35% of American Adults Have Debt 'In Collections' 570
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?
The American Dream (Score:3, Insightful)
is a pyramid scheme.
Past due not reported by companies (Score:5, Insightful)
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.
looming American spring... (Score:4, Insightful)
Not surprised. (Score:4, Insightful)
Once you have something go into collections it is always there until you pay it. (medical bills/school debt probably drives a lot of this)
You're only 30-90 days lat for a short period.
"Many consumers were burned for relatively small amounts -- about 10 percent of the debts were smaller than $125, Ratcliffe says"
This kind of thing probably drives the numbers way up too. That late fee from blockbuster, etc.
So! The game is rigged! (Score:5, Insightful)
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 Rich got Richer over the past 30 years (Score:3, Insightful)
The Middle Class didn't.
The Poor got taken to the cleaners.
Thank god my investments in Guillotine and Pitchfork franchises are proving to be fruitful.
They Want you in Collections (Score:5, Insightful)
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.
Re:i blame my kids (Score:5, Insightful)
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.
Re:The American Dream (Score:5, Insightful)
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
um yea... (Score:1, Insightful)
I remember I posted a few weeks back that you should never own a credit card. I got modded troll and flamed pretty heavily.
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.
Re:The American Dream (Score:3, Insightful)
Its only eroded as socialism has advanced.
socialism stepped in as the american dream eroded.
Lack of ability to challenge bad debt (Score:5, Insightful)
Re:Lies and statistics... (Score:5, Insightful)
Yes, since the bills would be covered by insurance.
After the deductibles and co-pays. I have a "platinum" plan through my employer; better insurance than anyone else I know and the co-pays still total up to a considerable amount. No deductibles for in-network on my plan, which makes me extremely fortunate. As a single guy I can afford the co-pays even with my modest salary but I can see how quickly they would bankrupt someone with a family, particularly if said family had one or more members with a chronic illness.
Incidentally, I was just exposed to rabies a few months ago:
Strike One: The only place to get the immunoglobulin is the ER, because it's very expensive (>$4,500) and has a short shelf-life. ER co-pay: $150
Strike Two: There's a set schedule for the vaccine, Days 0, 3, 7, and 14. You can get the vaccine from your primary, in theory, but of course my primary has a months long waiting list because we're driving PCPs out of business. Bottom line, I can't get appointments with them for Days 3 or 7, so that's two more trips to the ER. Additional co-pay total: $300
Strike Three: New York State ostensibly has a fund to pay for out of pocket expenses related to rabies exposures, but they only reimburse for the rabies vaccine and immunoglobulin. Since the ER decided to give me a tetanus shot on Day 0 NYS won't reimburse me, even though my out of pocket would have been $150 with or without this extra shot. Hooray for bureaucracy!
Totaling all this up, that stupid bat that found its way into my apartment has personally cost me $465 ($450 of ER co-pays, $15 of PCP co-pay) while my insurance company is on the hook for close to $7,000. My annual premium is about $6,000. So this one incident wiped out every penny they made on me and then some. I'm an otherwise healthy 32 year old marathon runner that ought to be subsidizing those who are less fortunate. Now imagine a family of four that were all exposed to the same scenario I was.....
Re:So! The game is rigged! (Score:5, Insightful)
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.
Re:Lies and statistics... (Score:5, Insightful)
I suspect most medical collections (by volume, not dollar) fall into unpaid copays, and miscoded bills that are never correctly sent to insurance.
I suspect most medical collections by dollar are catastrophic issues of some sort. Hospitalization for uninsured or underinsured.
Re:i blame my kids (Score:4, Insightful)
Re:The American Dream (Score:2, Insightful)
I'll take the advice of professor in economics over a talk show host - so does most business people, BTW.
Re:The American Dream (Score:1, Insightful)
And now fascism is coming up fast along the rail.
Re:The American Dream (Score:1, Insightful)
In a remarkably similar manner, being in debt is about spending more than you earn.
It's cute that you people can take relatively simple problems with overarching patterns and obfuscate them with condescension on loan from Rachel Maddow.
Re:Past due not reported by companies (Score:5, Insightful)
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.
There's another reason that people seem to be ignoring: something that is "past due" will change out of that status, one way or another, after a short time. Something "in collection", not so much. One has to consider why it went into collection in the first place.
Another factor that is rather passed over in OP is that despite a few changes that were made for the better some years ago, they were actually pretty weak changes and credit reporting is still egregiously one-sided today.
Most companies of any size have whole departments that regularly report "past due" debt to collection agencies. But a consumer has many time-consuming and often expensive hoops to jump through to get that back off their record. In many ways it's still guilty-until-proven-innocent.
The fact that over generations people have become used to this travesty of justice just makes it all the more insidious.
Re:um yea... (Score:5, Insightful)
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.
Re:medical services need a billing time limit (Score:5, Insightful)
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... [wikipedia.org] to form a valid contract
Re:The American Dream (Score:4, Insightful)
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.
Re:The American Dream (Score:4, Insightful)
Re:So! The game is rigged! (Score:4, Insightful)
By paying off a credit card every month I am not paying any fee to use my money. In this case the seller is paying the fee and I collect on the benefits. On one card I earn cash back and on the other I earn airline miles which I have used to fly all over the country with very little out of pocket for the tickets (mostly various airline fees and taxes). I don't pay one cent for the use of my credit card. I don't pay interest or fees. In my case, the sellers are paying the credit card fees, not me. I'm basically getting all of the benefits at no cost to me being paid by the companies I purchase from.
The scam is when you end up paying fees to use a credit card or when you don't pay it off and pay obscene interest rates. I could see someone doing that on a rare occasion like an emergency, but it should be paid off as soon as possible. Carrying debt for the sake of carrying debt on a credit card is stupid. I have never done this and always had a very high credit score.
All of my regular banking is through my credit union where I do not pay any fees to use my money. I don't pay ATM fees at any other credit union (and they'll reimburse me for any). The more I hear about banking through the big banks the more disgusted I am.
Medical services need total billing clarity (Score:5, Insightful)
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."
Re:The American Dream (Score:5, Insightful)
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?
Re:The American Dream (Score:4, Insightful)
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!
Re:The American Dream (Score:5, Insightful)
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.
Re:Past due not reported by companies (Score:3, Insightful)
If you have a million in assets, what do you need a loan for?
We've finally arrived at the point where your only chance to getting a loan is not needing one.
Re:The American Dream (Score:2, Insightful)
even in communist countries, they didn't have much but at the very least they had an apartment for themselves!
Yes, because in communistic countries, you don't get to keep what you make. I fled one of those countries. My income tax was 52% and the sales tax was 21%. The government would happily fund up to the equivalent of $2000 to those who had no job (regardless of whether or not that was by choice).
You want to live in a communistic country? Putin will welcome you. Perhaps you can press that little red button next time a Malaysian Airlines flight flies of Ukraine.
Support the country you live in, or go live in the country you support.
Re:The American Dream (Score:5, Insightful)
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.
Re:The American Dream (Score:5, Insightful)
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.
Re:The American Dream (Score:5, Insightful)
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.
Re:The American Dream (Score:3, Insightful)