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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Save_America1st's picture

If you want to join the FSA you have to swim the Rio Grande and climb the fence.  Helps if you mule for a drug cartel as well.  Drag some homeless Guatemalan children across the border with you for extra-extra free shit bonus points.  Border patrol will make you a sandwhich, change all your diapers and give you new tighty-whiteys before you get your free bus tickets to anywhere you want to squat in America.  It just gets better for you after that.  You'll be livin' the high-life in no time with credit card offers and as much debt as you can choke down with your EBT free food each day.

thamnosma's picture

I signed up for the FSA and they sent me to Syria...

Grinder74's picture

You said that already.  Why don't you spread the wealth of your million dollar bonus?

p00k1e's picture

What's the inverse of a debt jubilee?  Recall, people living back in X-ian times only aged to 35 or so and hip replacements weren't needed - Jesus was the cure-all. 

SilverDOG's picture

Pladizow

 

Why the HELL NOT !

Soon enough USA will mirror; Yugoslavia, Argentina,

Greece this century, Spain etc etc.

Default ! you stupid ass slaves.

Default ! I dare say.

 

 

john39's picture

life on planet usury...  where the chains are now vitual.  Remember when usury was a mortal sin? yeah, somehow they lobbied and got that little issue fixed so that we could all be "modern".  progress, right?:

http://realcurrencies.wordpress.com/2013/01/17/meet-the-real-deal-michae...

dontgoforit's picture

I've worked pretty hard to get the credit that allows me two new cars and a home and $1 million on my credit cards - if I were stupid enough to use it.  I hate that folks have lost jobs - I do; I've lost several myself; however, if there were no credit, most of us would be walking and living under bridges.  Credit is not a bad thing - it's how easy it is to get that gets people in trouble.

john39's picture

an economy based on debt (as the "currency") has only one destination.  It inevitably places wealth in the hands of the few, and the masses in poverty.   This is by design.   We can only speculate how people might behave, and how the world economy might look, if unburdened by the money changers and their debt slavery scheme.

DaveyJones's picture

money is also just a marker, a marker for real things. As the real things get scarcer and the population gets larger, the expanding credit economies and the expanding debts do more and more damage and become less and less accurate at measuring anything economic.

Decolat's picture

'As the real things get scarcer and the population gets larger...'

 

And THAT pretty much sums up the root cause of everything we bitch about on ZH.

RaceToTheBottom's picture

Depends on how close you are to the Government tit: that is what drives the question of how much debt is prudent.

If you are a bankster of your job is guaranteed for life (in real life, not just in your mind), your ability to pay off debt is easier than if you have real world risk in your life.

 

dontgoforit's picture

I worked in the private sector all my life until recently.  With the grace of God, education and hard work, my wife and I provided for our kids and ourselves.  We have never welched on a deal - ever.  We always paid what we agreed to pay - even if it cost us a fortune (which it did once).  We have never considered bankruptcy as an option.  My dad, who would have been 98 last week had he made it the past 8 years, told me to do the honorable thing - because without integrity - you have an empty life.  (He did bail my ass out when I was young because I got in credit heaven without a ladder to get down - and I thank him for it even though it was entirely my own fault.)

El Vaquero's picture

You need to get over that sentiment.  The banks are fucking people and the very design of the system puts people into a position where they won't have a choice on welching on a deal.  People make a lot of dumb decisions and should suffer the consequences of those decisions, but once you understand that the amount of debt must always be greater than the amount of dollars and what that means, you will understand that the system is corrupt and all ethical considerations should be thrown out the window when dealing with the system.

RaceToTheBottom's picture

Treat them exactly as ethically as our children are being treated.  

When MS defaults on realestate loans while of the government tit, it should tell you where we are...

dontgoforit's picture

I believe there is a ton of corruption, but I also believe I have a choice whether to sign on that dotted line or not.  If I can't fucking afford it; I can't fucking have it.  When credit is too easy - as in the sub-prime debacle - folks step right into the trap.  Banks don't necessisarily get rich off of stuff like that.  They want the contract consumated and completed as agreed to.  The politicians who said, "Everyone deserves a home of their own," should have been the ones to put their money up to cover that sub-prime shit that was the start of the general malaize we suffer from still.  Clinton, I believe it was.  In any event, people have choices.  I can't believe the number of people who blame someone else for their bad decisions.  Mea culpa, mea maxima culpa.

El Vaquero's picture

I don't believe there is a ton of corruption, I know there is a ton of corruption.  If people stopped taking out credit, the system would collapse.  That leads to predatory relationships and the banks push it.  Debt slavery is a necessity in our system.  Most people do dumb things, but the banks are corrupt to the core.  Unless you are geriatric, you will be faced with a decision between ethics and survival in your lifetime, and it all goes back to an unethical and unsustainable system of currency requiring continual growth on a finite planet.

NickVegas's picture

The banks create the "clown bux" out of thin air, and lend it at usury. They have taken the noble sentiment of fair trade, and perverted it for their own purposes. That is why the system continues. Ask yourself, where did the bank get this money to lend? No one works for the money created, only you work, to pay it back. It is slavery. Gold, silver, and platinum can not be created by fiat. Get it, fiat currency, perverted fair trade. It breaks societies, but that is by design.

Seek_Truth's picture

Dontgoforit:

Did you ever take the time to read a credit line or loan agreement? It is a mutual agreement with "outs" for both parties.

There is nothing dishonorable about not paying an unsecured debt as long as it adheres to the language in the agreement.

An attorney would make you smart on the issue of unsecured debt in one 1 hour or less session.

Perhaps you should learn a thing or two before gratuitously patting yourself on the back.

You haven't defaulted- yet!

There's still time pal.

Then you'll be singing a different tune.

Steaming_Wookie_Doo's picture

I applaud you for doing the right things. Unfortunately now we have a culture (if you can call it that) that is literally oriented towards the most consumption w/o much regard for how much it's producing that's pro-survival and valuable. Ever since I saw Lifestyles of the Rich and Famous as a kid in the 80s, I knew we were headed for doom-- getting people to "covet thy neighbors goodies". "Easy money" is slavery with a velvet lined handcuff--and with the dumbing down of a large swath of the populace, they won't know it until it's far too late. Of course, those doling out the easy money themselves will receive bailouts since they're too important and well-connected to fail. 

Dingleberry's picture

No, credit did not allow survival.  

Credit CAUSED those economic problems that caused people to live under a bridge, namely price inflation and market distortions that cause the economic problems you claim credit can ameliorate. Google student loan bubble, housing bubble, stock bubble (margin), derivatives, etc. 

If productivity, inflation and sound money were common knowledge to the unwashed and sound practice, we would not need anywhere near the credit we do in order to live, let alone survive.

No matter, as credit (like everything else) eventually runs out or ceases to have its desired effect. We are increasingly seeing this with QE (a form of corporate credit) and its lack of effectiveness in e.g. housing.

For those of you who understand this...reserve your underpass spot now. 

 

dontgoforit's picture

I guess I kind of see it as a 'guns don't kill people - people kill people' kind of issue.  Just because the credit is there doesn't mean you have to use it.  I've got several guns but I've yet pulled one on another human being.  I've got credit and with it I've been able to do things I otherwise would still be waiting to do because it would have taken my entire lifetime to have saved that much money.

sessinpo's picture

dontgoforit    I've got credit and with it I've been able to do things I otherwise would still be waiting to do because it would have taken my entire lifetime to have saved that much money.

----

I am with you and understand your point. You are talking about being responsible for oneself and the use of credit. However, your statement is not logical.

If it would take you a lifetime to save enough money for something, buying it on credit doesn't make it cheaper. You are now paying back with interest. Thus it will take you an entire lifetime plus interest.

The true answer is: if you can't afford it, do without. Life isn't fair but that is life and hard for most people to swallow.

dontgoforit's picture

Sessinpo - I'm not arguing that it makes it cheaper, I'm saying credit makes it possible.  If there's a 'good' side to credit it is that people can buy a home or a car.  Yes we pay more than the item would cost if we paid cash, but if you're not among the 1% chances are you would never have the house or the car.  I agree to pay the 3% interest on the house; and 1.9% on the cars.  When Jimmy Carter was POTUS we paid 13% on the house.  Soon, we will have paid these things off and there will only be taxes and insurance.  So for the last 35 years, we had nice homes and nice cars.  But, we also had employment.  This generation is being cheated out of the work they so badly need.

sessinpo's picture

dontgoforit   Sessinpo - I'm not arguing that it makes it cheaper, I'm saying credit makes it possible.  If there's a 'good' side to credit it is that people can buy a home or a car.  Yes we pay more than the item would cost if we paid cash, but if you're not among the 1% chances are you would never have the house or the car.  I agree to pay the 3% interest on the house; and 1.9% on the cars.  When Jimmy Carter was POTUS we paid 13% on the house.  Soon, we will have paid these things off and there will only be taxes and insurance.  So for the last 35 years, we had nice homes and nice cars.  But, we also had employment.  This generation is being cheated out of the work they so badly need.

----

But that isn't mathematically logical. An item that takes a lifetime to save for is not worth putting on credit. You said it would take a lifetime to save for such things. Maybe you were exagerating to make a point and that would be a way out. Notice the words I put in bold of your statement. You wouldn't be able to pay these things off if it really took a lifetime to save for just the principle. I don't know. Since I don't really know you, I have to take you at your word with what you post. Thus I pick apart statements that don't make sense. But I think you have the right meaning and just posted a message that wasn't as clear as you wanted.

Generally for most people, a home is the largest expense they put on credit. Even in that case, if they are prudent with their income and pay down their debt as quickly as possible, it isn't a lifetime. So, I think I know what you mean.

Thank you for your kind response.

DontGive's picture

Seems both of you 'tards arguing over the same thing. Credit is like a knife, it can cut both ways.

We got dudes on the cotton field who are pushing 70 years old with $100k in credit cards and nothing else to show for it, seems like the older generation bought consumerism hook line and sinker. We can only hope the offspring will get a clue before it's too late. But then I guess when you live in a basement and your parents money runs out it might change, not that this up and coming generation will have a clue how the financial whiplash will conclude with them having less opportunity (as far as less well paying cotton fields around these days unless you suck dick for the government).

There is a 3 part BBC show floating around, the resourceful here will find it: The Men Who Made Us Spend - http://www.theguardian.com/tv-and-radio/2014/jun/28/men-who-made-us-spen...

sessinpo's picture

DontGive   Seems both of you 'tards arguing over the same thing. Credit is like a knife, it can cut both ways.

We got dudes on the cotton field who are pushing 70 years old with $100k in credit cards and nothing else to show for it, seems like the older generation bought consumerism hook line and sinker. We can only hope the offspring will get a clue before it's too late. But then I guess when you live in a basement and your parents money runs out it might change, not that this up and coming generation will have a clue how the financial whiplash will conclude with them having less opportunity (as far as less well paying cotton fields around these days unless you suck dick for the government).

There is a 3 part BBC show floating around, the resourceful here will find it: The Men Who Made Us Spend - http://www.theguardian.com/tv-and-radio/2014/jun/28/men-who-made-us-spen...

----

It seems the only tard is you considering your post. I and dontgoforit were having a cordial discussion without getting into name calling such as you. We are well aware of people living in basements. Our discussion is about self responsibility which may mean NOT HAVING CREDIT CARDS and GETTING INTO DEBT, or at least using credit responsibly.

No one forces you to take credit. That is a life choice. For example, I have no credit cards and refuse them when offered. I may not have as much to show for that action in terms of material items. But I also don't have that debt.

Dingleberry's picture

No, you MUST use far more credit now (compared to wages) if you want to go to college, buy an over-priced home, or over-priced SUV.

Wages have not kept up with inflation nor productivity. The reason: the Fed.

Used to be 10 year mortgages, even mortgage burning parties (when is the last time you heard of that?), 4 year max car loans (now loan restrictions would put dealers out of business, including the re-emergence of subprime), and you cold actually work your way thru public college.

Not any more. This si due to inflation, caused by easy credit, and whether you participate or not, you (or someone you know) are affected by the inflated price.

This is not to excuse stupid consumer behavior. Many use credit properly. But obviously, that is the exception, not the rule. And rules were in place to protect everyone. Now all are effected, whether you play the game or not. Before we entered this high-speed world of easy money (starting in the 70s), life was not so hard economically and prices were not insane like they are now.  

There is no going back. Easy, cheap money is here to stay indefinitely.

sessinpo's picture

Dingleberry   And rules were in place to protect everyone. Now all are effected, whether you play the game or not.

----

And here you see the real problem with a statement and don't realize it.

Rules to protect people only causes people to act irresponsibly and get into more trouble. And Government creates that. If there were no protections, less people would act so irresponsibly and the ones that do act irresponsibly would pay for it instead of pushing that off to the rest of us.

Those that play with bankers will get burned by bankers.

El Vaquero's picture

Guns don't wither away from a lack of pulling them on people.  Our banking system will collapse if credit is not issued.  Big, big difference.

El Vaquero's picture

Prices would be unbelievably different without a debt-is-money system.  Our system has created distortions so great that it is near impossible to imagine what it would be like without most dollars in existence being merely entries on a ledger.  Fractional reserve banking - where that credit comes from - is unsustainable and unstable.

dontgoforit's picture

Politicians have wasted the surplus that made the U.S. a great country.  Hopefully we can turn this around before it's too late.

El Vaquero's picture

We won't, and the surpluses are gone.

sessinpo's picture

dontgoforit   Politicians have wasted the surplus that made the U.S. a great country.  Hopefully we can turn this around before it's too late.

---

That is not a correct statement. There were never surpluses.

If you have a budget of 50K but have accumulated 100k in debt, just because one year you have 55k in income doesn't mean you have a 5k surplus. You still have debt that exceeds your income. That is bad economic theory and needs to corrected and stopped right here.

PT's picture

dontgoforit:  I agree that there is good debt and bad debt, the difference being that good debt pays for itself - what Minsky called hedge borrowing.  As for bad debt, bad debt allows idiots to buy stuff that they otherwise could not afford at prices that they could not otherwise afford.  You think you're smart by saving and paying cash, only to be outbid by an idiot who pushed up prices by borrowing.  The idiot goes broke next week, his toys are repossessed, but next week you are outbid by another idiot.

"Success" at this stage of the game relies on sitting on the fine line between Ponzi debt and the Minsky moment.  Clever?  Or lucky?  No, the winner is the guy with the most accommodating bankster.

How to buy the world:  Start a business, sell cheaper than everyone else.  Offer finance to any customer who is breathing.  Don't worry about profit, worry about market share.  As long as a bankster continues to bail you out you can undercut the competition, drive the competition broke, buy the competition, repeat till you have bought everything and owe it all to your bankster.

There is a real problem when earnt money has to compete with borrowed money.  Borrowed money wins.  Earnt money starves.

Zerozen's picture

Ok so in a nutshell, good debt = used to finance stable/cash-flowing investment

Bad debt = used for consumption

 

PT's picture

I was well into my thirties before I realised that "good debt" existed.  Basically, if you only earn $100 per week but, by buying a machine for $10000 dollars, you could make $1000 per week, you'd be mad to save and pay cash.  You have to save for 100 weeks or else borrow and the machine pays for itself in ten weeks (plus interest - don't forget interest!!!)  By borrowing money, you save yourself 90 weeks (minus interest) and in 100 weeks time, you are ahead by $900* 90 week = $81000 ( minus whatever interest ).

Hate to repeat myself in the same thread but I really like this description:

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

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.

I've seen a company that actively promotes Ponzi finance, as described above.  Their attitude:  Negative gearing and don't bother paying your short fall.  If your asset's value appreciates by 10% and your debt increases by 5%, you're still 5% ahead so you're laughing.  I don't know how they survived 2008.  It might have something to do with their "never sell" attitude.  What's that phrase again, "extend and pretend"?  Maybe they have good "valuers". 

Next time you can't afford to buy something, think about this.  They are your competitors.

Seek_Truth's picture

"I was well into my thirties before I realised..."

What kind of machine? An automobile?

No matter:

Have you factored in depreciation? No?

Have you factored in the time value of money? Didn't think so.

Maintenance? Of course not.

The only kind of machine that works given your "math" is a money-printing machine.

Your last name is Yellen, amiright?

PT's picture

?????????  Yes, my numbers were simplified and exaggerated in order to emphasize a point.

But lemme guess.  In your neck of the woods, every single company you know of saves their profits and pays cash for everything and no-one borrows money for anything - not for houses, auto-robots, silicon chip manufacturing plants, gold mines, oil wells, roads, electrical infrastructure - all paid for in cash they saved and put in the bank.  Is that your problem?????????

Canoe Driver's picture

What a moron u r if u can't see that the prices of cars, homes, vacations etc are all several times higher than they could be without the general availability of credit. U only need the credit because it exists, genius.

Seek_Truth's picture

" however, if there were no credit, most of us would be walking and living under bridges.  Credit is not a bad thing - it's how easy it is to get that gets people in trouble."

A bald faced lie.

Credit is a very bad thing.

When you lose your job and your investments go south, you'll find out.

Never take a loan, credit, etc.

Save up for what you need, and you'll soon find out how many of your "needs" are wants.

It's people like you that keep TPTB in power.

813kml's picture

The rules of religion are fungible depending on the need for guilt and manipulation.

Seek_Truth's picture

Not all religion.

But yeah, the vast majority.

nink's picture

Here is how it works. 1) get everyone in debt 2) lock people up for being in debt 3) now increase profits because you have a free labor force who are cheaper than Ethiopia

ultra_knight's picture

If it stops at it you must say thank god.

What if interest rate rises and force everybody to default... so that all these millionaires can buy everything damn cheaper.

Ah... has it happened before yes, 1929 great depression...

pods's picture

Right after it stops functioning as our money supply.  With countries trying now to sidestep the USD, should be a couple more years of agony.

pods

SubjectivObject's picture

You ... you sunshine pumping troll you!

pods's picture

I've watched enough National Geographic to come to the realization that the baby Thompson's gazelle is not going to escape inevitability.

pods

Monty Burns's picture

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

A question I keep asking myself. (Shakin' ma haid...)

mastersnark's picture

My consumer confidence is up as I'm choosing not to face my collectors