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Study: 35 percent in US facing debt collectors

By JOSH BOAK

WASHINGTON (AP) - 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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Shawn July 29 2014 at 4:11 PM

obamanomics at it's best

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sam54ct Shawn July 30 2014 at 9:07 AM

Too bad 11 of the 13 States with the highest default rates, aare Southern Republican, and thus, it has zip to do with Obama, instead its a problem of low wages, low education, no healthcare, thus healthcare debt etc.

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d1anaw July 29 2014 at 4:46 PM

Many of the current debt collectors are trying to collect on "vampire debt", which is by law not legally owed. I wonder if that was factored into the figures.

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Craigermt July 29 2014 at 8:38 PM

This is how a lot of this goes. I will go to school for 5 years, took a bit to figure out what I wanted to do, and took out loans for all of it instead of working while I went to school. Got done and then rented a good apartment, bought a new car, got a new cell and got the dish, needed a new computer for work, need lattes going to the unemployment office and refuse to accept a job that I feel is beneath me. And why should I pay my debts when I have no money. Gee!

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baldbiker2 Craigermt July 29 2014 at 10:14 PM

And if I hold opput long enough, Obama will make an executive order releasing me from my school loan responsibiliuty. barracks dying to do it, for the democrats and 2016. Hes thinking about it, probably just trying to figure a way to get it past congress when theyre not looking.

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sam54ct Craigermt July 30 2014 at 9:06 AM

Yo baldy biker, it was a Republican that began the student loan program, and that was IKE, the goal, educate enough people to ensure we could compete with Russia in the space race. Ike's goal was FREE education, which was shot down by the Democrats.

Finally it was Bush Senrio who began the shipping out of jobs, shaking hands on National TV with the President to MExico, and Prime Minister of Canada, a mistake made forever, when Clinto Ratified the agreement.

So wake up, both Parties are working against the citizens, all to ensure they get enough campaign donations to remain on the taxpayer gravy train.

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baldbiker2 July 29 2014 at 10:09 PM

Yeah,,,,but everyone has money for their cell phone bills.....

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brennemanbelkin July 30 2014 at 4:24 AM

If you can pay a credit card company, you can pay yourself.
Pay off the card, cut it into pieces and open a savings account.
A year of tough times or a lifetime.
It's that simple.

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royjoneswolf62 July 29 2014 at 10:01 PM

And if the GOP gets it's way, there will be debtor prisons very soon. This was statred by Reagan and topped off by GW Bush. They ruined our economy and Obama has had no help from Congress try to slove the problems.

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2 replies
baldbiker2 royjoneswolf62 July 29 2014 at 10:15 PM

6 years into barack Obama and yer still holding on huh? Don't forget, barack said that if we elected him, all this was going to go away,,,,remember? It has nothing to do with past presidents now, its about baracks campaign promises. t

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sam54ct royjoneswolf62 July 30 2014 at 9:03 AM

Correct, Reagan began the downfall of our country, followed by EVERY President since that time, from both Parties.

When Reagan put Federal employee's on 401k plans, a scam developed by his banking buddies, companies offering pensions dropped from 47% to 12 % before he left office. Regan, and his same banking buddies, the Keating Five, than tried to close down the Credit Union industry, to ensure they had access to even more citizen funds.

That said, every President since that day has made policy which works against us citizens.

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chuck July 29 2014 at 10:42 PM

as some of you may know i have made no secret that i think oboma and his SS and libs are trators and need to be removed from office. i also said the IRS is a bunch of crooks for targeting repubs. now i got a letter from the IRS and they are making me pay 5600.00 from 2012. maybe i made mistakes, i dont know. they came up with things i never heard of but also that was just a few months after my wife died from a heart attack so im sure i didnt do the forms right. but it sure seems strange that they came after me afteer me after i said what i think about the gov in gen. what do you think? so watch out repubs you might be next victem of the libs.

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2 replies
DOUG chuck July 30 2014 at 12:49 AM

Actually it sounds like your a tax cheat fudgeing the numbers and you got caught. Stop being such a crybaby.

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sam54ct chuck July 30 2014 at 8:59 AM

Grow up, yhou're an embarrasment to us good republicans. Those of us with a brain, know it's both Parties that have written policy which works against citizens of the USA.

Next, read the article, 11 of the 13 States where default is over 40% are Southern Conservative, Republican States, not Liberal States.

We are the Party of welfare users, in fact 62% of our Party receives Entitlements.

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