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Study: 35 percent in U.S. facing debt collectors

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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 $50 billion each year, according to a separate study published this year by the Federal Reserve's Philadelphia bank branch.

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.

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.

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  • Nice Try, Steve
    You got that from my post? Oh,and btw, private Catholic schools, private college and grad school. But I suspect you make things up and ignore facts anyway.
  • Chip
    Chip thinks big goverment is great - enough said. It's not his fault, he watches MSNBC and is a product of the public schools.
  • markus
    umm - in case you havent heard the senate and oval office are run by democrats, and the one in the oval office couldn't care less about congress or the constitution. I suppose you still blame Bush
  • Inflation could be a fix
    By driving up wages, the debt weight would diminish. But getting higher wages is practically impossible in a economy held hostage by the U.S. House Republicans.
  • RepubliCAN'T
    Sarah Palin told me to block anything that makes this country work or move forward. I love Sarah. Sarah loves me and her paid speaking engagements. Have you seen my latest selfie with rock, flags and eagle on Facebook?
  • Uh, CC
    Take your own advice please. Think before you post.
  • Chip Should Think Before He Types
    @Chip, are you serious? Dallas = Dem Mayor, San Antonio = Dem Mayor, Houston = Dem Mayor, El Paso and McAllen have unaffiliated mayors. Even with this point, the economy in Texas is outpacing the rest of the country http://www.texasahead.org/economy/outlook.php Getting into debt is based on the personal decisions of the debtor. It is irrelevant which party is in power. Educate yourself and quit being one of the sheeple.
  • Dimocrat
    Obama told me we are in a recovery. I love Obama. Obama loves me. Have you seen my latest selfie on Facebook?
    • Hmmm
      I find it rather stunning that the delinquent debtors are in the south and Texas...all GOP strongholds. Perhaps that's the strategy...keep them dumb and poor and keep selling the dream of smaller government (less regulation) and trickle down that, of course, will never come true. Very sad how the GOP manipulates and exploits the feeble minded and desperate.

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