Abusive Debt Collection Practices Increase Financial Instability
Consumers depend on credit to build wealth, as credit is required to purchase assets such as a house or a car. However, accumulating too much debt can destabilize a family’s finances. Debt collection services can serve an important role: by minimizing losses and working with borrowers who are overly indebted, they help lenders manage risk and keep the cost of credit affordable. Millions of families are affected by debt collection each year. In 2014, approximately 77 million Americans had debt in collections, amounting to roughly one out of every three adults with a credit file, and the average debt amount was over $5000. Fair and effective debt collection practices and policies are necessary to support working families’ efforts to move up the economic ladder.
In this Federal Policy Brief, debt collection practices are explored with an eye toward how these practices can destabilize a household's financial footing.