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One afternoon in October 2009, a former banking executive named Aaron Siegel waited impatiently in the master bedroom of a house in Buffalo that served as his office. As he stared at the room’s old fireplace and then out the window to the quiet street beyond, he tried not to think about his investors and the $14 million they had entrusted to him. Siegel was no stranger to money. He grew up in one of the city’s wealthiest and most prominent families. His father, Herb Siegel, was a legendary playboy and the majority owner of a hugely profitable personal-injury law firm. During his late teenage years, Aaron lived essentially unchaperoned in a sprawling, 100-year-old mansion. His sister, Shana, recalls the parties she hosted — lavish affairs with plenty of Champagne — and how their private-school classmates would often spend the night, as if the place were a clubhouse for the young and privileged.

So how, Siegel wondered, had he gotten into his current predicament? His career started with such promise. He earned his M.B.A. from the highly regarded Simon Business School at the University of Rochester. He took a job at HSBC and completed the bank’s executive training course in London. By all indications, he was well on his way to a very respectable future in the financial world. Siegel was smart, hardworking and ambitious. All he had to do was keep moving up the corporate ladder.

Instead, he decided to take a gamble. Siegel struck out on his own, investing in distressed consumer debt — basically buying up the right to collect unpaid credit-card bills. When debtors stop paying those bills, the banks regard the balances as assets for 180 days. After that, they are of questionable worth. So banks “charge off” the accounts, taking a loss, and other creditors act similarly. These huge, routine sell-offs have created a vast market for unpaid debts — not just credit-card debts but also auto loans, medical loans, gym fees, payday loans, overdue cellphone tabs, old utility bills, delinquent book-club accounts. The scale is breathtaking. From 2006 to 2009, for example, the nation’s top nine debt buyers purchased almost 90 million consumer accounts with more than $140 billion in “face value.” And they bought at a steep discount. On average, they paid just 4.5 cents on the dollar. These debt buyers collect what they can and then sell the remaining accounts to other buyers, and so on. Those who trade in such debt call it “paper.” That was Aaron Siegel’s business.

It turned out to be a good one. Siegel quickly discovered that when he bought the right kind of paper, the profits were astronomical. He obtained one portfolio for $28,527, collected more than $90,000 on it in just six weeks and then sold the remaining uncollected accounts for $31,000. Siegel bought another portfolio of debt for $33,388, collected more than $147,000 on it in four months and sold the remaining accounts for $33,124. Even to a seasoned Wall Street man, the margins were jaw-dropping.

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Siegel soon realized that there was the potential to make a fortune. What he needed was capital to invest in portfolios on a grand scale. Using his connections from his school days and from the banking world, he courted eight investors to fund a private-equity firm that would deal exclusively in such paper. He opened the firm, which he named Franklin Asset Management, in an elegant old home at 448 Franklin Street in Buffalo. In the ensuing year and a half, he bought $1.5 billion worth of unpaid debts. This would be his trial run. If all went smoothly, he would soon start another fund with even more money in it.

But all did not go smoothly.

Some of the deals Siegel made were hugely profitable, while others proved more troublesome. As he soon discovered, after creditors sell off unpaid debts, those debts enter a financial netherworld where strange things can happen. A gamut of players — including debt buyers, collectors, brokers, street hustlers and criminals — all work together, and against one another, to recoup every penny on every dollar. In this often-lawless marketplace, large portfolios of debt — usually in the form of spreadsheets holding debtors’ names, contact information and balances — are bought, sold and sometimes simply stolen.

Stolen. This was the word that was foremost in Siegel’s mind on that October afternoon. He had strong reason to believe that a portfolio of paper — his paper — had been stolen and was now being “worked” by one of the many small collection agencies on the impoverished and crime-ridden East Side of Buffalo. Using his spreadsheets, this unknown agency was calling his debtors and collecting debt that was rightfully his. The debtors, of course, had no way of knowing who actually owned the debt. Nor did they have any reason to suspect that they might be paying thieves. They were simply being told they owed the money and had to pay.

This was not a problem Siegel was used to handling. There had been no classes at Simon Business School on how to apprehend crooks who appropriated your assets. He could, of course, call the police or the state attorney general, but by the time they intervened, the paper would be picked clean, worthless. His problem was more fundamental, more pressing. At this point, he didn’t know exactly how many files had been stolen, but he knew he needed immediate intervention.

Fortunately, Siegel had someone to call — a fixer who knew just what to do.

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What got Siegel into this mess — and into the shadowy realm of debt collecting — was the simple desire to return home. In 2005, when he was 31, Siegel left Wall Street and decided to move back to Buffalo, where his parents and sister still lived. He took a job at a local division of Bank of America, specializing in private-wealth management. The only problem was that he had almost no work. “I spent my days spinning around in a chair and throwing pencils at the ceiling,” Siegel said. “There was nothing to do. There’s very little private wealth to manage here.”

In many ways, Buffalo never recovered from the loss of its steel mills in the 1980s. Yet at least one industry was booming: debt collection. Buffalo is among the nation’s debt-collection hubs. One of the largest collection agencies in the country, Great Lakes Collection Bureau, was once based there. When many of the com­pany’s managers eventually struck out on their own, their companies prospered, multiplied and hired still more collectors.

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Siegel was intrigued by the fact that so many people in his midst were toiling to collect on debts that his employer — the bank — had given up on and had sold at huge discounts. He sensed an opportunity and in the fall of 2005, using $125,000 from his personal savings, he bought his first batch of paper and opened a collection agency. During the day, he worked at the bank; after hours, he ran his new company.

The most pressing order of business was hiring collectors. Those who applied to work for him were mainly a downtrodden lot, and their ranks included ex-convicts, drug addicts, 20-somethings without high-school diplomas and a variety of other hard-luck cases. “Oh, my God, they were like thugs,” Siegel recalled. He quickly concluded, however, that the more clean-cut types simply couldn’t get the job done. As he put it: “You realize that you’re sitting on an investment and you’ve hired a bunch of Boy Scouts who can’t turn any money.” What he needed were telephone hustlers. The problem with the hustlers, Siegel explained, was that they hustled not just the debtors, but him as well. Siegel said one of the first truly great collectors he hired — an overweight, womanizing aspiring bodybuilder — robbed him of several thousand dollars by counterfeiting the firm’s checks.

Still, he was making money. And that was largely because of a former armed-robber named Brandon Wilson, whom Siegel met in 2006. Wilson worked as Siegel’s most valued debt broker, buying portfolios on his behalf. He also served as Siegel’s emissary to the collection industry’s many unsavory precincts.

From the outset, they were a most unlikely duo. Siegel likes to wear $2,000 custom-­made pinstripe suits, and he strikes a patrician demeanor from the moment he shakes your hand. His sister told me, “I always say that you can tell he hasn’t worked a manual-labor job in his life because his hands are like butter.”

Wilson, by contrast, favors loosefitting sports clothing — the style and the brand don’t matter, so long as they come with a Red Sox or Celtics logo. He spent much of his youth in the notorious housing projects along Mystic Avenue in Somerville, Mass. His mother recalled that “when he was growing up, I was chasing Brandon around the projects with a bat, and he was throwing stones at me, and I was hitting the stones back at him with the bat — but boy, could he run.” When Wilson pulls up his shirt, which he does with some regularity, his arms and upper body are covered with scars, the marks of various knife fights. This is a guy you’d cross the street to avoid.

By the time he was in his early 20s, Wilson had amassed an impressive criminal record. His many offenses included assault and battery, armed robbery (three counts), larceny, armed assault in a home (two counts) and knowingly receiving stolen property. And these, of course, represented only the times he was caught. He was never busted for robbing toy stores or night deposit boxes at banks, both of which he claimed to have done repeatedly.

Continue reading the main story ‘You realize that you’re sitting on an investment and you’ve hired a bunch of Boy Scouts who can’t turn any money.’

Not long after getting out of prison, Wilson took a job as a debt collector. He proved quite good at it, and soon he bought some paper and opened his first agency. Later, he also became a debt broker or dealer, a type of role he knew quite well: “I used to buy pounds of weed, all right, and then break it down and sell ounces to the other guys, who were then breaking it down and selling dime bags on the corner, right? Well, that’s what [I’m] doing in debt.”

Initially, at least, Siegel knew very little about Wilson, except that he was in his mid-30s, shrewd, plain-spoken and very candid about the decade he spent in jail. What mattered to Siegel, however, was simply that Wilson delivered. From the moment they started doing business, Wilson was providing good paper, with “plenty of meat on the bone,” as they say in the business. “The paper that I bought from him performed wonderfully,” Siegel said.

The secret to Wilson’s success was that he knew how to find “crap,” as he called it. Instead of buying “fresh” paper directly from the banks — paper that just a few of the banks’ own collectors or subcontractors had tried to collect on — he looked for older paper that had been bought and sold many times over. He often bought credit-­card debt, for example, that had been sold off by the banks 10 or even 15 years ago. Old paper was much cheaper, but the trick was figuring out which portfolios had not been collected on efficiently and thus wrung dry. If you called the debtors from these sorts of portfolios and simply reminded them what they owed, they would often send you a check. “I am a bottom feeder,” Wilson said. “I specialize in finding paper that everyone else thinks is worthless.”

A dizzying array of variables affects a portfolio of debt’s true potential — the age of the debt, how many agencies have tried to collect on it, the size of the balances, the type of credit card, where the debtors live and the current economic climate. What’s more, there is no single market or venue — like the Nasdaq or the New York Stock Exchange — where this kind of debt is sold. This creates a marketplace that is inherently inefficient, and Wilson seemed to have a genius for exploiting it. He was quick with numbers and was a tenacious haggler. Wilson talked to everyone, did his research and found opportunities that no one else could — like, for example, a portfolio of paper that no one had touched for five years, other than an incompetent call center based in Brazil. This was the bedrock of his reputation as a debt broker. “I buy old crap,” Wilson said. “I’m the King of Crap.”

Siegel felt confident that if he could enlist Wilson to help him buy an enormous quantity of paper — crap, but good crap — he could make a fortune. Instead of running his own collection agency, he would start a private-equity fund, buy large portfolios of debt and have them worked at other agencies. The fund would be set up as a one-time deal with a limited life span: Investors would make an initial investment and then, over the course of the next several years, receive returns until all of the money the fund earned was dispersed. Best of all, Siegel wouldn’t be responsible for the actual collecting. That meant no more headaches, no more bodybuilders making off with his checkbook. All he needed to do was persuade Wilson to join his operation.

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Until then, Siegel simply bought paper from Wilson without knowing where he had purchased it or for how much. This worked out well for Wilson. In fact, as Wilson told me, he often bought paper for one penny on the dollar and then instantly sold it to Siegel for two pennies on the dollar, doubling his money. Now, Siegel wanted him to reveal all of his suppliers, help him analyze prospective deals and then step aside and let Siegel make the deals directly.

In theory, though, this new arrangement meant that Wilson stood to make a lot of money. Siegel had $14 million to spend, and he was also authorized to reinvest his profits for a limited time, which meant that he would most likely be purchasing closer to $20 million worth of paper. Siegel would offer Wilson a 5 percent commission on all of the purchases he made from Wilson’s sources. If Wilson brokered all of these deals, he could make $1 million. Still, Wilson was skeptical. This deal meant going against a way of doing business — dating back to his criminal days — in which you never, ever gave up your sources or suppliers. But eventually Wilson agreed, in the hopes of becoming a millionaire. As Wilson remembered: “At first, I was like, I am not giving you my sources or my prices — that is how I feed my family. But I did it to make a million bucks.”

Siegel’s gut feeling about Wilson was that he was honest and that he knew what he was doing, but it did give him a moment’s pause that he was entrusting his fate to a man who may have robbed the very banks for which Siegel himself once worked.

In Wilson’s view, his checkered past actually enhanced his pedigree. “Part of the package you get of being my business associate or my friend is that I’m going to protect you from the sharks,” he explained. By “sharks,” Wilson meant the industry’s many unscrupulous collectors, brokers and agency owners. “If you don’t give them a little bit of fear, right — if it’s just the law, if it’s just the attorney general, if it’s just a civil suit — they could care less. So they need someone to go put a stop to that right now. That might not be bashing someone over the head, it might be sitting them down and saying: ‘Look, man, you ever do 10 years in the can? I have. You ever sat there for 10 years waiting for your date? I have. You think you’re getting away with this? You’re not.’ ”

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Not long after Siegel started his fund, Wilson became interested in a debt buyer based in Painesville, Ohio, known as Hudson & Keyse. Wilson suspected that the company was in financial trouble — and he was right. An insider at Hudson & Keyse later told me, “There was a desperation to sell paper to raise funds.” At Wilson’s urging, Siegel capitalized on this desperation. On Dec. 16, 2008, Siegel bought a parcel of debt from Hudson & Keyse containing 8,518 accounts with a face value of $47.5 million for precisely one penny on the dollar.

The portfolio of debt that Siegel purchased — which I will refer to simply as “the Package” — was the archetype of the kind of paper he hoped to buy. It was cheap paper that proved very collectible. The debtors in the Package hailed from a range of places across the country, including Ewa Beach, Hawaii; Dutch Harbor, Alaska; Prairie Village, Kan.; and Rock Springs, Wyo. Some of these debtors owed as much as $29,777, and others as little as $209; some were as young as 19, others were as old as 85; some had accounts that were charged off by the banks as long ago as 1989, others had accounts charged off as recently as 2008.

Continue reading the main story ‘I buy old crap. I’m the King of Crap.’

For Siegel and Wilson, the Package represented money — plain and simple — but, in truth, this Microsoft Excel spreadsheet represented much more than this. The various columns and rows told the stories of several thousand Americans whose financial lives had fallen into ruin and whose futures dangled precariously in the balance. Wilson understood this. At his collection agency in Bangor, Me., where he worked some of Siegel’s paper, he was often on the phones himself. He heard the excuses, the tirades, the lies, the desperation and the heartbreaking stories of loss.

For Wilson, none of it was personal. Instead, he saw the challenge of collecting in very professional, even empirical terms. He’d developed his own quasi-scientific taxonomy, grouping debtors into some 38 different species or types. For example, a D.H.U. (Debtor Hung Up) was a sorry specimen because he had hung up the phone and would probably do so again; a C.B. (Call Back) was a better prospect, because he had at least bothered to call back; a Promised to Pay had potential, because he acknowledged that the debt was his; a Broken Promise had failed to honor his guarantee, but that wasn’t entirely bad because you could now use that against him; and a Broken Payment simply needed a little nudging because he had started to pay and just needed to get back on track. Using a software system that Wilson developed himself, he could program the office’s auto-dialer to call only those debtors who fell into certain classifications. One day, I watched as the auto-dialer at his office called Broken Promises, Broken Payments and C.B.s.

One debtor was an elderly woman who was apparently too poor to pay her debts. Wilson strove for empathy, trying to “marry the debtor,” as he put it.

“I’d love to tell you to forget the whole thing,” Wilson said. “I have a mother, I have a grandmother. But I can’t do that. Unfortunately, it’s in your name, it’s under your Social and the balance is due. I could give you a settlement, I could work out some kind of hardship plan with you.”

“Sir,” the woman said, “I get Social Security, and that’s it.”

“Right,” Wilson said.

“I barely get enough to live on,” the woman added.

“Right, well, I understand times are hard, ma’am,” Wilson said, undeterred. “There are a lot of people in that situation.”

One imperative for Wilson and his collectors was conveying the calm, cool, unshakable understanding that they were, in fact, the rightful owners of these debts and that these debts needed to be paid promptly. It remained unsaid, of course, that this “paper” had often been purchased for as little as one penny on the dollar, and there was no mention of the fact that many of the debts that Wilson specialized in were too old to appear on a credit report or to be sued for in court. Most negative information disappears from credit reports after seven years and, depending on state law, debts may be unrecoverable through a lawsuit after as little as three years.

Yet Wilson’s pitch — you owe the money, and now you need to pay — was both simple and perfectly legal. In most states, you can still try to collect on a debt even after its statute of limitations has expired. As the Federal Trade Commission notes on its website: “Although the collector may not sue you to collect the debt, you still owe it. The collector can continue to contact you to try to collect.” Wilson knew the rules and used them to his advantage. As far as I could tell, that’s what Wilson loved about collections: It was a hustle, but a legitimate hustle.

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In the fall of 2009, however, it appeared that Wilson and Siegel were the ones being hustled. Someone was pre-empting them, collecting the debts from the Package before they could. The first people to be affected, of course, were the debtors themselves; the danger they faced was that if they paid the wrong collectors, they would still be liable for their debts.

Debtor No. 3,159 from the Package, for instance, was a woman named Theresa from a small town in the Southwest. Theresa defies almost all the stereotypes of debtors. She joined the Marines in the early 1990s, at 18, and served for the next eight years. Theresa was so determined to live responsibly that throughout much of her teens, she worked more than 30 hours a week at a McDonald’s, earning $4.25 an hour.

After the Marines, Theresa married, bought a house and landed a job as the manager of a grocery store. Life was good. And that’s precisely when everything fell apart. “What happened was, I found out that my husband of 11 years had another family somewhere else,” she said matter-of-factly. Theresa filed for divorce in 2005, but this quickly created a new set of problems. “He left me with everything except the truck that he took, and that was fine, except that I now had to pay for everything,” she said. “I had the credit-­card debt. I had the mortgage. I had everything.”

Theresa’s credit-card debt included a Washington Mutual account that had a balance of $4,184 as of July 2006. In August, September and October, she continued making steady payments even though she wasn’t using the card to make any purchases. Eventually, finances became so tight that she stopped paying altogether. Things came to a head in 2009 when she began receiving phone calls from people who claimed to work at a law firm. She was told that unless she paid off the balance in full, they would take her to court.

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At the time, Theresa had no way of knowing that the threat was a bluff, nor did she realize that such bluffs are increasingly common. According to annual reports filed by the F.T.C., the number of complaints about “false threats of lawsuits” from collectors more than doubled from roughly 12,000 in 2008 to more than 30,000 in 2012. And the combined number of complaints about threats of violence and “false threats of arrest or seizure of property” have jumped, more than tripling. David Torok, who oversees the F.T.C.'s complaint database, speculates that there were “more consumers truly on the edge” and that collectors were therefore simply “trying to squeeze even harder to get some money out of an extraordinarily dwindling pot.”

For Theresa, the possibility of being sued was deeply unsettling. She had recently landed a job with the Border Patrol and knew that a lawsuit could destroy her career as a federal law-enforcement officer. (As a matter of policy, the Border Patrol says that debts and “financial issues” may render candidates “unsuitable” for service.) The collectors explained that she now owed more than $6,000 with interest, but they offered her a deal in which she could settle the matter for just $2,700. Theresa said that she set up a payment plan and that over the course of the next six months the money was withdrawn directly from her checking account.

There was just one problem: The company never sent a letter confirming that she had paid the bill. Even worse, the payment never appeared on her credit report. She spent the next six months trying to understand where, exactly, her money had gone. “I didn’t want the money back,” she told me. “I just wanted somebody to say, ‘Hey, she tried to pay.’ ”

It wasn’t entirely accidental that Theresa’s debts ended up in the hands of thieves. When the original creditor, Washington Mutual, sold her debt, it stopped caring about what Theresa owed, how she was treated or what happened to her personal information. This is true for many banks; when they sell their unpaid accounts, their contracts testify to this indifference. According to American Banker, in a series of transactions in 2009 and 2010, Bank of America sold millions of dollars of charged-off debt to a company in Denver called CACH. In the sales agreement, Bank of America said it would not make “any representations, warranties, promises, covenants, agreements or guarantees of any kind or character whatsoever” about the accuracy of the account information it was selling. When Siegel bought the Package from Hudson & Keyse, the sale contract had similar wording. It stated, for example, that the seller was offering no “warranty of any kind” relating to the “validity, collectibility, accuracy or sufficiency of information” that was being sold. In other words, there might be problems with the debts, but they were being sold as is.

And there were problems, dating right back to the original creditor, Washington Mutual. Theresa’s­ bank records confirm that Washington Mutual issued her a significant credit — $702 — on the very same day it sold her debt. It’s unclear what the credit was for. An official at Chase Bank, which acquired Washington Mutual in 2008, told me that the credit might have been offered as relief — a gift, essentially. But he couldn’t be certain. On the monthly statement, the credit appeared as a payment alongside the words “Payment received — Thank you.” Whatever the explanation, one thing is certain: When Siegel bought the account in 2008, Theresa’s balance didn’t reflect this credit. Somewhere along the way, quite possibly at the bank itself, it was simply forgotten or ignored. Such sloppy record-keeping may seem surprising, but it is prevalent enough that in 2009, the F.T.C. said in a report: “When accounts are transferred to debt collectors, the accompanying information often is so deficient that the collectors seek payment from the wrong consumer or demand the wrong amount from the correct consumer.”

In truth, there was little that Theresa could do; she had paid off her debt to the wrong collectors and had fallen into the debt underworld. If anyone was going to help her, it wouldn’t be the state attorney general, or the Better Business Bureau, or the F.T.C., or even the police, but the former banker and the former armed-robber who bought her debt.

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Around the same time that Theresa was getting phone calls from a mysterious law firm, Siegel received an email from the owner of an agency that he had hired to do his collecting. The collectors at this agency were getting the same message from many debtors: We just paid off these accounts — to someone else. Siegel was both flummoxed and concerned. Was this the work of a renegade collector at one of his agencies who was collecting on his own and pocketing the cash? Or had the paper simply been stolen from his offices?

The notion that a portfolio of debt could be stolen may seem improbable, but plenty of debt brokers are all too willing to sell “bad paper.” Such brokers sometimes “double sell” or “triple sell” the same file to multiple unsuspecting buyers. Other times, a broker may sell paper that he does not own and obtained by nefarious means. I spoke at length with one debt broker from Buffalo, who told me that he had hired a hacker from China to break into a former client’s email account and obtain his password. Once he had the client’s password, the broker had access to his paper. He then simply took a portfolio and, subsequently, sold it to another buyer — who didn’t know and didn’t ask where it came from.

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On several occasions, Siegel dealt with collection agencies or debt brokers who tried to cheat him in one fashion or another. Once, after being scammed by two local debt brokers, he hired a lawyer and sued the culprits. It took Siegel two years to get a judgment, and then it turned out that the companies were shells. I accompanied Siegel to his lawyer’s office when he got the bad news. “Just because you get a judgment,” his lawyer told him, “doesn’t mean you can collect it.”

Much of the responsibility for policing debt collections falls upon the nation’s various state attorneys general — and perhaps none have been more aggressive or successful than the one in New York. Still, the Buffalo bureau consists of only two people devoted to the collections industry. Karen Davis, who is the office’s senior consumer fraud representative, said she received thousands of written complaints about debt collectors each year. After sifting through these complaints and investigating many of them, she singles out companies whose behavior seems to be the most egregious. She puts those companies on a list of the worst offenders that she, personally, has to monitor. When we spoke in the spring of 2013, there were 324 companies on her list.

One of Davis’s recent coups was against an outfit known as International Arbitration Services. The agency’s collectors had been posing as law-enforcement officers and threatening debtors with arrest. (This particular tactic, which is not uncommon, was just a slightly more aggressive version of the one used against Theresa.) Rogue agencies like I.A.S. often use fake addresses, post-office boxes and rented phone numbers to mask their whereabouts. Davis believed that I.A.S. was located somewhere in Canada, but she couldn’t determine where exactly. “It went on for months, with us being frustrated, but we could get nowhere,” Davis said. “We just couldn’t figure out where they were.” Then one day an informer showed up at the Buffalo bureau and announced that he worked as a collector for I.A.S. He said he was unhappy because he had been cheated out of his pay — so unhappy that he walked over to complain in person. Walked. That single word left Davis flabbergasted. “What do you mean?” she said. “They’re not located in Canada?” No, the informer said, explaining that the I.A.S. office was just a few blocks away. Two days later, she served I.A.S. with a subpoena. Davis’s office ultimately forced I.A.S. to shut down and fined the owner a modest $10,000. And this is how a list of 325 companies dwindled to 324.

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When Siegel realized that his paper had ended up in someone else’s hands, he knew there was only one thing to do: call Wilson. Wilson quickly started his detective work. First, he spoke with some of the debtors who recently paid the mysterious other agency. None of them could recall the name of the agency, but several combed through their credit-card statements and identified the company that processed the payments they made. So Wilson called the processing company. “I got them on the phone, told them that I was the debtor and said: ‘What is this? I am reversing the charge! What company charged me for this?’ ” And, like that, Wilson had the name and the phone number of the collection agency.

Continue reading the main story ‘We’re going to shut down this rogue agency or burn it down to the ground.’

He called up the agency and introduced himself as the debtor. According to Wilson, the woman who answered the phone promptly told him that he was going to be arrested if he didn’t pay. Wilson asked for the address where the business was located, but the woman refused to tell him. Realizing that he was getting nowhere, Wilson hung up and glanced around his office, surveying the faces of his collectors. He called out the names of four of them. They all stood up. One was a young employee named Jeremy Mountain. As he recalls it, Wilson calmly explained to them what they were about to do: “We’re going to shut down this rogue agency or burn it down to the ground.” No one hesitated. They piled into Wilson’s small Mercedes sports car. “On average, the guys in the car weighed about 240 pounds,” Mountain said. “I was the only person who hadn’t gone to prison.”

Wilson decided to call one last time and got a man who claimed to be the owner. Wilson told him, “You guys are stealing money.” The owner, who asked to be identified only by his nickname, Bill, insisted that the accounts were his and that he would not stop collecting on them. Wilson’s last-ditch effort to negotiate had apparently failed.

Before “going to war,” as Wilson put it, he and his crew stopped by Siegel’s office in Buffalo. As it turns out, Wilson had some business to settle with Siegel as well. Under their arrangement, Siegel was supposed to notify Wilson every time he bought paper from one of Wilson’s sources and then send him a 5 percent commission. Wilson suspected that Siegel had either forgotten or simply neglected to pay him for some of these deals. In the car, Wilson apprised his posse of the situation: “I told my guys, ‘I know he has been holding out.’ ” Wilson figured that now was the perfect time to leverage his position and demand payment.

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Siegel recalls Wilson’s arrival vividly: “They come down here in this small Mercedes, and they come storming out of it like clowns out of a clown car — only they’re ex-cons.” With some trepidation, Siegel invited them up to his office. Siegel’s assistant told me that she, too, was startled by the sight of Wilson: “He showed up in the office in a long black coat, drinking whiskey out of the bottle, with all these guys that I would not want to meet in a dark alley.” Siegel quickly resolved the matter of the unpaid commissions by writing Wilson a check for $50,000.

Before the posse left Siegel’s office, one final member arrived; he was the owner of another collection agency in Buffalo, which also worked Siegel’s paper. The man — who asked to be identified only by his middle name, Shafeeq — was a Muslim who said he tried to avoid charging interest whenever possible. Shafeeq had the advantage of being a local. He knew the collections scene in Buffalo — the good actors, the bad actors and everybody in between. Shafeeq knew, for example, that Bill owned and operated a corner store near Buffalo’s downtown. There was another benefit to having Shafeeq in the posse as well, namely that he ran his own security firm and was licensed to carry a firearm. Wilson recalls that when they all met up, Shafeeq had a 9-milli­meter pistol with two clips. He also had a large knife. Wilson asked him what it was for. According to Wilson, Shafeeq’s reply was, “It’s for when I run out of bullets.”

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Wilson and his crew eventually found Bill at his corner store in a run-down neighborhood. Wilson gestured for several of his guys to come with him, including Mountain and Shafeeq. When he walked into the store, he saw an enormous man, roughly 6-foot-6 and 280 pounds. Wilson asked the man his name. It was Bill.

The encounter was tense. Mountain recalled seeing a gun resting on a shelf behind the checkout counter. Bill confirmed that he had a gun at the ready and said that whether Wilson knew it or not, “he was the one in danger.” Wilson looked around and saw a door that appeared to lead to a back office. He gestured toward the door and said, “I don’t want an audience.” The two men walked through the back door, where Wilson hoped they might find some privacy. “Turns out it was a closet,” Wilson later told me. “So it’s the two of us, just standing there, in a storage closet.”

As he recalls it, Wilson told Bill to sit down and then drew close so that the two of them were eye to eye. “If you collect one more dollar on this paper,” he said, “I will come back down here, I will take your server, I will burn your agency to the ground, I will come to your house and burn it down, and then I will come back here and burn this store down. Understand?” Bill, indignant, proclaimed his innocence, insisting that he had bought the file legitimately from a fairly notorious debt broker based out of Buffalo.

This news gave Wilson pause. He knew this broker both personally and by reputation. “Saying that [this guy] sold you some bad paper and ripped you off is like saying: ‘Guess who robbed me in the forest? Robin Hood!’ Of course he did.” According to Wilson, the broker and his associates were notorious in the industry for selling stolen and double-sold accounts. Wilson himself had had “a couple of run-ins with these guys.” On one of these occasions, Wilson claimed that he was cheated out of money that he was owed and drove down to Buffalo to confront them. He never found them, but he remembered the incident bitterly and wondered for a second whether what Bill said might be true.

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But at the corner store, Wilson was primarily concerned with impressing upon Bill just how serious and dangerous he was. Shafeeq, who overheard much of their encounter, described it as two “big kids” trying to prove who was meanest: “It was a tough-guy show.” Bill said that he refused to be strong-armed and that he told Wilson: “It’s not going to happen here — you’re talking to the wrong guy.” Wilson was not to be outdone. As Shafeeq recalled it, Wilson went into a tirade, lifting up his shirt and screaming at the top of his lungs: “I got stabbed right here! I got a bullet hole right here!” According to Shafeeq, Wilson’s tactic worked. “As soon as you see that kind of behavior,” Shafeeq said, “you’re like, O.K., this dude is absolutely crazy.”

In the end, Bill promised to stop collecting on Siegel’s accounts. Bill said he was happy to do this because he paid only $10,000 for the accounts and had already collected many times that. What’s more, Wilson didn’t demand that he return what he had made. “It was a win-win,” Bill said proudly. Siegel resolved to make the best of a bad situation. Whenever he could confirm that a debtor had paid Bill, he closed the account and permanently retired the debt; besides that, there wasn’t much more for him to do. He eventually sold many of the uncollected accounts in the Package for a tidy profit.

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How, exactly, the Package got into Bill’s hands remains a mystery. The notorious debt broker did not return my calls. I did eventually manage to speak with one of his former partners — a man who asked to be identified only by his first name, Larry. Larry insisted that he himself hadn’t handled the Package, but said it was entirely possible that his partner had, because this was how business worked in their corner of the industry. Larry told me that he had often made deals in his car in which the buyer gave him cash, and he handed the buyer a thumb drive with a spreadsheet containing the names, addresses, Social Security numbers, credit-card balances or loan amounts of several thousand debtors. Where exactly, I inquired, did such files come from? “I’m not asking where the files are coming from,” he said. “I’m just dealing.”

This, of course, was the root of the problem. No one could ever be sure how Bill obtained the accounts from the Package. The possibilities were dizzying. Bill later suggested to me, for example, that he mentioned the notorious broker’s name only as a diversion and that he had in fact bought the paper from an employee in Siegel’s office, who was selling the paper covertly. Ultimately, there was no telling where the files came from, or who else had copies of them. And this was a problem not just for Siegel, but also for the debtors from the Package.

Several years after the Package was stolen — in the summer of 2013 — Theresa received a phone call from a company called McKellar and Associates Group, trying to collect on this very same Washington Mutual debt. I spoke with the agency’s co-owner, Adam Owens, who is based out of Beverly Hills, Calif. I asked Owens how he obtained Theresa’s debt, given the fact that Siegel had permanently retired it. He told me he had purchased it from a debt broker in Florida. It was part of a much larger package of roughly $50 million worth of debt, which he bought for just 12 basis points — or one-twelfth of a penny on the dollar. It had been bad paper, Owens said, and he’d gotten burned on the deal. After the purchase, Owens discovered that another agency was collecting on the same paper and, what’s more, that some of the dates on the debts had been manipulated so that the paper appeared newer than it actually was. As Owens saw it, when buying from debt brokers, this was all part of the risk you faced. He concluded: “It is just data you are purchasing.”

The federal government is, at long last, starting to make a serious effort to clean up the collections industry and protect consumers like Theresa. In 2012, the Consumer Financial Protection Bureau announced that it would start supervising some of the nation’s larger debt collectors to “help restore confidence that the federal government is standing beside the American consumer.” The bureau vowed to police the nation’s largest 175 agencies, but one recent projection on the industry estimates that there will be 8,501 debt-collection firms in 2015 in the United States. And the companies engaging in the most grievous behavior — like falsely threatening lawsuits or collecting on bad paper — tend to be the smaller operators. It inevitably falls upon the state attorneys general to go after them, which means depending on overburdened officials like Karen Davis.

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And so far, regulators have concentrated on debt collecting, as opposed to the buying and selling of debt, which is the source of many of the industry’s problems. As long as paper continues to be stolen, double-sold or otherwise exchanged without accurate supporting information — like statements or copies of the original signed contracts — consumers will be exploited and collectors like Siegel and Wilson will have to fend for themselves.

A centralized loan registry might help, and there are some in development. Mark Parsells, the chief executive of a company called Global Debt Registry, has developed a database that tracks the ownership of consumer debts once they are sold off by banks or original creditors. Each debt is assigned a “universal loan identification number,” or ULIN, which functions like a vehicle identification number on a car. When a car changes hands, its license-plate number changes, but the VIN remains the same; likewise, when a debt is bought or sold, the account number and the creditor information might change, but the ULIN would remain the same. The registry also maintains electronic records of the original data and documents associated with each debt, like statements and loan applications. If a debtor like Theresa received an inquiry from a strange collection agency or law firm, she could access the registry’s secure website and quickly verify whether this agency actually owned the debt or was authorized to collect on it.

So why hasn’t the government helped establish such a registry? After all, the Department of Motor Vehicles keeps track of who owns what car, and the Register of Deeds records who owns a piece of property. When I visited the Federal Trade Commission in Washington, I posed this very question to an official who investigates and brings actions against debt collectors. The question wasn’t entirely fair, because it fell outside his purview, but I wondered if anyone at the F.T.C. was giving this any thought. “Yeah, I don’t know,” the official said. “The commission hasn’t weighed in on something like that. I think that the commission would have to have a lot more information.”

Just this month, the Office of the Comptroller of the Currency, which supervises all national banks, issued written guidance on how debts should be sold. Banks need to vet potential buyers and provide accurate and complete information, the office says. Reform may be on the horizon. And with it there may come a time when there is no need for Wilson’s strongman services or his tough-talking antics, but for the moment, at least, they continue to fill a need. Wilson is still hunting for “crap,” selling it to his clients and promising to keep the sharks at bay. Siegel is still paying back his investors, but his fund is almost at an end. Wilson, not surprisingly, is busy looking for new clients. He even had hopes that his former foe Bill might be a good candidate. In fact, as a thank you for Bill’s prompt and polite cooperation, Wilson said he sent him a small present, a trademark Brandon Wilson tiding of good will: a file containing 1,000 old accounts. Pure crap — but crap with potential to become gold.