Report: Debt Collectors After 35 Percent of Americans

We all recognize that default on debts is a major problem for many Americans right now. These defaults are on everything from cell phone contracts to mortgages to student loans to hospital bills. These debts are more than a simple hit to a credit score. They can impact a person’s ability to be approved for loans, secure housing in decent neighborhoods or land a good job. However, it’s easy to lose sight of just how widespread the issue. blackandlight.jpg

A recently-released study conducted by the Urban Institute reveals that every third person you pass on the street is indebted to a collection agency for one reason or another. A total of 35 percent of Americans have unpaid debts reported to collection firms. That figure translates to 77 million Americans who are behind on medical bills, child support, credit card bills and more.

The problem is even worse when you consider the researchers’ assertion that low-income consumers are underrepresented in the data, meaning that other forms of debt, such as payday loans, aren’t even included.

Our Miami debt collection defense attorneys know despite the large swath of those impacted, relatively few seek assistance in addressing these problems. Collections firms have become notorious for filing lawsuits based on illegitimate debts. They win most of these cases not because they are meritorious, but because debtors assume they can’t negotiate or fight back. The end result is wage garnishment, liens and other bad marks on their credit.

The Urban Institute’s research revealed the average amount of debt owed, based on figures from last September, was $5,200.These are debts that are so far past due that the account has been placed in collections, something that usually happens after 180 days of non-payment.

This information counters what we’ve been told about debt in this country since the formal end of the Great Recession in 2009. While it’s true that credit card debt, as compared to income, has fallen to its lowest point in 10 years (and borrowers are increasingly paying off their monthly balances), the percentage of those who have been reported to credit agencies has remained relatively the same. Where there were 35.1 percent of those with dinged credit due to unpaid balances in 2013, that’s on par with the 36.5 percent reported in 2004.

The collective effect has been a dramatic change in the U.S. economy. Consider that the debt collection industry recovers an average of $50 billion annually and has become a source of employment for some 140,000 workers.

The states most negatively affected? Those located in the South (including Florida) and the West. In fact in Florida, where residents were disproportionately impacted by the housing market crash, debt collection rates exceeded 41 percent. The average amount of debt for a Floridian is higher than $47,000. While this is slightly lower than the national average of $54,000, we have a larger-than-average number of residents who have fallen behind.

Other states rounding out the highest concentration of those facing delinquent debt are Alabama, Arkansas, Georgia, Louisiana, Mississippi, South Carolina, Texas and Kentucky.

According to the institute, the biggest hurdle we now face is income stagnation. In the last five years. the U.S. Department of Labor asserts that wages have only barely kept pace with inflation, and there are a fair number of industries where even that modest increase is not occurring.

Those dealing with debt collection firms need to understand they are protected under the federal Fair Debt Collection Practice Act. This bars debt collection actions that are deceptive and/or abusive. They can’t hound you with late-night phone calls. They can’t threaten you with arrest. They can’t resort to name-calling.

The most important thing to remember, particularly if you are being sued, is not to ignore the problem. By declining to show up in court, you are allowing the lawsuit to go unchallenged. A default judgment against you is going to be much harder to fight than a case pending in court. It may even turn out in court that you have the upper hand, as many agencies don’t bother to substantiate the information regarding the debt prior to filling suit. Many of the cases that are challenged end up with a reduced settlement or being tossed altogether.

If you’re battling foreclosure or debt collection in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

Additional Resources:
Americans In Debt: 35 Percent Have Unpaid Bills Reported To Collection Agencies, July 29, 2014, By Josh Boak, Associated Press
More Blog Entries:
New CFPB Report Spotlights Risky Debt Collection Tactics, June 20, 2014, Miami Debt Collection Lawyer Blog