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?
Re:Lies and statistics...
By mythosaz
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2014-Jul-29 19:50
• Score: 4, Interesting
• Thread
I actually suspect that's a lot of people's 35%.
We've been fighting a small medical bill because the hospital couldn't bill insurance correctly. Bill trickle in after major events (doctors and other specialists bill separately, badly, incorrectly coded) and rarely are they all seamless. Even perfectly covered items might leave a hospital (or doctor, or...whatever) chasing you around the world for a co-pay. ...and knowing they'll rarely see it, they sell them for pennies on a dollar to debt collectors who'll ding your credit.
If my wife wasn't a benefits specialist in a previous life, we'd drown in the things - all so badly handled by incompetent billers and insurers.
Relative Window Duration
By Bob9113
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2014-Jul-29 19:58
• Score: 3
• Thread
Anyone have other theories why this number is so much higher than the 5% of people who are just "late"?
The first window lasts from 0.08 years to 0.5 years, while the second window lasts from 0.5 years to 7.0 years. The relative window width is (7.0 - 0.5) / (0.5 - 0.08) = 6.5 / 0.42 = 15.47. So if each person only had zero or one debts, and no debt was ever paid off, you'd expect there to be 15.47 times as many debt holders in the second window as in the first. 15.47 * 5% = 77%. So the fact that it is at 35% means that there is some combination of people being in both categories and people paying off their debt while it is "In Collections." If it was 5%, or 77%, you'd be able to make a pretty solid guess that something was hinky, but 35% is in the "could be perfectly reasonable" range.
I'll also echo the sentiment that some creditors do a horrible job of billing. I had a large outstanding debt for years before finding it on my credit report. The company had a typo in my address from the original signup, but had been getting copies of my credit report which had my correct address. They sent all the bills to the incorrect address they had on file, never once contacted me at the address on file with the credit reporting company they had been contacting.
um yea...
By Charliemopps
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2014-Jul-29 20:09
• Score: 3, Interesting
• Thread
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.
Is it a legitimate collection?
By schwit1
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2014-Jul-29 20:12
• Score: 3
• Thread
The Michigan teachers union sics bill collector on former members after they legally opted out of the union:
http://poorrichardsnews.com/po...
Lack of ability to challenge bad debt
By asmkm22
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2014-Jul-29 20:17
• Score: 4, Insightful
• Thread
I ran into this a few years ago. Basically, I got a random call saying I owed about $1k. After asking for the debt verification letter to be sent, I was able to figure out that the debt in question was for some daycare provider in 2009, 3 years before receiving my first collections call. Problem was, we had moved out of that area when this supposed debt occurred, meaning it shouldn't have been charged in the first place. The daycare provider couldn't produce any documentation to support their claim, saying that it happened 3 years ago and they can't find anything. I then called the debt collection agency back and asked for the debt to be discharged as a result, but they said the daycare center claims the debt is valid and won't reverse it. I then opened a ticket with TransUnion (where the collections was listed) and explained the situation. 30 days later I got a letter saying the looked into the debt and determined that it is valid, despite having no documentation to back the debt up, and my documentation showing I wasn't even living in that area. Best part is, I followed up with TansUnion to find out how they validated the debt, and was told they called the daycare center and simply asked them if it was valid; no proof or documentation or anything provided. The whole system is a racket, and there's basically no way to get collections reversed unless the debt involves identity theft. The original creditor has no interest in the truth because they already sold the debt. The collection agency has no interest in the truth because they have already bought the debt. The credit industry has no interest in the truth because it's their core business. The only reason this whole thing hasn't bothered me too much is because since I basically went 4 years before realizing the debt existed, I can just wait for it to fall off my report.