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Deadbeat Nation: A Shocking 77 Million Americans Face Debt Collectors

Tyler Durden's picture




 

We have been warning for years that as a result of the Fed's disastrous policies, America's middle class is being disintegrated and US adults are surviving only thanks to insurmountable debtloads. But not even we had an appreciation of how serious the problem truly was. We now know, and it is a shocker: according to new research by the Urban Institute, about 77 million Americans have a debt in collections.

The breakdown by region:

As the Washington Post reports, that amounts to 35 percent of consumers with credit files or data reported to a major credit bureau, according to the study released Tuesday by the Urban Institute and Encore Capital Group's Consumer Credit Research Institute. "It’s a stunning number," said Caroline Ratcliffe, senior fellow at the Urban Institute and author of the report. "And it threads through nearly all communities."

More:

The report analyzed 2013 credit data from TransUnion to calculate how many Americans were falling behind on their bills. It looked at how many people had non-mortgage bills, such as credit card bills, child support payments and medical bills, that are so past due that the account has since been closed and placed in collections.

 

Researchers relied on a random sample of 7 million people with data reported to the credit bureaus in 2013 to estimate what share of the 220 million Americans with credit files have debts in collection. About 22 million low-income adults who did not have credit files were not represented in the study.

While we understand why someone owing tens if not hundreds of thousands can just do what the US government does so well, and simply decide to stop paying their debt (if unlike the government, without the option to roll it), what is scary is that there are people who are in collection on amount as tiny as $25.

The debts sent to collections ranged from $25 on the low end and to more than $125,000 on the high end. Many consumers were burned for relatively small amounts -- about 10 percent of the debts were smaller than $125, Ratcliffe says. But the median debt, $1,350, is still pretty substantial, she adds.

The geographic breakdown is not surprising, headed by the state that hosts Las Vegas, where an unprecedented 47% of all consumers have debt in some stage of collection.

Nevada was hit the hardest, with 47 percent of consumers with a credit file showing a debt in collections -- a mark researchers said may stem from the housing crisis when people struggling to keep up with their mortgage payments may have fallen behind on other financial obligations.

It's not just Nevada. It's, well, everywhere else too:

In 12 states, including the District of Columbia, more than 40 percent of residents with a credit file have a bill in collections. That includes Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Texas, and West Virginia.

But how is it possible that tens of millions of Americans are in such dire straits? After all, banks have been reporting better delinquency data for years. The answer: the study found that the share of people with debt past due, meaning they are at least 30 days late with payment on a non-mortgage debt, was much smaller: 1 in 20 people. That includes people who are late with credit card bills, student loan payments and auto loans. The majority of those people, 79 percent, also had debt in collections. However, because certain bills, such as medical bills and parking tickets, may not show up on a person's credit score until they are sent to collections, the total share of people falling behind on their bills may actually be much higher.

The flowchart:

 

And the breakdown by state: the stunner, again, is that the share of Americans with debt in collections is 7 times greater than those with merely debt past due:

The report's punchline, via AP:

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.

But.. recovery? And consumer confidence at 2007 highs? Or did the Conference Board decide to just poll the residents of 15 CPW and 740 Park?

Of course, there is a simple solution to all of the above: instead of being deadbeats, if only these 77 million Americans had BTFD as the the S&P's chief market valuation officer, Janet Yellen and Ben Bernanke before her, had advised them, then the US would truly be a crony capitalist-cum-socialist nirvana by now. Sadly, the way it is right now, the US Department of Truth will have to put this record number of deadbeats out of the labor pool (and hook them to the government handouts machine), while pretending that what once used to be known as the economy, and now is nothing but pure propaganda, is getting "better."

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Tue, 07/29/2014 - 10:29 | 5017528 MidwestJester
MidwestJester's picture

So....are the guidance counselors telling kids to become debt collectors in the schools nowadays? Lots o opportunities!

Tue, 07/29/2014 - 10:31 | 5017537 Oh regional Indian
Oh regional Indian's picture

Haaaaaaahhhhhaaa....the news flow is dripping with irony today:

at 10:08 

Consumer Confidence Explodes Higher To October 2007 Highs

at 10:27

Deadbeat Nation: A Shocking 77 Million Americans Face Debt Collectors
Tue, 07/29/2014 - 10:35 | 5017561 SHEEPFUKKER
SHEEPFUKKER's picture

When(if ever) does the national debt go into collections?

Tue, 07/29/2014 - 10:41 | 5017598 Pladizow
Pladizow's picture

All 77mil should default!

Tue, 07/29/2014 - 10:47 | 5017626 hedgeless_horseman
hedgeless_horseman's picture

 

 

Debt is wealth!

Tue, 07/29/2014 - 10:47 | 5017637 MillionDollarBonus_
MillionDollarBonus_'s picture

This is bullshit. The federal government needs to introduce risk free loans for people who are suffocating under this oppresive debt. I'm tired of getting caught out by loans that look good at first but later down the line there turns out to be a massive catch like higher interest payments. I want the government to introduce no-interest loans - no bullshit, just easy money.

Tue, 07/29/2014 - 11:32 | 5017804 El Oregonian
El Oregonian's picture

Wimpy: "I will gladly pay you Tuesday for a hamburger today".

Stark: "Great! I'll cook you two and that way I'll have made twice as much in negative sales! I am now twice as unrich, and that is a good thing... I believe?... But hey, I am a very smart man!"

Tue, 07/29/2014 - 11:40 | 5017941 Shocker
Shocker's picture

This recovery is getting to everyone

Daily Layoff / Closing List: http://www.dailyjobcuts.com

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Tue, 07/29/2014 - 11:43 | 5017960 Liberal
Liberal's picture

Can't we raise taxes, create a federal department for the downtrodden, hire all these people and raise the minimum wage to $100/hr?

Tue, 07/29/2014 - 11:49 | 5017976 Headbanger
Headbanger's picture

STARVE THE BEAST!

It's the only way to end this fucking farce of an "economy" and a "government"!

 

But here comes a major war and a pandemic to kill us off too!

Tue, 07/29/2014 - 12:02 | 5018060 El Vaquero
El Vaquero's picture

Yes, I hope more of these people start fighting the shit in court.  There are so many debt collection lawsuits in this country that it would collapse the system if people simply fought their cases.  As it stands people either agree to a stipulated judgment (equivalent of a guilty plea) or they don't respond to the complaint and get a default judgment against them.  I fought mine and won without an attorney.  Then I got sent back to collections.  But after dealing with attorney debt collectors, dealing with normal debt collectors was a cakewalk.

 

The problem is not that people are deadbeats.  The problem is the debt is money system itself.  It is corrupt, coerecive and unsustainable.  But people are conditioned to "pay their debts."  Fuck that shit.

 

Starve the beast indeed. 

Tue, 07/29/2014 - 12:25 | 5018154 q99x2
q99x2's picture

I'm entitled to my debt.

Tue, 07/29/2014 - 12:31 | 5018176 dontgoforit
dontgoforit's picture

What an ass this Cali democrap is.  This is typical 'lawyer' type handling of any question: deflect, detract and defer the answer.  Never any truth out of these people.  And they consider themselves 'wise.'  My dog is smarter.  Jan should have punched his lights out when he said, 'Get the fuck outta here.'

Tue, 07/29/2014 - 13:14 | 5018381 svayambhu108
svayambhu108's picture

They don't face debt collectors they are taken from behind by debt collectors, there's a subtile difference

Tue, 07/29/2014 - 14:37 | 5018861 CheapBastard
CheapBastard's picture

 Discount stores are slowly dying. 

Yesterday, Dollar Tree announced it would buy Family Dollar, a chain that is in the process of closing hundreds of stores and firing workers. 

Other discount stores have been struggling as well, writes Heidi Moore at The Guardian. Fashion discounter Loehmann's filed for bankruptcy, while  Wal-Mart's sales have declined for the past five quarters. 

"There’s just not enough money deployed by American families to keep all the discount chains in business," Moore writes. 

 

Full grim story:

http://finance.yahoo.com/news/americas-poorest-shoppers-putting-discount...

 

I'm guessing the Michigan Confidence peeples did not 'survey' these folks.

Tue, 07/29/2014 - 12:32 | 5018174 Skateboarder
Skateboarder's picture

The number I heard quoted often was that collections on average gets ~7 cents to the dollar. A friend of mine once told me, "just call up the people and say you know they're only gonna get 7 cents to the dollar anyway, so might as well make a deal and take my offer of 10 cents to the dollar." And they do. ;-)

Tue, 07/29/2014 - 12:41 | 5018214 El Vaquero
El Vaquero's picture

That depends on the creditor.  I don't know about today, but when I was fighting my shit, Capitol One would not deal.  They wanted the full amount.  I watched a grandmother get screwed in the courtroom by Capitol One after she had tried to settle with them and interacted with a lot of people who just wanted shit to go away and CapOne wouldn't deal.  Then you got to the Junk Debt Buyers (JDB.)  Those crooked fucks could almost always be beaten pro se if the person simply challeneged their standing.  Banker records are bad enough.  JDB records suck ass.  They would often settle with people for 10 or 15 cents on the dollar if a person pushed hard enough. 

Tue, 07/29/2014 - 12:53 | 5018281 Skateboarder
Skateboarder's picture

I hear you on how it was before. These days, and going forward, you have two 'industries' that need to be fed for the Ponzi to survive, and will compete with each other. One one hand, you have the collections side, where each node in the heirarchy from creditor to collector, is trying to maximize its 'revenue.' On the other hand, you will have the popo and the gub trying to throw you in jail for nonpayment, whether it will be the original amount or the collections one. It seems plausible to expect many a new law on the handling/enforcement/collection of personal debt in the near future.

Regardless of the step-by-step outcomes at any point, we are all led along the path of most profit to Hidden Hand Criminal Holdings Inc.

Tue, 07/29/2014 - 12:57 | 5018302 El Vaquero
El Vaquero's picture

Fortunatly, the legal proceedings are handled at the state level, not federal.  Some states suck ass and others are fair to debitors.  When shit goes sidways for the banks, it'll happen faster than laws can get passed.

Tue, 07/29/2014 - 13:45 | 5018570 ajax
ajax's picture

 

 

On November 8, 2012, Scott Reynolds Nelson delivered a Banner Lecture entitled A Nation of Deadbeats: An Uncommon History of America's Financial Disasters. Pundits will argue that the 2008 financial crisis was the first crash in American history driven by consumer debt. But Scott Nelson demonstrates in his new book, A Nation of Deadbeats: An Uncommon History of America's Financial Disasters, that consumer debt has underpinned almost every major financial panic in the nation’s history. In each case, the chain of banks, brokers, moneylenders, and insurance companies that separated borrowers and lenders made it impossible to distinguish good loans from bad. Bound up in this history are stories of national banks funded by smugglers, fistfights in Congress over the gold standard, America's early dependence on British bankers, and how presidential campaigns were forged in controversies over private debt. Scott Reynolds Nelson is the Leslie and Naomi Legum Professor of History at the College of William and Mary.(Introduction by Paul Levengood)

http://vimeo.com/62187967

Tue, 07/29/2014 - 12:59 | 5018311 Georgia_Boy
Georgia_Boy's picture

I think a lot of the people sent to collections for small amounts are there for money they don't really owe. I was sent by U-Haul when they screwed up a credit card charge. They didn't even send me a warning letter beforehand, I just started getting several vulture calls a day out of the blue and that's the first I heard that U-Haul had a problem. (Don't ever use fucking U-Haul, I also got a truck that broke down a different time.)

When the customer service seriously sucks, it can take weeks to get them to fix even a simple problem. Or what if it's a fly by night operation that went bankrupt? Good luck getting that fixed. By the way, never use U-Haul, did I mention that yet?

Tue, 07/29/2014 - 13:05 | 5018343 El Vaquero
El Vaquero's picture

To most people, debt collector calls are stressful.  To those who know the FDCPA, they are an opportunity to make money.

Wed, 07/30/2014 - 02:48 | 5021430 SF beatnik
SF beatnik's picture

I've felt that since Reagan's dereg, corporations have been given a lot of slack. Now big corps almost have to routinely screw little guys just to compete. 

Case in point, my former car insurer sent me bills long after I had paid fully and canceled at policy expiration.  They then sent threatening letters.

I sent a threatening letter back and lo and behold, they send me a "refund" check. (WTF?) 

Tue, 07/29/2014 - 12:22 | 5018145 Abitdodgie
Abitdodgie's picture

"Irony "  we could stop world war 3 and bring down the nazi Gov't in about a week , if we the people would just stop paying taxes, but you wont , why? , fucked if I know.

Tue, 07/29/2014 - 12:27 | 5018158 El Vaquero
El Vaquero's picture

Because not enough people will do it to overwhelm the system.  If you don't, when push comes to shove, men with guns will be sent to take your shit and throw you in a cage.

Tue, 07/29/2014 - 12:34 | 5018184 dontgoforit
dontgoforit's picture

O-Peach-Me would love it if we did that.  It would be the thing he'd need to declare himself emperor for life and turn the dogs of war loose on the American public.  However, our taxes are paid by our employers before we even see our paychecks so you'd basically have to get them to do it, which they won't.

Tue, 07/29/2014 - 12:54 | 5018284 El Vaquero
El Vaquero's picture

If enough people did it, government pensions would be exposed for the sham that they really are.  The people that whatever sitting president would send out would suddenly be exposed to the fact that the government is going to screw them over too.

Tue, 07/29/2014 - 12:28 | 5018160 tonyw
tonyw's picture

and yet we can still send billions to bring down foreign governments, help poor israle bomb gaza, have hundreds more foreign bases than any other country...

Tue, 07/29/2014 - 13:55 | 5018630 Seek_Truth
Seek_Truth's picture

"STARVE THE BEAST!"

Yeah, I see that sentiment alot on ZH.

What are you personally doing to "Starve the Beast?", eh?

Here's what I've done for over a decade:

-no debts

--no loans

---no credit

----save up for every purchase

-----but used, trustworthy vehicles, never new.

------get out of Corporate America, go 1099

-------grow your own food

--------learn to trap, hunt and fish

--------learn survival skills and practice them regularly

---------Boycott companies that keep TPTB in power.

----------get right with God, on a long enough timeline...

Bottom line:

typing slogans on a computer = easy (makes no difference).

Actually starving the beast = requires determination, sticking to the plan (makes a difference).

If everyone repeating that mantra actually lived by it, TPTB would come crashing down.


Tue, 07/29/2014 - 15:19 | 5019074 dontgoforit
dontgoforit's picture

So, is that Con-Ed or Pacific Gas & Electric you're using and is that a Dell, dude, or a Toshiba laptop?

Tue, 07/29/2014 - 15:30 | 5019145 Seek_Truth
Seek_Truth's picture

There are things that are within our power to change immediately.

There are others that take longer.

It's not black or white, it's shades of grey.

What are you doing to bring about change?

Other than typing asinine retorts to actual efforts?

Tue, 07/29/2014 - 12:02 | 5018062 PT
PT's picture

Meet the people who buy lots of stuff. What? You can't afford stuff?  Prices too high?  You need to get competitive.  Or you can borrow some money.  he he he

Sure they'll go broke, but we'll find someones to replace 'em ...

Tue, 07/29/2014 - 12:30 | 5018165 max2205
max2205's picture

So if half default completely then shtf

 

Thia seems very misleading

Tue, 07/29/2014 - 12:11 | 5018096 PT
PT's picture

Re "The debts sent to collections ranged from $25 on the low end and to more than $125,000 on the high end" :

No debt collections above $125 grand.  Those guys use Ponzi Finance:

http://en.wikipedia.org/wiki/Hyman_Minsky

Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation of debt by the non-government sector. He identified three types of borrowers that contribute to the accumulation of insolvent debt: hedge borrowers, speculative borrowers, and Ponzi borrowers.

The "hedge borrower" can make debt payments (covering interest and principal) from current cash flows from investments. For the "speculative borrower", the cash flow from investments can service the debt, i.e., cover the interest due, but the borrower must regularly roll over, or re-borrow, the principal. The "Ponzi borrower" (named for Charles Ponzi, see also Ponzi scheme) borrows based on the belief that the appreciation of the value of the asset will be sufficient to refinance the debt but could not make sufficient payments on interest or principal with the cash flow from investments; only the appreciating asset value can keep the Ponzi borrower afloat.

But only the amateurs worry about debt.  The professionals CYNK everything into a LOCO IPO.

 

Tue, 07/29/2014 - 12:35 | 5018192 PT
PT's picture

But it's all okay because the banks are allowed to lend as much money as they like to whoever they like because that's what freedom is about and banks need to be de-regulated and free and if someone borrows too much money then they are an evil scum and it's all their fault and not the banks' fault even if the bank lends them more money at a later date because everyone deserves a second chance and because banks would never lend too much money because then they would go broke and no capitalist would deliberately go broke because then the bank would get taken over by a bigger bank and the banksters might get laid off or they might just keep their bonuses and keep working in the new company and anyway banks would never lend bucketloads of money to idiots who would inflate prices beyond sustainable levels because then the bigger bank would become Too Big Too Fail and then it would never go bankrupt and it would continually get bailed out by the givmint and then it would push the whole world economy to its knees because who cares at least the bankers still get their bonuses and that is all that matters because between the time they lent the money and the time they sold the piece of debt paper or got bailed out they were taking on risk and we need to reward risk-takers because no-one takes on risk anymore well hell how could anyone possibly take on risk when prices are so high already?

And you should have mercy on the bankster who killed his parents because now he is an orphan.

 

Tue, 07/29/2014 - 12:38 | 5018195 Ignatius
Ignatius's picture

MDB:  "I'm tired of getting caught out by loans that look good at first but later down the line there turns out to be a massive catch like..." repayment.

You're slipping, MDB.  Not like you to miss the target, much less the barn.

Tue, 07/29/2014 - 12:42 | 5018218 Badabing
Badabing's picture

MDB is that you?
Did you get a frontal lobotomy?
You got more up votes than down!

Tue, 07/29/2014 - 16:02 | 5019338 caShOnlY
caShOnlY's picture

I want the government to introduce no-interest loans - no bullshit, just easy money.

That, my friend, is how John F Kennedy found heaven. You'd best be damn careful as to what you are saying.  The "FIRM" has eyes and ears everywhere.

Tue, 07/29/2014 - 11:11 | 5017757 GetZeeGold
GetZeeGold's picture

 

 

Pete's gettin upset!

 

Turns out my grandkids are trillionaires.....I'm gonna go give them the good news.

Tue, 07/29/2014 - 11:12 | 5017777 dontgoforit
dontgoforit's picture

This would be the 47% Romney took such a hosing over.  "Truth?   You can't handle the truth!" 

Tue, 07/29/2014 - 12:01 | 5018055 highly debtful
highly debtful's picture

HH, I took the trouble of watching this thing until the end, but believe me, it wasn't easy. WTF?! If these are the guys representing/running your country, please explain to me how anyone in the world is still paying attention to the US.

At 1:09 with his ..."I'll say this slowly, okay..."-line, I started dreaming of pitch forks and lamp posts.

What a dumb sanctimonious asshole.

Tue, 07/29/2014 - 18:09 | 5019804 Psquared
Psquared's picture

What an arrogant condescending human being.

Tue, 07/29/2014 - 10:49 | 5017630 MillionDollarBonus_
MillionDollarBonus_'s picture

Just introduce no-BS government loans already! It's BULLSHIT that I can't buy the things that I want when other people can get much more

Tue, 07/29/2014 - 10:52 | 5017655 Rainman
Rainman's picture

Get with the program ... join the race to the bottom and drive that FICO to zero !! It's only a number.

Tue, 07/29/2014 - 11:47 | 5017986 DaveyJones
DaveyJones's picture

it's like old age, it's only a number. I'm sure it can go on forever

Tue, 07/29/2014 - 12:00 | 5018053 Manthong
Manthong's picture

It's only a problem if you need credit..

like a downwardly displaced former middle class member or student who did not understand the scam.

Tue, 07/29/2014 - 12:18 | 5018132 PT
PT's picture

When you can't get credit, you have a problem.  When no-one can get credit, the banksters have a problem so then they just lend out the money anyway and go crying to the givmint and claim TBTF status and get bailed out and then they just lend anyway even though they know full well that they'll never be repaid by the debtor but they'll be bailed out by the givmint instead and then you still have problems but the bankster no longer has a problem and so everything is safely swept under the rug.  As long as the bankster bonuses are safe, everything's gonna be all right.

Tue, 07/29/2014 - 12:37 | 5018194 dontgoforit
dontgoforit's picture

What I've always told my kids, "Money only matters when you don't have any."

Tue, 07/29/2014 - 15:40 | 5019189 SmackDaddy
SmackDaddy's picture

For most of the people I know, money matters big time.  The exceptions being the folks at the exteme ends of the income scale.  Money doesnt matter to those at the top because they have a shit load of it.  But likewise, it doesnt matter to those at the bottom- hell they ran out a long time ago and have nothing to fear thanks to Daddy Gov...

Tue, 07/29/2014 - 12:31 | 5018172 robertocarlos
robertocarlos's picture

I'm still not sure if I want to become the oldest person alive or not.

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