Making Justice RealThe Official Blog of the Legal Aid Society of the District of Columbia
35% of Americans Facing Debt Collection Even as Economy Improves
Earlier this week, guests on The Diane Rehm Show explored a recent study from the Urban Institute revealing that 35% of Americans have debts and unpaid bills that have been sent to debt collection. Margot Saunders of the National Consumer Law Center speculated that this staggering figure may be due in part to the creation of financial products offered to consumers with the expectation of default, noting that the credit industry actually generates profits from consumers’ default.
Adding insult to injury, many of these bad debts are sold to companies in the business of purchasing debt for “pennies on the dollar”, explained Peter Holland, visiting assistant professor at University of Maryland School of Law. When creditors and debt buyers use the court system to try to collect, many of those bad debts end up getting converted into judgments. In our courts, where an estimated 95% of consumer defendants are unrepresented, consumers are often unable to challenge the unfair practices of those in the credit industry who are profiting at the expense of low-income Americans.