One of the reasons I started this blog…and why I recovered/rebuilt it after the crash this past weekend… is because I wanted to get in the habit of writing and improve my style. For a while, I’ve been wanting to write a story/novel about a near-future world where consumer debt has become enough of a "problem" that a modern form of slavery has emerged in lieu of bankruptcy and collections.
So, you know that an article in today’s Wall Street Journal (free link) would catch my eye:
In a move that consumer groups say could increase pressure on people with unpaid medical bills, some hospitals are trying out a new tactic to recoup patients’ debts: They’re auctioning the debt online.
Hospitals have long relied on outside collection agencies to go after debtors. Under traditional arrangements, these agencies receive a percentage of any money they get from a debtor; the more they collect, the more they earn.
Now, some of the same collection agencies, as well as other firms that purchase debt outright, have begun participating as bidders in online auctions, in which they buy the debt or provide guaranteed payments to hospitals for access to the unpaid accounts. Some experts say this gives them more reason to aggressively pursue patients in arrears. Auctions can drive up the amount paid for debt, meaning a collector must recoup more money from patients to cover its initial investment and turn a profit. And the winning bidders often get to keep all the money they collect on the auctioned debt.
From a finance-and-net geek’s point of view, the idea of turning to (essentially) eBay to optimize selling bad debt to collection agencies is intriguing. It’s efficient, permits free market principles to work, and having a central clearing house creates opportunities for a regulatory body to impose some consumer protections on the mess (if an agency misbehaves, they can be excluded from future auctions).
But is it too great a stretch of the imagination to see "debtor auctions" down at the bottom of the slippery slope flowing from "debt auctions"?
