More Americans Haunted by the Ghost of Phone Bills Past Due
Paid your phone bill lately?
Apparently not enough customers are paying on time, if you ask the phone companies. It turns out three of the top four collection accounts based on the number of bills submitted to third-party collection agencies are from major telephone carriers -- AT&T (T), Sprint (S), and T-Mobile (DT) -- according to the recent Debt Report from Bills.com.
It's easy to see why. According to an iYogi Insights report released this month, 63% of U.S. households surveyed said they spend 35% more on technology bills than utility bills.
The High Cost of Keeping the Phone On
iYogi found mobile phones top the chart on these monthly expenditures. Households spend an average of $94 a month for their mobile services, like data plans for smartphones, and an additional $19 to download games, music, movies, and the like.
Add to that bill another $20 to $180 per month for Internet service provider bills, which usually come by way of a telephone carrier or cable company.
Between the smartphone and ISP expenses, consumers can find themselves owing roughly $300 to their telephone carrier each month to keep the lines of communication open.
In these tough economic times, it's natural that some consumers are skipping phone payments due to a lack of funds. But others are cutting the cord -- to bolt to another carrier before their two-year contract is up or switch to a prepaid disposable phone -- and simply failing to settle the existing bill with the carrier they left, says Brad Stroh, co-founder and chief executive of Bills.com.
"Consumers' attitudes are different with their cell phones," Stroh says. "Many of them don't realize they still owe money if they leave their contract before it's up, or they don't think it'll hurt their credit rating. The telephone companies also report to the credit rating agencies and this can impact [consumers] for a long time." And while the size of a delinquent phone bill is usually much less than a student loan or credit card balance due, it's a black mark on your record, nonetheless.
Phone Business Is Booming for Bill Collectors
Stroh says phone companies are quick to send a delinquent customer's bill to an outside collection agency. "A credit card company is dealing with larger amounts, so it makes sense for them to handle collections in-house for up to a six-month period before outsourcing," says Stroh, whose company tracks bills owed via its free consumer software tool Debt Coach.
Debt collectors, however, have a different view.
"Phone companies are not quicker than anyone else. There is a period of 90 days when debt is still in-house and they're trying to collect on their own," says Mark Schiffman, public affairs director of ACA International, the collections industry's largest trade group. "After 90 days, they begin to work with third-party collection agencies. I don't see anything that phone companies do that is faster than other companies trying to collect from a delinquent debt."
He noted that his organization, which is an association of credit and collection professionals, finds telecom, technology, and utility bills account for roughly 10% of the money represented in uncollected bills.
Don't Wait to Settle Up
Katie Ross, education and development manager for the American Consumer Credit Counseling organization, says phone companies may not be necessarily faster about sending bills to collections -- because they may not need to.
"In most instances, if consumers are late and get late notices, they are quick to make payment since their phones are now tied to much more than a phone service," Ross said in an email interview. "Social networking plays a huge part of this. Many companies now offer bundled services where you can get phone, cable, Internet, etc. Consumers can't resist the social world."
Regardless of how quickly a delinquent account gets sent to collections, she notes, it is wise to pay off the phone bill as quickly as possible.
Motley Fool contributor Dawn Kawamoto does not own any stock in the companies mentioned. However, she does own a smartphone and is among those families whose technology bill is larger than their utility bill.