Roughly one in three adult Americans have a past-due debt that’s been turned over to a collection agency, according to a novel new study.
Southern states fare worst in the study, with most having four in 10 residents with credit files that show debt in collection. The New England states fared best.
The findings overlap other economic data that together suggest millions of Americans continue to struggle to make ends meet in an uneven economic recovery that’s benefited the top end far more than the middle and bottom.
“Debt in collection is pervasive, and it threads through nearly all communities,” said Caroline Ratcliffe, the lead researcher on the report titled “Debt in America,” published by the centrist think tank Urban Institute. “Every third person you see on the street has debt reported on their credit file.”
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McClatchy obtained a copy of the report ahead of its release. Among the findings, based on records shared with researchers by the credit reporting agency TransUnion, are:
_ 35 percent of Americans with a credit file have debt in collection reported in these files. Bills more than 180 days overdue are sent to collection agencies.
_ The average amount owed on bills in collection is $5,200.
_ 5.3 percent of Americans with a credit file have bills reported to a credit bureau between 30 and 180 days past due.
_ The average amount owed on past-due debt not yet in collections is $2,258.
_ Americans with bills in collection and past-due debt owe a combined average of $9,123.
Future research will focus on a breakdown of debt by category, which will give a better sense of how much is credit card debt vs. medical bills or student loans. The latter is likely an important part of the story.
“The big thing that was changing is big increases in student loan debt, which would also be part of this,” said Ratcliffe. “We know that a lot of the recovery happened more at the top than the bottom, people with delinquent debt are those least likely to be unable pay down the debt.”
Other existing statistical measures fill in the missing pieces. The Federal Reserve issues a quarterly report on delinquency rates on loans by commercial banks, and the latest, from January through March, shows 2.31 percent of credit card debt is delinquent.
That’s lower than what the Urban Institute study shows and suggests that credit cards aren’t the whole story. The low levels of credit-card delinquency, said experts, reflects both consumer reticence to take on new debt and weaker borrowers who no longer have access to credit.
There are an estimated 222 million credit files, and researchers got access to a random sample of 7 million in the month of September 2013. They then built a model to estimate national, regional and state levels of past-due debt and debt in collections. Another 22 million adults, 9 percent of the adult population, don’t have credit files and fall outside the study.
State-level data proved striking in the Urban Institute report _ conducted with the Consumer Credit Research Institute in San Diego. It showed that 13 states and the District of Columbia had more than 40 percent of their citizens with credit files with debt actively in collection, 11 of those states in the South.
Nevada, slammed during the housing crisis that brought the deep national recession, led the pack at 47 percent. Other states over the 40 percent mark included Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Texas and West Virginia.
On the better side were North Dakota, Minnesota and South Dakota. The three states, rich in oil and minerals, had substantially lower percentages of citizens with debt in collection, respectively at 19.2 percent, 19.8 percent and 20.8 percent.
Among metropolitan areas, Southern cities fared poorly in terms of the percentage of their population with credit files that had debt in collections. South Carolina’s cities of Greenville and Charleston came in at 44 percent and 42.8 percent, respectively. Charlotte, N.C., was also elevated at 41.8 percent.
Florida, another state hard hit by the housing crisis and recession, had several cities with high percentages in collections. Miami was a hair under 40 percent. Jacksonville, Orlando and Tampa showed 45 percent, 44.8 percent and 41.6 percent. The Lakeland area between Orlando and Tampa had a very elevated 47.3 percent in collections, while North Port on the Gulf of Mexico was at 35 percent.
Despite an energy boom, several Texas cities had high levels of debt in collection. The border city of McAllen had a whopping 51.7 percent in collections, San Antonio 44.5 percent, El Paso 44.4 percent, Dallas 44.3 percent and Houston 43.7 percent.
The West Coast fared slightly better, with California having 33 percent of all its citizens with credit files with debt in collection, while Washington had 31.2 percent. Among major metro areas, the California cities of San Francisco and Sacramento showed 26.7 percent and 31.7 percent, respectively, while Fresno was elevated at 43 percent.
In Washington, the Seattle area stood at 31.9 percent while Spokane and its environs were at 30.9 percent. In the middle of the nation, Kansas City, Mo., saw 35 percent of its credit files in collections, while Wichita and its nearby Kansas communities had 33.4 percent in collections.
The credit-bureau data provides researchers another window into both the behavior of consumers and their precarious financial state.
“Our ambition is to use this as a basis akin to financial epidemiology,” Christopher Trepel, managing director of the Consumer Credit Research Institute, likening the research to that of scientists studying disease. “My hope is that we are about to define a new science of financial distress in a sense.”
CCRI researches the behavior of consumers in financial distress. Its work is funded by Encore Capital Group, a large purchaser of distressed debt.