Debt Collection Statistics Released: Common Reasons for Debts to Go into Collection

A recent study concluded that one out of every three adult Americans has at least one debt that has been turned over for collection.  However, Georgia had one of the highest rates, with 40% of its adult residents having at least one collection account.  Other blogs on this site have discussed how to handle collection agencies, but this one will seek to explain how that high a percentage of the adult populace can be facing at least one debt that has been turned over for collection.

1)      Identity theft – while not one of the primary reasons for a collection account, identity theft is becoming much more common.  And identity theft can run the gamut from sophisticated hackers who hijack and sell personal electronic data, to a family member who uses a child’s name and social security number to obtain utility services.  Because the individual is unaware of the existence of the debt, they are unable to prevent it from going into default and being turned over for collection.  It is usually not discovered until the consumer applies for a loan or lease.

2)      Mismanagement of services – probably one of the more common reasons, especially with respect to utility, phone, cable, and internet services.  Because of the small amounts of these types of debts, they are usually turned over fairly quickly to a collection agency.

3)      Medical bills – especially when they are unexpected or for emergencies.  While some health care providers will offer payment plans, others will turn the debt over to medical collection agencies if they cannot be paid in full.

4)      Consumer disputes – another reason for a collection account is that the consumer has a legitimate dispute with the original creditor, which has not (or cannot) be resolved.  A common example would be an individual who cancelled a gym membership, but the creditor/collection agency insists that the written cancellation was never received. If the collection agency and credit reporting bureau are notified of the dispute, they are obligated to investigate it and take appropriate action if the consumer is correct.

5)      Insolvency – the consumer simply does not have the ability to pay the debt, either because of lack of income, lack of assets, or both.

6)      Apathy – the consumer may have the ability to satisfy the debt, but is unwilling to do so, usually because they are not concerned about collection activity and the consequences on their credit.

So in conclusion, while the percentage may be high, it is by no ways an indication that carelessness and recklessness are prevalent among Georgians.  There are plenty of reasons while even the most conscientious and responsible Georgia consumers could find themselves among the 40% of those who have at least one account in collection.