Study: 35 percent in U.S. have delinquent debt

Health care-related bills account for about 38 percent of the debts, student loans 25 percent
Associated Press
Jul 29, 2014

More than 35 percent of Americans have debts and unpaid bills that have been reported to collection agencies, according to a study released Tuesday by the Urban Institute.

These consumers fall behind on credit cards or hospital bills. Their mortgages, auto loans or student debt pile up, unpaid. Even past-due gym membership fees or cellphone contracts can end up with a collection agency, potentially hurting credit scores and job prospects, said Caroline Ratcliffe, a senior fellow at the Washington-based think tank.

"Roughly, every third person you pass on the street is going to have debt in collections," Ratcliffe said. "It can tip employers' hiring decisions, or whether or not you get that apartment."

The study found that 35.1 percent of people with credit records had been reported to collections for debt that averaged $5,178, based on September 2013 records. The study points to a disturbing trend: The share of Americans in collections has remained relatively constant, even as the country as a whole has whittled down the size of its credit card debt since the official end of the Great Recession in the middle of 2009.

As a share of people's income, credit card debt has reached its lowest level in more than a decade, according to the American Bankers Association. People increasingly pay off balances each month. Just 2.44 percent of card accounts are overdue by 30 days or more, versus the 15-year average of 3.82 percent.

Yet roughly the same percentage of people are still getting reported for unpaid bills, according to the Urban Institute study performed in conjunction with researchers from the Consumer Credit Research Institute. Their figures nearly match the 36.5 percent of people in collections reported by a 2004 Federal Reserve analysis.

All of this has reshaped the economy. The collections industry employs 140,000 workers who recover around $50 billion each year, according to a separate study published this year by the Federal Reserve's Philadelphia bank branch.

Health care-related bills account for 37.9 percent of the debts collected, according to a new report commissioned by the Association of Credit and Collection Professionals. Student loan debt represents another 25.2 percent and credit cards make up 10.1 percent, with the rest of the collections going for local governments, retailers, telecoms and utilities.

The delinquent debt is overwhelmingly concentrated in Southern and Western states. Texas cities have a large share of their populations being reported to collection agencies: Dallas (44.3 percent); El Paso (44.4 percent), Houston (43.7 percent), McAllen (51.7 percent) and San Antonio (44.5 percent).

Almost half of Las Vegas residents— many of whom bore the brunt of the housing bust that sparked the recession— have debt in collections. Other Southern cities have a disproportionate number of their people facing debt collectors, including Orlando and Jacksonville, Florida; Memphis, Tennessee; Columbia, South Carolina; and Jackson, Mississippi.

A few major factors appear to be driving the delinquencies, said Eric Salazar, the Texas and Florida manager for the credit counseling agency GreenPath.

First, many of these workers have low-paying jobs in construction and services, in addition to minimal education on their finances.

"There is not the income growth to save and they have to make survival decisions," Salazar said. "You make the decision to pay for the roof over your head and to feed your family and that's all you can afford to do."

Secondly, these states are home to retirees who live on fixed incomes and may struggle to pay medical bills, Salazar said.

Other cities have populations that have largely managed to repay their bills on time. Just 20.1 percent of Minneapolis residents have debts in collection. Boston, Honolulu and San Jose, California, are similarly low.

Only about 20 percent of Americans with credit records have any debt at all. Yet high debt levels don't always lead to more delinquencies, since the debt largely comes from mortgages.

An average San Jose resident has $97,150 in total debt, with 84 percent of it tied to a mortgage. But because incomes and real estate values are higher in the technology hub, those residents are less likely to be delinquent.

By contrast, the average person in the Texas city of McAllen has only $23,546 in debt, yet more than half of the population has debt in collections, more than anywhere else in the United States.

The Urban Institute's Ratcliffe said that stagnant incomes are key to why some parts of the country are struggling to repay their debt.

Wages have barely kept up with inflation during the five-year recovery, according to Labor Department figures. And a separate measure by Wells Fargo found that after-tax income fell for the bottom 20 percent of earners during the same period.

 

Comments

SunshineDaydream

I just don't understand how people can't budget correctly. If you bring home $3500 per month, you can't spend $4,000 month after month. Why is basic math so complicated for people?

coasterfan

If you bring home $3500 per month, but your basic expenses + other loan obligations cost $4000, you fall into debt. Not sure why that basic match is so complicated for you.

All it takes is a large college loan, or unexpected longterm expensive medical issue, and your bills outpace your income. That has nothing to do with irresponsibility or bad math.

SunshineDaydream

Because planning ahead is illegal or something? I mean really, who doesn't have at least half of their yearly income in savings? Better yet, who racks up $60k in college loans for the same education they could have received from a community college for less than half of that? Medical bills are an excuse, not a reason these days. Your argument is half-witted.

Florence Nightingale

Sunshine, I agree with your first statement 100%. People don't know how to budget. But there is no way that most people have half their yearly income in savings. And there are many degrees you can't get from a community college.

SunshineDaydream

It's really not that hard to save a few bucks. Sure, it's taken me a few years but right now, if I lose my job, I can survive for one full year without a job. Make a few changes to my lifestyle, I can extend it 4 or 5 months. Cash in my retirement, I can go jobless for almost a decade. Yeah, I've thought about this. I have a plan.

Florence Nightingale

That really is incredible! Good for you, and I am not being sarcastic. I need to be more disciplined in saving, as I bet most people do.

The Hero Zone's picture
The Hero Zone

Many aren't aware that you can get a Federal student loan to go to a Canadian university. Most I believe have transferable accreditation and the cost is much less than many American programs. It feels awkward to suggest our government pay you to go to good schools in another country, but it is what it is. Get the degree with less expense up north.

knowitall

The median wage is a lot less than you mention. That is how. And if you do not have a decent healthcare insurance that is primarily paid for by the company you work for, you could get socked real hard very quickly with medical expenses. You must be rich to not be aware of this stuff.

WhatTheHeck

If all you so called Republicans on here would get up off of your lazy duffs and ride the public transportation to the polling site this fall the Dems wouldn't win the elections.

Contango

Speaking of debt:

"About 83,000 Defense Department employees and contractors with security clearances to protect the nation's secrets have delinquent federal tax debts totaling $730 million, according to an internal government audit.

The findings in the new Government Accountability Office study raise security concerns for the U.S. government. Officials say employees and contractors who have financial problems are top targets of foreign intelligence agents."

http://www.cnn.com/2014/07/28/po...

coasterfan

Of course, if Republicans weren't for cutting the budget and weren't for making our Fed. Gov't smaller, there would be more workers available to monitor things like this. Gotta love when conservatives push for deregulation and policies that make it harder to adequately oversee things, then complain that things are being properly monitored.

I think what we really need to monitor is a lack of intelligence among Republicans in general, and the teaparty specifically. Hehehe...

Contango

Re: "harder to adequately oversee things,"

The problem isn't fed income, it's fed spending.

We are a nation of consumers, not a nation of savers.

BOTH the Dems and Repubs have taken the U.S. from the world's largest creditor in the 1950s, to currently being the world's largest debtor in history.

Approx. 50% of our fed debt is owned by foreigners. This FACT has some serious military and geo-political ramifications.

http://www.treasury.gov/ticdata/...

FYI: During the '07-'08 financial crisis, BOTH China and Russia considered dumping their U.S. Treasuries and GSE mortgage backed securities.

The Big Dog's back

You're so full of sheet pooh your eyes are brown.

knowitall

Consumerism keeps the economy going. Very low interest rates keep the savings rate down. But, we are a wasteful, indulgent society in general.

Really are you ...

The Unites States of America is 100% in debt. Trillions and trillions of dollars in debt. Our government can't even agree on a budget. The government is collecting money from every working tax paying American. The government has placed some kind of taxes on almost everything we buy. Our money is taxed when received and spent. These goverent officials are elected to? Spend? Not comprise? Kick the can down the road? Send our men and women off to wars that don't affect American soil? Make laws to override previous laws? Create corporate loopholes? Tell us what is good for us? Debt!

Follow the leader. Great leaders lead by example. Carry on.

coasterfan

The only 2 presidents who have lowered the Federal Deficit since 1980 are Clinton and Obama. Taxes are lower in 2014 than at any time over the past 60 years, yet conservative radio/Fox continue to insist the exact opposite.

Carry on.

Contango

Re: "Taxes are lower in 2014 than at any time over the past 60 years,"

A specious argument since state & local taxes and service fees have grown comparatively and then some.

Also, the taxable base has been broadened and some income tax deductions of 60 yrs. ago are no longer permissible.

The Big Dog's back

Off-topic pooh.

knowitall

No problem. Print the stuff.

capcap

It's called DOWN SIZING and loosing job after job after job...That how people can get bad credit ok. What bill am I going to pay this month, or should I starve next month. You rich azz people don't have a clue what it is like out there.

coasterfan

Agree with Capcap.

Dr. Information

My parents came from nothing, no education and worked mediocre jobs. They budgeted and lived just fine. They didn't have the 50 inch flatty or cell phone bills because they just have to get on FB all day long. They never drove a car they couldn't afford or had clothes in their closet paid for by plastic.

Choices. You don't make them right, you end up in trouble.

The Big Dog's back

No education runs in the family dr. no info.

deertracker

Not very many people are happy with nothing. Just because you don't have much does not mean you are happy about it. Flat screens and cell phones were not available back then and in case you didn't the CRT tvs are not being sold anymore.

knowitall

Some truth to that but it is a bit oversimplified.

knowitall

Right on cap cap.

pntbutterandjelly

And yet...the Republicans say there isn't any income disparity! Our nation IS rapidly becoming a class society, the "haves" and the "have nots".

Donegan

Quit supporting 1%ers with a "D"behind their name. The disparity is the worst ever under Obama. http://money.msn.com/investing/p...
Oh look another 65 billion just went to Wall Street.

coasterfan

Actually, it's the Republican 1-percenters who are the problem. Dem. billionaire Warren Buffet is in favor of tax reform to benefit the middle class/poor. Meanwhile, GOP billionaires the Koch Bros. and others are busy buying elections and advancing their goal to turn America into an oligarchy.

This problem began during the Bush years and is a direct result of actions taken by that administration. The Republican Party has resisted any/all attempts by the Obama administration to change things, which isn't a surprise, since the GOP always supports policies that favor the 1%. Apparently, you haven't been paying attention...

Donegan

Facts are facts Coaster, the inequity is the worst ever under your god. Your Boy Buffet is a billionaire who cares nothing about you or anyone else. He just bought YOUR god to stall the pipeline to kill jobs, Destroy the environment and keep his railroad billions rolling in. Face it the "D's" are just as bad if not worse than the "R"s".
Oh look another 65 billion just went to Wall street...

Pages