Even years after the great recession 35 percent of Americans are still deep in debt.http://www.legacy.com/obituaries/nhregister/obituary.aspx?pid=171867717
According to a new report by the Urban Institute, more than 35 percent of Americans owe non-mortgage debt that’s been turned over to a collection agency—including anything from credit card balances to student loans to medical bills and parking tickets. If that sounds especially shocking, consider: In 2004, the Federal Reserve found that 36.4 percent of Americans had debt in collection on their credit file.
The 2004 number is probably related to the collapse of the tech bubble in the early 2000s and outsourcing which resulted in many who had well paying jobs suddenly found themselves unemployed. The word collection agency is a bit misleading. Banks, credit card companies and cell phone companies don’t turn turn bad debt over to collection agencies they simply write it off and then sell packages of debt, often for as little as 5 cents on the dollar, to usually unscrupulous agencies that use all sorts of illegal practices to try to collect. They are often closed down by government agencies within months but then just appear under a new name and do the same thing.
Like most financial ills, Americans in some parts of the country are having more trouble paying off their bills than others. As shown on this map above, the South is especially plagued with debt collectors—in some corners of the region, more than 61 percent of adults with credit reports have an agency on their tail. What’s more, these figures don’t include low-income Americans who are shut out of mainstream credit sources and instead rely on services such as payday lenders. (One slightly positive note: When you cut bills out of the picture, and focus only on credit-card balances and actual loans, only 5.3 percent have debt past due.)
Two points to make here. First, a smart populist politician could probably get a lot of mileage promising to crack down on some of the sleazier tactics that debt collection agencies employ. They’re a villain many of us can relate to. Second, this is why we need consumer finance laws that protect Americans from themselves.
When you look at the map many of the dark areas were very poor to begin with and many of the people living in those areas probably never should have been issued credit cards in the first place. I still remember when I used to get 3, 4 or even 5 credit card offers in the mail every week. I used to joke with my mailman about more food for my shredder. The debt and collections from 2004 are not shown here because in most states there is a 7 year statute of limitations on debt. They can’t only not try to collect but it disappears from your credit report. As a result these so called collection agencies are even more likely to use illegal and threatening tactics in the last year.