According to the Federal Reserve Bank of New York, consumer debt rose to $12.73 trillion in the first quarter of 2017. It took nearly 10 years, but the United States has surpassed the previous $12.68 trillion worth of consumer debt that peaked in the third quarter of 2008.
Although mortgage market debts now account for 5% less of the total consumer debt than they did in 2008, this means that other types of debt have increased. In fact, according to a 2017 study conducted by the federal Consumer Financial Protection Bureau (CFPB), in 2016 alone, credit card debt increased by $46 billion (or 6.3%), student loan debt by $78 billion (6.3%), and auto debt by $93 billion (8.7%).
These numbers are astounding. We may have moved away from the Great Recession, but a decade later and American consumers are still in an overwhelming amount of debt.
Which, ultimately, means your business may be in debt too. That is, unless, you can collect on those delinquent accounts.
In a survey conducted by the CFPB, about 32% of consumers with a credit record said they had been contacted by at least one creditor or collector trying to recoup one or more debts in 2016. Furthermore, 72% reported that they had been contacted about two or more debts.
What kind of debts? Well, the CFPD found that past-due medical bills (LINK TO MEDICAL BILLING HOME PAGE), credit cards, and student loans were the among the most common debts that consumers were contacted about by collectors. So, how important is it that businesses in these industries hire collection agencies?
Industry statistics don’t lie. They only reinforce how much potential revenue can be collected.
A $500 bill is difficult to pay. According to a 2017 Kaiser Health Tracking Poll, 45% of Americans said that had difficulty paying an unexpected medical bill of $500. Of them, 19% said they wouldn’t be able to pay it at all, while 20% would have to pay it over time using a credit card.
Both insured and uninsured have difficult paying bills. A survey in 2016 by the Kaiser Family Foundation and New York Times found that 20% of Americans with health insurance had serious financial challenges when trying to pay off medical bills. Compare this to the 53% of uninsured patients who said the same. Furthermore, approximately one-third of all those with medical bills (insured and uninsured) were unable to pay for basic necessities like food, heat, or housing; and, 55% of those with insurance say they don’t have enough money to make ends meet or are just getting by.
They’ve been contacted. 59% of people surveyed by CFPD who had been contacted by a debt collector said it was for medical debt.
Student Loan Debt:
It’s the second largest type of consumer debt. Although housing debt continues to dominate the total share of consumer debt at 71.4%, student loan debt accounts for 10.6% of it, according to the Federal Reserve Bank of New York.
There’s more student loan debt than credit card debt. Student Loan Hero states that 44.2 million Americans collectively owe over $1.44 trillion in student loan debt. This equates to $620 billion more than the total U.S. credit card debt.
The amount graduates owe is on the rise. The amount the average graduate in 2016 owes in student loan debt is up 6% from the year before, according to Student Loan Hero. On average, students have racked up $37,172 in student loan debt by the time they graduate college. For borrowers aged 20-30 years old, the average monthly student loan payment is $351.
Credit Card Debt:
Consumers are piling other debts onto their credit card. As aforementioned, 20% of Americans who had difficulty paying an unexpected medical bill said that they had used a credit card to pay off the debt. Many consumers see credit cards as an easy fix to an unpaid bill. However, with the addition of interest, this debt can only be exasperated.
Lots of Americans have credit cards; lots are in debt. According to Student Loan Hero, 77% of adults in the U.S. (or 191.8 million people) are credit cardholders. However, the average cardholder is about $4,061 in credit card debt.
It’s not the largest type of debt, but it’s far from the smallest. Although 6% of the total share of consumer debt doesn’t sound like much, this equates to about $764 billion in credit card debt.
What This Means for Your Business:
Basically, all these numbers add up to the fact that Americans have an overwhelming amount of credit card, student loan, and medical debt. If your business is in any of these industries, chances are you have a large portion of invoices that will go unpaid.
Think you can collect on delinquent accounts yourself? Think again. You will exhaust countless hours and resources trying to collect on unpaid bills. Unless you want to be just as overwhelmed in attempting to collect that debt, then it’s better you hire a reputable and experienced collection agency do the work for you.
360Connect can help you find the right collection agency for your business. Just fill out a form, and we will match you with reputable agencies in your region. It’s that simple.