January 9, 2020 (Sacramento, CA):  For most of us there is no shortage of reasons to make a list of new year’s resolutions. New diets and exercise routines usually top the list. Making better choices about how we spend and save money are close seconds. But few people are willing to make resolutions about how they handle debt. It’s not a fun topic and it usually reminds us of unfortunate events, emergency room visits, surprise expenses or a few bad choices made along the way about how we spend our money.


If you have a mounting pile of past due bills, remember you are not alone.  Just google the phrase, “consumer delinquency rates” and you will see consumer delinquency rates remain at or slightly above pre 2008 Great Recession rates. This means consumer debt in the United States is once again growing to worrisome levels. Ben Mohr, senior research analyst of fixed income at investment consultant Marquette Associates, calculated that,


“Total U.S. consumer debt hit $14 trillion in the first quarter of 2019, surpassing the roughly $13 trillion of leverage accumulated in credit cards, auto loans and mortgages and other debt back in 2008, when those souring loans and securities pegged to them helped to send global markets into a tailspin.”


To figure out if you are contributing to this staggering figure on consumer debt, take this short quiz.


Question #1 – Are you unable to pay off a credit card in full in 60 days or less?


Question #2 – Are your creditors adding late charges to your bills?


Question #3 – Are you paying more than $100 per month in interest on credit card debt?


Question #4 – Have you missed or made a late payment on your rent, mortgage or car loan in the past three months?


Question #5 – Have you received a collection notice or a call from a collector in the past 30 days and failed to respond, pay in full or set up a payment arrangement?

If the answer to anyone of these questions is yes; you may want to consider making a few new year’s resolutions that will prevent your creditors from sending your accounts to a collection agency and protect your financial health.


Resolution #1Pay off credit card debt

Ideally, consumers should pay off outstanding credit card debt in full every month on or before the due date. Most credit card debt comes at a high price. Interest rates can range from 15% to 28% making it more and more difficult to bring your balance to zero.


Resolution #2 – Stop the late charge cycle

Every so often, even the most diligent bill payer can miss a payment. But if you are routinely failing to pay your bills on time, your creditors will add late fees, penalties and sometimes interest to the outstanding balance due. If this is happening to you, it is a sign you are living beyond your means.


To stop the late charge cycle, make sure you mail or make your online payments with ample time to process so the payment is received by the creditor on the due date. If your bill is due on February 15, you should mail your payment no later than February 12 and schedule your online payment at least 24 hours in advance of the due date.



Resolution #3 – Make timely payments to avoid interest

Credit cards can be a wonderful luxury. They can also be a path to financial ruin. When we use a credit card, we are basically borrowing money to help us buy a good or service. When we fail to repay the company within 30 days, this means we probably could not afford to buy the goods or the service in the first place. The company will charge an interest rate for the use of the money. This means the price of the good or the service increases by the amount of interest accruing on the unpaid amount.


Resolution #4 – Make your rent, mortgage and car loan payments on time

Missing, or even making a late payment, on rent, mortgage or car loan is a telltale sign you are struggling financially. A late payment on rent can trigger late payment charges and missing a rent payment entirely can trigger eviction proceedings.


Some mortgage loan agreements permit the holder of the mortgage to assess penalties on late payments and initiate foreclosure proceedings if you miss a series of mortgage payments.


Car loans are secured by the vehicle. This means missed car loan payments entitle the holder of the car loan to repossess your vehicle and charge you the difference between the value of the car at the time of repossession and the amount due on the remaining balance of the car loan.


In each of these examples, failure to pay on time will negatively impact your credit rating and your ability to rent or borrow money in the future.


Resolution #5 – Respond to Debt Collectors

The only thing worse than being contacted by a debt collector is not responding to them. This is not because the debt collector will treat you poorly or be unreasonable. Rather it is because the debt collector has been hired by the creditor to whom you owe money to collect payment. If you do not respond to their letters or their calls, they will not go away. Instead, they will need to exercise other remedies to prompt repayment of the debt in order to perform their job.


If you have received a notice or a call from a collector in the past 30 days and failed to respond, pick up the phone and return the collector’s call as soon as possible. Explain your situation. In most cases, the collector can settle the debt or authorize a payment arrangement over time. Even $50 per month can hold the creditor at bay and give you time to get back on your feet.

If you think the collection notice was sent in error or contains inaccurate information about the balance due; write the collector and request verification of the debt within 30 days of your receipt of the notice. The debt collector must discontinue collection activity until they provide you with the evidence you owe the debt.


If the debt is truly not yours, send the collector a cease and desist letter informing the collector the debt is not yours, you refuse to pay the debt and the collector should cease all further collection activity. Understand this should be a letter of last resort. If you are mistaken and the debt is yours, the creditor can send the account to a law firm and initiate a collection lawsuit against you.


Taking steps today to prevent a financial crisis in the future is a great reason to make debt management number one on your list of new year’s resolutions. For additional resources about managing debt, please visit the Receivables Management Association International’s consumer web site at http://financialliteracy.rocks/ and the Consumer Financial Protection Bureau’s consumer web site at https://www.consumerfinance.gov/practitioner-resources/library-resources/online-resources/.




About Receivables Management Association International:


Receivables Management Association International (RMAI) is a nonprofit trade association that represents more than 500 companies that purchase or support the purchase of performing and nonperforming receivables on the secondary market. The Receivables Management Certification Program and Code of Ethics set the global standard within the receivables industry due to its rigorous uniform industry standards of best practice which focuses on the protection of the consumer.


More information about RMAI is available at www.rmaintl.org.