Debt Collection Statistics
These debt collection statistics and consumer credit statistics illustrate how the credit crunch is affecting millions of Americans.
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Debt Collection Statistics
Approximately 30 million Americans have at least one debt in collection.
Source: Fed. Reserve Bank of N.Y., Quarterly Report on Household Debt and Credit (Aug. 2014)
Consumers have submitted more complaints with the Consumer Financial Protection Bureau (CFPB or Bureau) about debt collection than about any other product or service.
One-third of CFPB complaints from older consumers (age 62 and older) are about debt collectors.
Older consumers’ most frequent debt collection complaint is that collectors demand payment of
a debt not owed.
Source: A Snapshot of Debt Collection Complaints by Older Americans, CFPB November 2014
About 19.5 percent of credit reports - nearly one in five - contain one or more medical collections tradelines, while 24.5 percent contain one or more non-medical (collection) tradelines.
More than two-thirds of all collections tradelines (67.5 percent) – and over 80 percent of those tradelines that can be attributed to a particular creditor or provider -- are reported on accounts
that originated with a healthcare provider, utility company, or telecommunications company.
Most are for small amounts. The median unpaid non-medical collections tradeline is $366 (with an average of $1,000). Medical unpaid collections tradelines are even smaller with a median of $207 and average of $579.
Source: Consumer Credit Report: A Study of Medical and Non-Medical Debt, CFPB, December 2014.
Businesses nationwide placed $150 billion worth of debt with collection agencies (in 2010). Agencies were able to collect about $40 billion of that total.
There are 4,100 debt collection agencies in the United States, employing nearly 450,000 people, and the industry expects to grow by as much as 26 percent over the next three years.
The industry averages about 20 percent recovery on delinquent debt. Several decades ago, it averaged 30 percent.
Source: Harry Strausser III, president of the Mid-Atlantic Collectors Association, 9/21/2011, in the Huffington Post
Debt Collection Industry is Booming
- The Bureau of Labor Statistics (BLS) anticipates that between now and 2106, the debt collection industry will experience a 23% rate of growth, a much faster rate than the average for all industries. According to the BLS, much of the increased demand for debt collection services will come from doctors’ offices, hospitals and government agencies, including the IRS.
- While the value of many publicly-traded companies is falling in today’s slowed economy, publicly-traded debt collection agencies are becoming great investments. At the same time, the number of debt collection companies is growing, in part because more and more consumers are falling behind on their debts and also because new technology is making it profitable for even very small home-based entrepreneurs to get into the debt collection business. As a result, according to Smart Money Magazine, the number of debt collectors has doubled since the early 1990s and the revenue generated by debt collection agencies has tripled to $15 billion. Last year agencies recovered nearly $40 billion in debt, or $133 for every man, woman and child in the U.S. A PriceWaterhouseCoopers survey provides additional evidence that debt collection agencies are thriving. The study revealed that in 2005 alone, U.S. businesses sent a whopping $141 billion in delinquent consumer debt to collections and that debt collection agencies collected $51 billion in past due debt, keeping close to 25% of that as profit.
- Here is a dramatic example that illustrates just how much money there is to be made from collecting consumer debts. According to the Boston Globe, Norfolk, Virginia-based Portfolio Recovery Associates (PRA), purchased 658 debt portfolios with a face value of $16.4 billion over the last decade. The company paid just $415.4 million for the bad debt, or about 2.5 cents for each dollar of that debt. It then collected an average of 7.5 cents per dollar on the past due debt. Initially the profits realized by PRA were relatively small, but as the debt collection business grew and a growing number of creditors sold their debts to companies like PRA, the company began to thrive, turning a profit of $36.8 million in 2005. Those pennies added up!
- In a search for even higher profits, some US debt collection companies have begun farming out their collection calls to companies located in India. The problem with this development for consumers is that the India-based debt collectors may not always speak clear English or understand what consumers are telling them about their debts nor may they the debt collectors be completely up-to-speed when it comes to the details of the federal Fair Debt Collection Practices Act or any applicable state laws that apply to debt collection.
- As a result of changes in the debt collection industry, many municipalities are now finding it cost-effective to turn over consumers’ past due parking and library fines to collection agencies. Also, Mom and Pop businesses now find it easier to locate debt collection agencies they can afford to work with.
- Debt collection lawsuits are on the rise. According to WebRecon, a record breaking 12,000 debt collection lawsuits are expected to be filed in 2010, up from 9.300 in 2009 and 4.400 in 2007.
Consumer Advocates Are Calling For Debt Collection Reform
Consumer advocates are urging that the federal Fair Debt Collection Practices Act be amended in order to provide consumers with more protections when they are contacted by debt collectors. Among other things for example, they are asking that the law require debt collectors to provide consumers with the following information before they can begin trying to collect a debt:
- Proof that a consumer actually owes the money that a debt collector wants the consumer to pay
- The amount of the original debt
- A breakdown of all interest and fees associated with the debt
- The name of the original creditor
- When the original creditor sold the debt to the debt collector, assuming the debt collector purchased the debt
Consumers are also demanding that debt collectors be:
- Required to actually conduct an investigation when a consumer disputes a debt they are trying to collect
- Prohibited from reporting a collection account to the credit reporting agencies when a consumer disputes a debt that the debt collectors are trying to collect until the 30-day dispute period is up.
- Prohibited from reporting debts to credit reporting agencies if a debt collector can’t verify the debt.
Updated February 2009
Consumer Credit and Debt Statistics
According to the May 2009 report issued by the Joint Economic Committee of the U.S. Congress, entitled Vicious Cycle: How Unfair Credit Card Company Practices Are Squeezing Consumers and Undermining the Recovery, May 2009:
- "As household wealth has declined in the downturn, more American families are facing financial distress due to high debt burdens. In 2007, before the recession began, 14.7 percent of U.S. families had debt exceeding 40 percent of their income."
- "A growing share of consumers’ disposable income, which largely determines consumer spending, is being diverted to service credit card debt rather than to help economic recovery. As of March 2009, U.S. revolving consumer debt, made up almost entirely of credit card debt, was about $950 Billion. In the fourth quarter of 2008, 13.9 percent of consumer disposable income went to service this debt."
U.S. consumer bankruptcy filings totaled 106,255 nationwide during October, a 19.6 percent decrease from the 132,173 total consumer filings recorded in October 2010, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). The October consumer filings also represented a 2 percent decrease from the 108,517 filings in September. Chapter 13 filings constituted 31.5 percent of all consumer cases in October, a slight increase from September.
"The declining filings correlate to tightened consumer spending and the overall pull back in consumer credit associated with a stagnant economy," said ABI Executive Director Samuel J. Gerdano. "We expect total 2011 consumer filings to be less than 2010."
The 2009 Financial Literacy Survey conducted by the National Foundation for Credit Counseling indicates that:
- 26 percent of Americans said that they do not pay all of their bills on time. Among African-Americans, this number is 51 percent.
- Over the last 12 months, 15 percent of American adults were late paying one of their credit cards and
8 percent of them did not make a payment at all.
- More than 6 percent of American adults, or 13 million people, reported that their household maintained credit card balances of at least $10,000 from month to month. Six percent also indicated that they had debts in collection, were seriously considering bankruptcy, or had filed within the past three years.
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