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Study: One Third Of Americans Have Debt In Collections

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Sometimes debt isn’t so bad, and sometimes it is, but one thing is clear: 80% of Americans owe someone, somewhere, some money. It might be a mortgage or student loan, or a five-year-old fee that got forgotten about, but the vast majority of us have some outstanding debt. And worse: a third of the country may have debt collectors chasing after them for that cash.

The Urban Institute today released two studies, Debt In America and Delinquent Debt In America, looking at who owes what and where.

Consumer debt, the researchers found, is everywhere — but the distribution is far from even. The average amount of owed debt ranges from $30,000 or lower in some census tracts to $140,000 or higher in others. The two most indebted regions of the country, in general, are the Pacific coast (at $69,831) and the Northeast corridor, from D.C. to Boston (at $68,401).

The researchers note that it’s not surprising that residents of these areas have the highest total debt. Housing costs are highest in cities like San Francisco, New York, and D.C. and mortgages are — predictably — a big component of debt.

70% of the average total debt in the country comes from mortgages, the studies found. Among people with mortgages the average debt is $209,768, but for those without mortgages it’s $11,592. Non-mortgage debt is more evenly spread around the country, with a smaller regional variation.

In general, the study finds, high-debt areas are also high-income areas. If you make more money, you borrow more for your house or your car or your education, and your credit and income together will get you those loans. The correlation makes intuitive sense.

Likewise, there is a far more harmful correlation with the geography of delinquent debt. Debts that have gone to collections are concentrated in lower-income areas of the country, particularly the south and southeast.

However, although the south has the highest rates of accounts in collections, it is far from alone. Even in the area of the country with the lowest number of debts in arrears — New England — just over 25% of the population has at least one debt that has gone to collections. The highest is the West South Central area (Arkansas, Louisiana, Oklahoma, and Texas), with nearly 44% of consumers having a debt in collections.

In the hardest-hit state, Nevada, 47% have a debt in collections. Nevada was also one of the states that faced the worst fallout from the collapse of the housing market and economic crisis that began in 2008. When housing and employment fall apart, it’s going to be a lot harder to pay back your bills.

Nevadans aren’t alone, though. Overall, the studies found, just over 35% of Americans — a third of the country — have a debt that has gone to collections. That’s about 77 million people.

Not all these debts are particularly large. The studies found that the amount varies widely by person, “from less than $25 to more than $125,000.” The average is $5178, and covers everything from old gym memberships to medical debts. Past-due mortgages aren’t included.

Many consumers are not even aware they owe a debt that has gone to collections. Some only find out that they owe anything when they review their credit reports (which can have errors).

Negative debt reports don’t just affect consumers’ ability to borrow more in the future. A bad credit score can also make someone unable to get a job and have other long-lasting effects.

Both studies specifically looked at Americans with credit reports, and so those who are unbanked or otherwise do not participate in the traditional banking and lending system aren’t included. That’s about 9% of the country, or 22 million people, the Urban Institute estimates.

Of course, not all debts are inherently bad. Many of us will want to own a car or a home at some point and a reasonable loan with good terms, repaid on time, isn’t necessarily an evil. Though about 20% of Americans avoid even this, the studies found, and have no outstanding debts at all.

Debt In America (PDF) [Urban Institute]
Delinquent Debt In America (PDF) [Urban Institute]

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Ronald McDonald Won’t Sell Burgers At Your Kids’ School, But He’ll Talk About Bike Safety

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Is it possible to separate a world-famous brand mascot from the products that mascot has spent decades shilling for? Can you look at Joe Camel and not associate him with Camel cigarettes, or stare deep into the terrifying unblinking eyes of second-tier human-baseball Mr. Met and not immediately think of the NY Mets? McDonald’s apparently thinks so, telling consumer advocates that Ronald McDonald isn’t pushing Big Macs and McNuggets on kids when he visits schools to talk about bike safety and other non-greasy topics.

The folks at Campaign for Commercial Free Childhood were pleased earlier this summer to hear McDonald’s CEO Don Thompson tell shareholders that “we don’t put Ronald out in schools” and “in schools and our restaurants you never see Ronald McDonald,” as these statements seem to imply that the company is not using creepy clown Ronald McDonald to sell its food to kids.

But when the CCFC asked the chain about Thompson’s statements, McD’s VP of Corporate Relations clarified what the CEO actually meant:

To be clear, there is no new policy regarding Ronald McDonald. Mr. Thompson was correct in stating that “we don’t put Ronald out in schools.” Obviously, only schools or affiliated groups manage their invited guests. When invited to schools by administrations, or affiliated organizations such as parent-teacher groups, Ronald McDonald presents programs about bike safety, literacy or other children’s well-being matters.

So McDonald’s doesn’t put Ronald in schools, but it won’t say no if a school invites him to talk about a topic that has absolutely nothing to do with the very thing that children around the world associate him with.

To some, that’s like inviting Peyton Manning to speak about the proper use of propane grills, or having Christina Aguilera come by to talk about finding a summer job. Regardless of the topic being presented, a good chunk of the audience is still thinking about the previously held unrelated association with the speaker.

Additionally, the use of Ronald to push things like literacy and safety can be seen as window-dressing to improve the company’s public image by associating its most iconic character with education.

It’s not unlike the accusations that McDonald’s is using its affiliation with the Ronald McDonald House charities as a cheap way to put a positive PR spin on the company, even though it often provides minimal support to these organizations.

The CCFC and dozens of other groups have written to Thompson, daring him to publicly company policy regarding Ronald McDonald’s in-school visits, and to clarify whether this policy applies to schools in other parts of the world, like Brazil, China, Australia, and The Netherlands, where the freakish clown has been talking to kiddies in schools.

The groups also want McDonald’s to explain why, if the company doesn’t put Ronald in schools, several local McD’s sites continue to advertise his availability for in-school appearances.

“If you are accurate that Ronald McDonald is never seen in schools, we would applaud McDonald’s decision to end the exploitative practice of using him to market to children in schools,” reads the letter. “If not, we urge you to change McDonald’s policies to be in line with your characterization of them.”

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July 29, 2014

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July 28, 2014

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Whee!
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1 public comment
WorldMaker
2 days ago
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Robot Philosophy!
Louisville, Kentucky

Tänzchen, gif’d

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(via r0byn)

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