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35% of American Adults Have Debt 'In Collections'
New submitter meeotch writes: According to a new study by the Urban Institute, 35% of U.S. adults with a credit history (91% of the adult population of the U.S.) have debt "in collections" — a status generally not acquired until payments are at least 180 days past due. Debt problems seem to be worse in the South, with states hovering in the 40%+ range, while the Northeast has it better, at less than 30%. The study's authors claim their findings actually underrepresent low-income consumers, because "adults without a credit file are more likely to be financially disadvantaged."
Oddly, only 5% of adults have debt 30-180 days past due. This latter fact is partially accounted for by the fact that a broader range of debt can enter "in collections" status than "past due" status (e.g. parking tickets)... But also perhaps demonstrates that as one falls far enough along the debt spiral, escape becomes impossible. Particularly in the case of high-interest debt such as credit cards — the issuers of which cluster in states such as South Dakota, following a 1978 Supreme Court ruling that found that states' usury laws did not apply to banks headquartered in other states.
Even taking into account the folks who lost a parking ticket under their passenger seat, 35% is a pretty shocking number. Anyone have other theories why this number is so much higher than the 5% of people who are just "late"? How about some napkin math on the debt spiral?
Oddly, only 5% of adults have debt 30-180 days past due. This latter fact is partially accounted for by the fact that a broader range of debt can enter "in collections" status than "past due" status (e.g. parking tickets)... But also perhaps demonstrates that as one falls far enough along the debt spiral, escape becomes impossible. Particularly in the case of high-interest debt such as credit cards — the issuers of which cluster in states such as South Dakota, following a 1978 Supreme Court ruling that found that states' usury laws did not apply to banks headquartered in other states.
Even taking into account the folks who lost a parking ticket under their passenger seat, 35% is a pretty shocking number. Anyone have other theories why this number is so much higher than the 5% of people who are just "late"? How about some napkin math on the debt spiral?
One reason that I'm sure is a factor in the difference, is that companies are less inclined to bother reporting the "past due" status. It's overhead for them to do it, and there's not really any benefit, but when someone hits the collections threshold, they'll go ahead and take the time to report it.
Given the trend of income inequality it would be no surprise of any sort of abrupt riots to the magnitudes of some civil rights leader got killed
This was discussed on Fatwallet today, and most of the sensationalism was debunked quickly.
http://www.fatwallet.com/forum...
A few juicy tidbits:
More details: "An alarming 35 percent of people with credit files have debt in collections reported in these file s . This percentage is nearly identical to results from a 2004 analysis of credit bureau data by the Federal Reserve, which found that 36.5 percent of people with credit report s had debt in collections reported in their file s (Avery et al. 2004). Note that consumers themselves may not realize they have debt in collections. Some consumers report becoming aware of this debt only when they review their credit report (CFPB 2013)"
...and...
The actual source: http://www.urban.org/publicati...
Only 5.3% are currently past due on a bill. "5.3 percent of people with a credit file have a report of past due debt, indicating they are between 30 and 180 days late on a nonmortgage payment"
So most of the people have old debts which could be up to 7 years old.
So there you go. A lot of us have an outstanding medical bill on our credit reports, and we should check them more often.
The whole point of a "credit score" is horribly broken. In order to get approved for debt, you must have debt. If you have money in the bank and no monthly debt payments you have a reduced score. It's a SCAM! A scheme to make sure that you are constantly in debt, and yet it's perfectly legal. Living in debt constantly costs you money, and for what? So that you can have more debt? Wow!
The fact that people don't get this, or simply don't care, is very telling.
Personally I have almost no debt, just my car payment. I don't have a lot of debt so have a laughably low credit score. If I don't have cash I can wait to buy something. Actually since I manage my personal finances very well purchasing something I want is never an issue.
-The wise argue that there are few absolutes, the fool argues that there are no probabilities.
I have a "debt" in collections right now. Comcast claims I owe $95 to them. Last winter I moved to a place where I could not only get other service, Comcast doesn't even serve (thankfully). So I told Comcast I'd be terminating my service effective Jan 15. Comcast had my credit card to auto-bill for it's "service".
Then in March I started getting collection calls from companies Comcast hired to get this from me. Nobody will prove to me that I actually owe this money. And what's odd is the amount: $95 when my monthly bill for internet-only service was about $60 or $70. I just got another call yesterday on it.
I could easily pay it and never even feel the hit. But fuck that! Comcast sucks beyond the ability of science to measure and I'm so sick of being taken by them, they're going to have to take me into small claims court and get a court order for this sum.
And yeah, I get that this will harm my sterling credit rating, but what a great means of extortion. Bill people small amounts under the threat of losing their good credit rating and even when people don't actually owe the money, they'll pay up to save their rating.
What changed under Obama? Nothing Good
In order to get approved for debt, you must have debt.
No, to get approved for debt you need one of two things:
1. A credit history. That's not necessarily debt, it is a history of handling small debts that you've paid off.
2. Belong to a demographic that the credit companies are chasing.
When I was in college, the stores were deluging me with offers of credit cards because of my age/college while the credit union followed rule 1 and repeatedly denied me a credit card. In recent years, the largest flood of credit card offers were when I had no debt at all, but had a paid-off car loan.
It's a SCAM! A scheme to make sure that you are constantly in debt,
Nobody can force you to go into debt.
The simple fact of the matter is, if you are in collections, most companies get the ability to rape you. They will be as harsh as possible when talking to you so that you don't want to negotiate. This equals more money in interest.
Student loans threatened me into work I couldn't physically do, and was relying on medicaid to keep my fake leg working. The threats forced my work over what I could do and pushed me into homelessness for a time.
I tried calling the collectors with the last of my money and all they could do is tell me to pay $14,000 in student loans in 3 monthes. Despite their threats causing me $100k in medical bills, multiple suicide attempts, and lost work time.
Since I have stabalized financially and I have been talking to them more, you soon realize the system was made to rape you from the beginning. It's a lot easier to face when you realize you aren't necessarily the evil one.
You can ask specific questions, but the department of education will refuse to give any specifics. The best I had gotten was a letter that read, "We have investigated your claims [what was investigated specifically was not stated], and we have found no issues. We have no departments that can handle this matter and if you would like to pursuie this it will have to be through litigation."
This is the US of A. I'll hang myself at a college before
I'm threatened into [work I can't do] -> [homelessness]. I'll do my best, but when the interest is $700 a month, you know the company you were working with had no serious intension of helping to pay back any dept, but only to cause you new ones.
Children are simultaneously the most expensive and least liquid luxury you can get. If it's hard to make ends meet, maybe you should have gotten something more sensible and resalable, like a boat.
"Because Science" is one step from "Because old book". Try "Because of my experiment testing my falsifiable assertion".
its cute that you people can take a large and complex problem with many angles and reasons and boil it down to a simple catch phrase you heard on talk radio
The Michigan teachers union sics bill collector on former members after they legally opted out of the union:
http://poorrichardsnews.com/po...
I ran into this a few years ago. Basically, I got a random call saying I owed about $1k. After asking for the debt verification letter to be sent, I was able to figure out that the debt in question was for some daycare provider in 2009, 3 years before receiving my first collections call. Problem was, we had moved out of that area when this supposed debt occurred, meaning it shouldn't have been charged in the first place. The daycare provider couldn't produce any documentation to support their claim, saying that it happened 3 years ago and they can't find anything. I then called the debt collection agency back and asked for the debt to be discharged as a result, but they said the daycare center claims the debt is valid and won't reverse it. I then opened a ticket with TransUnion (where the collections was listed) and explained the situation. 30 days later I got a letter saying the looked into the debt and determined that it is valid, despite having no documentation to back the debt up, and my documentation showing I wasn't even living in that area. Best part is, I followed up with TansUnion to find out how they validated the debt, and was told they called the daycare center and simply asked them if it was valid; no proof or documentation or anything provided. The whole system is a racket, and there's basically no way to get collections reversed unless the debt involves identity theft. The original creditor has no interest in the truth because they already sold the debt. The collection agency has no interest in the truth because they have already bought the debt. The credit industry has no interest in the truth because it's their core business. The only reason this whole thing hasn't bothered me too much is because since I basically went 4 years before realizing the debt existed, I can just wait for it to fall off my report.
I pay for everything cash, so I have a low credit score. How the fuck does that work?
Sure, you might be independantly wealthy and just buy everything with cash... or maybe you live day to day off the money you make turning in aluminum cans. In other words, your score is low because they can't tell you from hobo.
I paid for my car cash, I pay my rent cash, I pay the cable company cash.
I have over $30k in the bank and I have monthly paychecks.
None of which is reported to a credit scoring agency.
So I should have a much higher credit rating than someone who is constantly paying with credit cards in my opinion.
You are probably more credit worthy, and probably deserve a higher score, but you aren't playing the game to get one.
I wouldn't even mind so much, except that when renting a house they do a background check, and they expect to find a credit history, which I don't have.
So get one. Apply for a card, buy some stuff you were planning to buy anyway, pay it off... costs you NOTHING. And you get a higher score on the credit rating game, for when you need it.
And that's the problem with the publics modern perception of credit. Because I do not have a credit card and suggest that you shouldn't either, I'm considered a quack. I buy just as much useless garbage as anyone that modded me down does. I go on vacations, I order things online, I buy soda at the gas station. The only difference is I don't pay a 7% to 30% fee to do all of those things. And that is exactly what a credit card does. It doesn't help your credit. That's a lie driven by marketing campaigns of credit card companies.
You no doubt got modded down because you have virtually every fact you mention entirely wrong. Having a credit card doesn't mean carrying a balance month-to-month, and you don't pay a single penny extra if you don't carry a balance (unless you stupidly sign up for a card with an an annual fee). I actually get 1.5 to 6% back on all my purchases, depending on how they categorize it. Now, you could argue that we pay 3%-ish more for everything as a result of stores passing on the transaction fees to their customers, but then, so do you, and you don't even get the benefits as a result.
And as for your credit rating, sorry, but yes, having a small number of regularly-paid cards most certainly does improve your credit, compared with having no credit history. I could provide you with an hundred links discussing the optimal number of cards and how much to cycle through them monthly, but you could already have done so and apparently chose not to.
Yes, we have a sick view of what "credit" means as a society. That doesn't invalidate the concept itself, just points a damning finger at how badly we tend to misuse it. Kudos to you for at least living within your means (and I mean that sincerely), but you massively overstate the case-for-cash while remaining blissfully ignorant of how credit cards really work in the modern world.
Medical bills need to be communicated up front, not after the fact.
I once went to a US hospital, I asked how much would it cost, they wouldn't tell me. I asked will it in the range of $100, or $1000, or $10,000 still wouldn't tell me.
How is any sane person meant to go into a contract without actually knowing even an approximate price. They should say would you like Xrays with that for $X.
how can there be a meeting of minds http://en.wikipedia.org/wiki/M... to form a valid contract
What you're ignoring is that in many parts of the US you can't live on minimum wage. The minimum wage around here nets you $1492 a month before tax and the average apartment costs nearly $1300. So, it's a matter of food or shelter, unless you've got somebody else picking up the tab on some of the rent.
What's more, thanks to Federal Reserve policies, the little bit of savings that people manage to save gets eroded constantly as the Fed purposefully keeps the interest rates below the rate of inflation. As a result, anybody who doesn't have enough money to keep their savings in the stockmarket falls further and further behind.
So share the apartment. You can certainly live on minimum wage. You just can't have your own place. You might not even have your own bedroom. But be clear: you're implicitly applying a standard of living that simply doesn't exist in most of the world, and has never existed in most of the world, in most of history.
I once went to a US hospital, I asked how much would it cost, they wouldn't tell me. I asked will it in the range of $100, or $1000, or $10,000 still wouldn't tell me.
How is any sane person meant to go into a contract without actually knowing even an approximate price.
THIS. With all the complaints about health care costs and clarity about insurance plans, the most fair and straightforward thing they could do is force doctors to give an estimate, like you'd get from any mechanic or painter or tradesman. Obviously this wouldn't quite be possible for complex procedures where quick decisions to do additional things are needed. But a general estimate or range, or maybe a list of "potentially necessary add-ons during complications" would make things so much clearer.
But that kind of reform would never pass, and not just because of the complexity -- doing this would reveal the true cost of care, it would show the gross disparities among charges at different hospitals, and it would make clear that all the "discounts" granted large insurers is just some weird kind of game where hospitals nominally charge often twice or three times as much as they actually expect to get paid, and the amounts are "adjusted" down by the insurance companies.
Healthcare costs are spiralling out of control in the US partly because we have a system where the true cost is hardly ever seen or paid by anyone, making it impossible for consumers to make choices or comparison shop in ways that could actually improve care and make the whole system more efficient.
Even worse, there are sometimes even deceptive statements made about how much you will have to pay, and business arrangements you enter into without even knowing that the other party exists, much less that you're getting their services.
I didn't see a doctor for ten years because I couldn't afford insurance, and when I finally got covered through a decent job and went to get my first general checkup in my adult life, there was a big sign up front saying "ALL CO-PAYS DUE AT TIME OF VISIT". I figured that meant what it said: anything I owed, that was not getting billed to my insurance, was going to be billed to me before I left. When they let me walk out without paying anything, I figured that meant I must not have had a co-pay, which made sense to me as it was just a general physical exam, and a blood draw for some basic general-health lab tests (cholesterol, blood sugar, STDs, etc).
Then I got a bill in the mail a month later. Called and complained, why am I getting billed, didn't my insurance cover this, and THEN they tell me that that bill is for the remainder that's left after what my insurance paid (IOW my copay). I argued about the sign saying all co-pays were due at time of visit and they said... I don't even remember what now, exactly, but something to the extent that that's no excuse and I have to pay the bill. Not knowing what else to do, I did.
A month later I got a different bill for the blood tests, from a different company. I called and complained that I already got a bill for that visit and paid it and even that was unexpected and what the hell is with two different companies trying to collect for the same fucking service. They explained that they are the lab that my doctor sent the blood off to for the tests, and they they bill separately, and that paying my doctor for their service doesn't get me off the hook for the lab service. I had no knowledge that I was even buying services from this lab company: the only entity I interfaced with was my doctor, they hired the fucking lab, let them pay the lab and roll the cost into their bill, I figured. But no, and lab insisted I owed them money, and not knowing what to do, I paid up.
A year later, my second doctor's visit in my adult life, different doctor in a different town as I had since moved. They at least had the decency to say up front how their billing works (without me even asking), and that they will send me a bill for the copay after they process it through my insurance. And they don't do in-house blood draws and send out to a lab, they send you to the lab of your choice with orders for what tests to run. So that's better, much more clear. But the lab itself also has a "ALL CO-PAYS DUE AT TIME OF SERVICES" sign... and this time, they actually billed me at time of services! Awesome. So far, I was liking the medical establishments in this new town a lot better.
Until a month or two later I got a bill from the lab. When I called to complain that I already paid them at the time of services as their sign said, they told me then that that was only an estimated copay, and that after they put the bill through insurance, there was still a balance remaining on my copay, which is what that bill was for. Again, no idea on what grounds to dispute it, so I paid up... but ugh, what the hell
For emergency services where the patient may not have the time or awareness to evaluate the costs and benefits, I can understand you just do the service and bill later. But for a motherfucking general checkup and routine bloodwork? Jesus fucking christ, how can you not just say what it will cost up front and bill before I accept your services?
It's only one step removed from the homeless guy who washes your windows without your consent and then demands you owe him money. "Hey man you need some medical services?" "Yeah uh I guess how much?" "Can't tell you yet now turn your head and cough." "Uh... [cough]" "Aight you cool man, that'll be $100." "WTF no you didn't say it would be that much" "Too late you got the work now you pay the bill man... don't make me go get my collections posse to shake down yo ass, pay up sucka."
-Forrest Cameranesi, Geek of all Trades
"I am Sam. Sam I am. I do not like trolls, flames, or spam."
its cute that you people can take a large and complex problem with many angles and reasons and boil it down to a simple catch phrase you heard on talk radio
This is especially silly considering that actual socialist countries don't have consumer credit at all. Do you think Cuba has people in collections? I lived in the People's Republic of China for several years (which is nominally socialist) and everything was based on cash. I paid cash for my cell phone (I was not even asked for my name or ID) and paid cash for the minutes. I would buy token cards for my electric meter, and feed them in to pre-pay for home electricity. The electricity company neither asked, nor cared, who was living in the apartment, and certainly had no need to do a "credit check". I had electricity five minutes after I moved in.
In America, I have been in collections several times. Usually when they send the bills to the wrong address, or I move and forget to shut off the trash service, but the bills still go to the old address. It was always for something that I would have preferred to pre-pay, if that option had been available.
Socialism? What socialism? In the US?
Do you know what the word means? Or just the "It's bad to take a cent from the rich" propaganda?
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
We must become more like India to stay competitive! We must be first! Even in the race to the bottom!
Hell, even in communist countries, they didn't have much but at the very least they had an apartment for themselves!
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
People just finally saw through the lie that the "American Dream" is: Yes, anyone can win. But not everyone. It's like the lottery.
Plus, the "rules" of the game have changed. It used to be "have an idea, work for it, follow it and in the end, with some luck and hard work, you will be successful!". That was the dream. And that even worked. Yes, for some. Not all. Of course, for every single one that succeeded, there were hundreds that failed. But that one success story kept the dream alive.
Today, it's over. The internet managed to keep it rolling for a bit longer than it would have originally and you have a few more of those "rags-to-riches" stories... only that the successful ones were not in rags by any stretch of the word to begin with. But outside those few stories, there is no chance for anyone to succeed. Corporations have the field divided, and there is NO chance for you to become more than a bit player. Ever. The absolute best you may possibly hope for is that you found an area where it's cheaper to simply buy you away than to entangle you in enough red tape that you willingly hand over your stuff.
The new american dream is simply playing the lottery. Same chance of success with less effort. And it's the same game: Anyone can win. Just not everyone.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
You put it as if there is only a choice between all or nothing (communist versus totally unregulated capitalist).
In addition, one would not be allowed to try to improve ones own country/system, but one should leave if you don't like it?
I think that is rather absurd.
So it's come down to a version of America where people pack themselves into slum housing to get by while the well-to-do reserve $100,000 suborbital joyrides? So much for a rising tide raising all boats.
The sci-fi authors were more right than anyone suspected.
No kidding!!! What do you say at this point?
Even back when individuals could make it they would still mostly have been better off fighting to improve their current situation. A key part of the American Dream is supporting things like low taxation for the rich, because one day you too might be rich, and minimal employee rights because one day you might be the employer. People screw themselves in the hope that it will pay off later, but for 99.99% of people it never does.
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SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC