debt

Middle class collapses in America as 35% of households face debt collectors


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Delicious
(NaturalNews) Middle-class Americans continue to take economic hits from a government that seems intent on wiping them out, even as lawmakers and presidents claim to be sympathetic to them as a whole.

According to newly released figures by the Urban Institute, more than one-third of Americans -- 35 percent -- have debts and unpaid bills that have been turned over to collection agencies.

As reported by The Associated Press (AP) and other organizations, the Institute found that these consumers had fallen behind in their credit card and hospital bills, mortgages, car loans and student debt. Often, these bills go unpaid.

So do past-due gym memberships and cellphone contracts -- all of which can wind up at a collection agency, which hurts credit scores and job prospects, says Caroline Ratcliffe, a senior fellow at the Washington, D.C.-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 Institute's study found that 35.1 percent of Americans with credit records had been reported to a collection agency for debt that averaged $5,178, according to records from September 2013.

Things are not improving

Here are the implications, as reported by AP:

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.


However, about the same percentage of people overall are still getting reported for non-payment of bills, according to the Institute's study, which was conducted with researchers from the Consumer Credit Research Institute. The figures they developed are nearly identical to the 36.5 percent of Americans in collections reported in a 2004 analysis by the Federal Reserve.

What is notable is that all of this has essentially reshaped the economy, AP reported. The collections industry employs about 140,000 people, who manage to recover about $50 billion a year, as per a separate study that was published this year by the Fed's branch in Philadelphia.

Here is a partial breakdown of figures identified in and by the study:

-- Healthcare-related bills account for 37.9 percent of all debts collected, as per a new report that was commissioned by the Association of Credit Collection Professionals;

-- student loan debt accounts for another 25.2 percent;

-- credit card debt amounts to 10.1 percent of collections; and

-- the remainder of collections go to local governments, telecoms, retailers and public utility companies.

Delinquent debt is also very regionalized, with the vast majority of it concentrated in Southern and Western states. In particular, cities in Texas have a large share of their populations being reported to collection firms: Dallas (44.3 percent), El Paso (44.4 percent), Houston (43.7 percent), McAllen (51.7 percent) and San Antonio (44.5 percent).

In addition, nearly half of Las Vegas residents -- many who bore the brunt of the housing collapse at the heart of the Great Recession -- are 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," AP reported.

Middle class under assault

Eric Salazar, the Texas and Florida manager for GreenPath, a credit counseling agency, said there were a couple of major factors that were driving delinquencies. For one, many of the workers in collections have low-paying construction and service industry jobs; also, they have minimal education regarding their finances.

"There is not the income growth to save and they have to make survival decisions," Salazar told AP. "You make the decision to pay for the roof over your head and to feed your family and that's all you can afford to do."

He also said the states most affected are homes to retirees who live on fixed incomes and may struggle often to pay some bills, especially medical bills.

A recent study by the Hamilton Project, a think tank that promotes growth and prosperity opportunities, found similar middle-class difficulties:

Many families in America's struggling lower-middle class--defined to include those with income between 100 and 250 percent of the federal poverty level, or between roughly $15,000 and $60,000, depending on family size and composition--live in economically precarious situations. Though not officially poor, these families experience limited economic security; one major setback in income could push them into poverty.

Sources:

http://hosted.ap.org

http://www.hamiltonproject.org

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