down the major perils of fringe finance into those related to transactions and those related to credit. This chapter deals with transaction products and services: check cashing and prepaid cards. Chapter Eight covers credit products and services: payday loans, auto-title and pawn loans, and rent-to-own financing. Among households without access to a bank account, 62% have used an AFS transaction product or service and 27% have used an AFS credit product or service. About 23% have used both. Both chapters offer analysis and information to help you identify the common tricks and traps of fringe finance so that you can avoid them. We consider alternatives to the most expensive products and services, as well as how to save money if you’re “locked in” or have no other options. There is no one-size-fits-all strategy for personal finance. We conclude Chapter Eight by outlining some individual and collective strategies that aim to minimize or eliminate our dependence on the current debt-finance system. Investors, however, expect the stunning rates of financial extraction in the poverty industry to rise, and it has created funds to invest in startups and small firms with big growth potential in the fringe finance sector. The “market” that investors want to tap is the unbanked (people without checking or savings accounts) and the underbanked (people who rely on a combination of both “traditional” and “alternative” financial products). Why are investors so interested in this market? Not only is it a market that has previously been off their radar, it is a market that promises greater returns—even after adjusting for increased risk (otherwise, they wouldn’t be interested). In a blog post titled “Not Unbanked: Untapped,” a venture fund manager explains, “It is fair to say that most of these products are generally more expensive than what most of ‘us’ pay. APRs [annual percentage rates of interest] higher than 30% (if not 300%); transaction costs of $2+; money-transfer costs of $10+; access to payroll check for 2–4%.” The transaction services segment of AFS has seen some of the most spectacular growth in recent years, where prepaid cards are making inroads and recording profits that rival the always-profitable check-cashing outlets (CCOs). This is the predicament of the poor in our debt-finance system: it costs poor people significantly more to use money—to spend it, to save it, to invest it, to borrow it, to send it “back home” (for immigrants whose families still live in their country of origin)—and they have less money to begin with. If you’re poor, you are likely forced to engage with the debt-finance system, and the more wealth it takes from you, the more indebted you become. Meanwhile, AFS owners and investors, who enjoy lower financing costs than you and have more money to begin with, profit from your loss and acquire pieces of your debt. Thus, investors on Wall Street come to own pieces of your future. These are the workings of a two-tiered financial system, on the bottom of which are relatively high-cost services marketed to the growing and changing ranks of the unbanked and the underbanked. The nearly ten million unbanked includes the working poor, the unemployed, the homeless, the undocumented, those who do not speak English fluently, those who are or have been incarcerated, those with mental or physical health issues, older people, those working off the books, those hiding from creditors or the “authorities,” those whose homes were stolen by robo-signing investment banks, youth who have been cut off from their parents, and anyone else who “traditional” financial institutions deem unworthy of service. Demographically speaking, the unbanked population is broad and diverse, but it is disproportionately comprised of low-income households (71% of unbanked households earn below $30,000 a year), households of color, immigrant households, and individuals with negative banking histories. (Of course, many of the unbanked fit into multiple categories.) In general, Latino/a and Black people are six and seven times more likely to be unbanked than Whites respectively. Households with an annual income under $30,000 are thirteen times more likely to be unbanked than those with an income between $50,000 and $75,000. More than half of immigrants in New York City are unbanked, according to a recent survey. People of color and immigrants are more likely to have low, unreliable, or seasonal income, making it more difficult to save enough money to meet minimum opening-balance requirements at banks. Not having enough money is the number one reason that the unbanked do not have a bank account. There’s another significant commonality: many people of color, low-income individuals, and immigrants justifiably distrust banks. Losing one’s home or hard-earned property, or being denied credit for no reason but the color of one’s skin—especially in a society focused on wealth accumulation—is traumatic. The effects can ripple across generations of a family, shaping how future generations interact with financial institutions. Banks have historically been places reserved for middle- or upper-class White men, and that explicitly exclusionary past makes its impact felt in today’s world in various less overt ways. Because of the openly racist and classist history of U.S. credit practices, banks can feel like unfamiliar or even hostile territory to many poor people of color (Massey and Denton, 1993). Inconvenient locations, limited hours of operation, and language barriers often make access difficult for low-income households. Undocumented immigrants generally lack the forms of ID required by many banks to open accounts, and furthermore fear that banks will share their immigration status with the authorities. Some of the unbanked and underbanked rely on fringe finance because it helps them avoid unnecessary difficulties posed by mainstream financial products—difficulties which reflect their socially marginalized status. If you are a transgender person applying for a bank account, for example, you must use your legal name and gender, even if it is different from the name and gender that you identify as (though in Washington State, at least, transgender people have the right to be referred to by their name and gender when doing business at a bank). Preloaded debit cards, which do not have the owner’s name printed on them, help trans people avoid harassment caused by a mismatch between the printed name and their gender presentation. (This information was obtained in a private email correspondence with the founder of a trans activist group in the Pacific Northwest. They relayed various members’ experiences with banking and using fringe finance.) It can become difficult for unbanked people to document and prove income when filing for benefits, workers’ compensation, or filing cases against abusive employers. For many of the unbanked, the experience of second-tier status in the financial system mirrors their experience with the two-tiered justice system. Those who are socially marginalized in one way or another are more likely to occupy the bottom tier of the financial system, which makes it more likely they’ll get caught up in the criminal justice system. The criminalization of poverty, the criminalization of immigration, as well as racial and ethnic profiling are well-documented trends that push people to the fringes of finance. And being on the fringes of finance is itself increasingly criminalized. In at least a third of U.S. states, being in debt can now land you in jail. In Washington State, for example, a Black man with mental health issues was incarcerated for two weeks for failing to pay $60 worth of “legal financial obligations” (LFOs). His jail stay, meanwhile, cost Spokane County over $1,500. In many cases, these barriers to the banking system can reinforce each other and create insurmountable walls between the banked and unbanked. The underbanked tend to share many of the same characteristics and face many of the same obstacles as the unbanked. MORE
Respectable” banks and financiers have always tried to distance themselves from the taint of loan-sharking and other fringe financial services. For many people, non-bank lending has traditionally conjured up images of dilapidated storefronts on the edge of town, surrounded by vice and petty criminality. But if you’re one of the twelve million Americans who took out a payday loan in the past year, it’s more likely that you did it in a suburban strip mall or cyberspace. It’s even possible that you got it from a bank—five large banks, including Wells Fargo, have begun to offer payday loans. (They call them “direct deposit loans,” but don’t be fooled; they’re just as bad.) Although they seem to be worlds apart, in reality these banks and fringe finance are interconnected and overlapping; the biggest players in all segments of fringe finance are publicly traded, national corporations. Around 20% of all users of “alternative” financial services (AFS) also use traditional banks. And even fringe financial services earn profits for wealthy investors—via the very “asset-backed securities” that brought down the financial system not too long ago. Whether sourced in prime credit or subprime, student loans or pawn loans, the profits of our indebtedness flow to the wheelers and dealers on Wall Street. MORE
Chapter Nine
Debt Collection: Don’t Feed the Vultures
Debt Collection: Don’t Feed the Vultures
Getting contacted by a debt collector can rank among one of the worst experiences of everyday life. And it happens over a billion times each year in the United States, according to industry estimates. Debt collection has become a complex global industry, reliant on strong-arm tactics including harassing phone calls and threats that are often illegal. The coercion runs along a spectrum from moral persuasion to threats of violence, and increasingly involves institutions such as the courts and law enforcement. Given the complexity of debt collection laws and regulations that vary from state to state, there are hundreds of ways a debt collector can engage in illegal practices. It’s important to know your rights and to record abusive and illegal practices. In many cases, your debt can be erased (due to collectors’ misconduct) or reduced. In some cases, you might even have the right to sue for damages. MORE
Chapter ten
Bankruptcy: It’s Better Than Nothing
Bankruptcy: It’s Better Than Nothing
If you happen to find yourself way out in the deep waters of debt, you should know that bankruptcy may be an option for rescuing yourself and getting a fresh start. Think of it as consumer protection for debtors, a lifeline in a financial contest that is generally rigged against you. As with many sets of legal codes, it reflects the society that created it and an economic system predicated on maximizing profit regardless of the human consequences. The protections offered by bankruptcy are anything but clear or straightforward. But bankruptcy can be more desirable than pursuing private negotiations with uncooperative creditors, going through sketchy debt management schemes, or refusing to pay and trying to go completely off-grid, especially if you can find a trustworthy legal representative to guide you through the process. MORE
This chapter provides tips for people who, either voluntarily or involuntarily, live at the margins of the credit and banking systems. It gives advice about finding free or cheap meals, renting an apartment with bad credit, and other practical matters. It points to ways we can live, work, and play that are based on principles of solidarity and mutual aid. The information presented here is only the tip of the iceberg—strategies for living off the financial grid could fill an entire manual of its own, and with your help, Strike Debt may produce one in the future. In the meantime, we encourage you to explore the resources listed at the end of this chapter. MORE
Chapter twelve
Municipal and State Debt: Crushing Debt from Above
Municipal and State Debt: Crushing Debt from Above
As we’ve seen in previous chapters, our lives have become increasingly beholden to the logic of debt. It can be hard to tell sometimes whether something as basic as your home is first and foremost a place to live, or a moving piece in a real-estate shell game. And if you’re considering pursuing a degree, a debt-benefit analysis might be your first consideration when selecting your area of study: will you be able to find a job in your field that pays well enough for you to survive with the amount of debt you’ll need to take on? Though you may not always lose in these risky games we’re forced to play, it’s always a safe bet that financial institutions will win. MORE
Chapter Thirteen
National Debt: The Politics of Scarcity and Control
National Debt: The Politics of Scarcity and Control
In common parlance, when we discuss the national debt of modern nations, we are typically referring to the total amount of money still outstanding that the government has borrowed from any and all sources. The debt may have been taken on to pay for government workers, social programs, infrastructure, research and development, or any expense that could not be paid by the Treasury Department as it came due. A significant portion of the current $16.74 trillion U.S. national debt (as of June 2013) has been taken on to make up for shortfalls caused by tax cuts for the wealthy, or to pay for the war on terrorism and bailouts for banks and corporations. The debt is issued with the promise that by enabling ongoing accumulation and economic expansion, these debts will be paid with taxes collected in the future. MORE
Chapter fourteen
Climate Debt: An Overdue Balance
Climate Debt: An Overdue Balance
Throughout this manual, we’ve been examining the many ways in which the wealthy and the powerful use claims of debt to steal from and exert control over the vast majority of us. No matter how destructive the results, we are constantly told (and tell ourselves) that such a system is morally just because of a supposedly simple, eternal truth: Money owed must be repaid. This deeply entrenched and widely held belief in the black-and-white morality of debt is the linchpin that holds the debt system in place. MORE
Chapter fifteen
Prospects for Change: Join the Resistance!
Prospects for Change: Join the Resistance!
The chapters of this manual highlight the inherent injustice of the kinds of debt that afflict most people living in the United States and around the world today, and provide some advice about what to do about them. If anything should be clear by now, it’s that all of these forms of debt are connected. They didn’t all just somehow happen. This is a system that’s been built to keep money flowing from our pockets into those of Wall Street, corporations, and creditors, with the hope that we won’t do anything about it. MORE
Glossary
GLOSSARY
GLOSSARY
Accounts receivable management (ARM)
A term used by insiders to describe the debt collection industry.
Active transportation
Transportation policy or choices that prioritize walking, biking, mopeds, scooters, trolleys, buses, shuttles, light rail, local, regional, and continental train systems over automobiles. MORE
A term used by insiders to describe the debt collection industry.
Active transportation
Transportation policy or choices that prioritize walking, biking, mopeds, scooters, trolleys, buses, shuttles, light rail, local, regional, and continental train systems over automobiles. MORE