The grimy business of buying and selling US debts
Last weekend, US TV show host John Oliver bought and forgave $15m (£10.3m) worth of medical debt, delighting hundreds of people who had defaulted on the sky-high expenses from life-threatening illnesses. It only cost him $60,000 plus a $50 set-up fee. So is it that simple?
Mr Oliver's show, Last Week Tonight, focused on debt collection companies that buy debt from banks for a small percentage of their actual value.
Mr Oliver set up a company and bought a total of $15m of debt belonging to nearly 9,000 people from hospitals in Texas.
But instead of going on to collect the money, as a real debt buyer would do, Mr Oliver pressed a big red button to symbolise debt forgiveness for all 9,000 on the list.
It may have been showbiz, but it threw an important light on an often overlooked industry.
'A grimy business'
Of course there are plenty of legitimate debt collecting companies, legally reclaiming money owed to companies which could go bust if they did not chase debtors.
But when debt collection companies become the owners of the debt, they are more inclined to aim for bigger profits and use practices that are not ethical.
Of course there are regulations for debt collection, set out by the Consumer Financial Protection Bureau.
For example, it forbids deceptive practices such as threatening the debtor with arrest.
But many intimidating tactics have been reported.
Mr Oliver went to a debt-collectors' conference and spoke to industry professionals who joked about bullying their victims and ruining their lives.
"It is pretty clear - debt buying is a grimy business," he said.
The human cost - a person in debt tells their story
"I was involved in a hit and run accident on my motorcycle. I was rushed to hospital in New York City where over a nine month period I had three major and one minor surgeries.
"Almost 10 years after the accident I went to hospital again to have a metal plate installed in my left arm.
"Over six years after the surgery, I started receiving letters from an agency demanding $159,714 payable to it.
"I tried several times to work this matter out with [the collection agency] but can't seem to get anywhere.
"I am receiving endless calls which have me so stressed that I have problems sleeping. I have been working since I was 15 years old and always stayed away from making unnecessary bills. I had excellent credit until this expense came up."
So how does debt buying actually work?
The institutions that are owed money by debtors may already have tried to collect as much of the debts as possible.
But when it is no longer worth their resources, they sell off the rest - the "zombie debts" - old and forgotten but coming back to haunt the debtor later.
Debt collecting companies buy these lists of names and debts for very small amounts of money - often only a few percent of the value of the debt - and start collecting.
And when they have got enough out of their list, it can be sold on and on, in what is a largely unregulated market of debt buying and selling.
One of the largest areas of debt buying is medical debt.
"Over $100bn (£68.7bn) worth of medical accounts is sold to collection companies each year," says Craig Antico, of the charity RIPMedicalDebt, which buys and forgives people's medical debt.
He blames the failures on the US healthcare system for this brisk market, in which one in five Americans is entangled.
"People go to a hospital, if they don't have health care insurance or sufficient health care insurance, they have to pay themselves. If you have an accident or illness, you're ruined," he says.
The reputable collection companies realise the best way to recover the money owed is by helping people through their ordeals first.
"But there are bad apples in the industry. We need people that are certified. There are still people that are just out to make a buck," Mr Antico told the BBC.
'Buyer wins automatically'
The debt buying industry in the United States has seen dramatic expansion in recent years.
But it is poorly regulated.
- In more than half the US states, you can legally buy debt without a licence
- In 17 states, you don't even need a licence to collect debts
- There is very little paperwork associated with collecting money
The lack of evidence on paper is a problem when cases get to the courts, according to a report in January by Human Rights Watch (HRW).
When institutions sell lists of debtors, they do not guarantee that the information is accurate.
"There might be mistakes, for example people might already have paid off some of it," HRW lawyer Chris Albin-Lackey says.
If the debtor has a lawyer, the case often doesn't even get to court, or is thrown out as inadmissible.
But most of the debt is owed by people too poor to have legal representation, or who are too overwhelmed to even answer the court writ.
In those cases, "the debt buyer wins automatically, without having to present any evidence to the court", Mr Albin-Lackey explains.
Like John Oliver, he calls for better regulation to stop debt buyers filing hundreds of thousands of law suits against mostly poor people, "even when the judges have no idea whether the cases have any merit".
For the 9,000 people whose debt has been forgiven by John Oliver's programme, there is light at the end of the tunnel.
For the rest of those with medical or other debts, regulation and supervision could not come soon enough.