There’s an old saying: "When you owe the bank a hundred pounds, you’ve got a problem. When you owe the bank a million pounds, the bank’s got a problem."
It works this way: to get you to put your money into banks, they have to pay you interest.
That money doesn’t come out of thin air.
So in order to pay you, and make a profit, they have to lend your money out at a higher rate of interest than they’re paying you.
That’s why, in hard times when money is short, bank advertising will be all about why you should save money with them.
In good times when money is plentiful, bank advertising will be all about why you should borrow money from them.
In bad times, they need to attract savers, in good times they need to attract borrowers.
Where a bank makes its money is on the interest that borrowers pay for the loans.
So the bigger the amount borrowed and the longer the loan goes on, the better.
But what if the borrower can’t repay the loan, what if the bank isn’t getting any interest?
Worse still, what if there’s a chance of the borrower going bankrupt, and the bank losing all the money?
In that case the bank usually decides the effort to collect isn’t worth it, they cut their losses.
They don’t write the whole loan off, they don’t want to lose every penny.
So they sell the loan on to what’s called the secondary market.
People who buy the loan cheap, then try to collect on the original amount.
So the bank gets some money back, but the borrower still owes the entire original amount.
If you borrowed £100, say, the bank might sell that to someone else for £20, but you still owe the original £100.
The bank can salvage some of its money, and the creditor hopes to make back more than the loan cost him to buy.
Of course, none of this benefits the borrower.
This is where two artists living in East London saw an opportunity.
Hilary Powell and Dan Edelstyn decided they could sell art to raise funds to buy cut-price debt.
Then when they’ve bought it, they could just write it off.
And that’s what they’ve been doing.
They managed to raise £20,000 and with it they bought £1.2m of debt.
Then, on March 13th, they wrote to 411 people saying that their bank debts (averaging £2,959) were cancelled.
They bought the debt cheap and they’ve destroyed it.
They got the idea from a New York collective who managed to raise $700,000 to buy $30m of student and medical debt, then just cancelled it.
They said they were fed up with well-meaning people just sitting around moaning about how unfair the banks were.
How they kept people in debt to make huge profits.
They said sitting around complaining doesn’t help anyone.
They decided to actually do something about it, to play the banks at their own game.
The banks’ game is to make money out of people, these people turned it around and made money out of the banks.
That’s what I admire, people who actually do something instead of just complaining.
There used to be an expression in New York for well-meaning people, who never actually did anything except express sympathy.
The expression was: "With that and a dime you can make a phone call."
Dave Trott is the author of Creative Blindness and How to Cure It, Creative Mischief, Predatory Thinking and One Plus One Equals Three