The rules and practices around debt in the United States have received a lot of attention lately. The biggest stories have come out of the federal government, including new rules for debt collection from the Consumer Financial Protection Bureau.
State rules make up a large portion of the regulations surrounding debt, however, and influence what consumer debt in each state looks like, and how creditors act to collect on unpaid debts.
Jurispect has examined debt collection statistics across the 50 states[1][2] to determine which states have the highest percentage of their population with debt in collections, the average amount of collections debt, and the states with the highest overall amount of collections debt. In Part 2, we will analyze how debt collection laws and regulations in the five states with the highest amounts of debt in collection have influenced the characteristics of debt collections in those states.
This analysis focuses solely on non-mortgage consumer debts; we will take a look at foreclosure rules and regulations in future posts.
Nationwide Trends for Past-Due and Collections Debt
Before diving into debt collections, we should first examine the percentage of populations in each state that have overdue debt. Not every overdue debt does into the collections process, and rules governing debt collection can affect just how many overdue debts become collections debts.
Fig. 1: Percentage of Population with Past-Due Debt by State
As you can see, states in the Southeast tend to have the highest percentages of their populations with past-due debts.
Since not all past-due debts go into the collections process, however, we should also look at what percentage of the populations in each state have debt in collections.
Fig. 2: Percentage of Population with Collections Debt by State
Not much changes in terms of general trends between the two graphs. A few states improve relative to other states, but for the most part, the Southeast has the highest percentages of people with debt in collections, just as the region had the highest percentages of people with past-due debt to begin with.
Looking at the average amount of collections debt in each state reveals an interesting shift, however.
Fig. 3: Average Amount of Collections Debt by State
This graph shows that, while states in the Southeast have higher percentages of their populations in debt collections, those states (with a few exceptions), have less debt per debtor in the collections process. States in the West and Midwest, however, have much higher average amounts of debts in collection. This finding suggests that some economic or regulatory factor could have resulted in those states could have contributed to higher amounts of collections debt.
In deciding which states’ laws and regulations to examine first, however, we determined that the total amount of collections debt should select the first states to analyze since higher total amounts will require more debt collectors, and (in theory) more refined rules governing their behavior.
Fig. 4: Total Collections Debt per State
This graph shows that a few states immediately stand out in terms of their overall collections debt: Texas, California, Florida, New York, and Georgia have the five highest amounts of debt in collections in the United States. These states also have five of the highest populations in the US, which definitely contributes to their high amounts of collections debt.
Comparison of Statistics for the Top Five States
To wrap up this look at debt collections statistics, we next examined the populations of each state and their overall amount of debt in collections against the average amount of collections debt per person and the percentage of people in each state with debt in collections.
Fig. 5: Total Collections Debt, Population, and Average Amount
Fig. 6: Total Collections Debt, Population, and Percent in Collections
These graphs show that Texas, while having a smaller population and a lower average amount of collections debt than California, has a much higher percentage of its population with debt in collections. That results in its place at the top of the list in terms of total debt in collections.
California sits somewhere in the middle in terms of collections percentage and average collections amount, but its large population gives it the number two spot.
Florida has the highest average amount of collections debt in the top five, and a pretty high percentage of debtors in collection as well. Even though its population is roughly the same as New York’s, those two factors combine to give it a total amount of collections debt almost two billion dollars higher than New York.
New York itself scores reasonably well in terms of average collections debt and population percentage, but still makes the list because of its high population.
Georgia just squeaks onto the list because of the high percentage of its population with debt in collections. It has the smallest population and the lowest average amount of collections debt, but the high percentage earns it the final spot on the top five.
Stay Tuned…
How have the laws and regulations in these states affected the percentages and amounts just discussed? Check back for Part 2 of this series, where we will break down the laws in each state and connect them to the statistics presented here.
[1] The consumer debt information in this article comes from TransUnion 2013 credit union data, via the Urban Institute. The data does not include US adults with no credit files, which results in an underrepresentation of low-income indviduals since adults without a credit file have a higher likelihood of being financially disadvataged.
[2] The population data used in this article comes from the United States Census population estimates for 2013.
