Three Key Findings on Hispanics with Debt in Collection: Results from CFPB’s Recent Survey
Debt collection in the Latino community is a critical consumer protection issue for one of the nation’s largest and fastest-growing communities.
Latino families need access to affordable credit but have been historically excluded or discriminated from safe financial products. A result of this persistent economic injustice is that Latinos and other consumers who have been outside of the financial mainstream are vulnerable to financial shock, such as with health-related expenses or a job loss. Having been sidelined from affordable products, Latinos have little choice but to turn to more expensive credit to pay for their expenses. To illustrate, 39% of Hispanics households used an alternative financial product (such as a payday loan) in 2015, compared to just 17% of White households.
At the same time, a staggering racial wealth gap impacts Latinos’ ability to pay their bills and secure long-term economic stability. Nationally, Latino household wealth is only 8 cents on the dollar compared to White households. Such inequality in the access to affordable credit and opportunities to build wealth leads Latinos to accumulate debt at higher rates.
Despite having these insights into Latino debt accumulation, not much was known about Hispanic experiences in the debt collection process until the Consumer Financial Protection Bureau released findings from their Survey of Consumers Views on Debt last month. The survey results not only provide comprehensive, nationally representative data on consumers’ debt collection experiences, but also detail differences in collection experiences by consumer’s demographic characteristics.
As detailed in the consumer agency’s report, the following are three key findings on Latinos’ debt collection experiences:
About two-in-five (39 percent) Latino consumers with a credit record indicated that they had been contacted by at least one debt collector. Hispanic consumers were more likely than White consumers to report having been contacted about a collection (39 percent vs. 29 percent).
Most Hispanic consumers (54%) contacted about debt reported having been contacted about credit card debt, specifically. Latino consumers were also more likely than White consumers (44%) to report having been contacted about credit card debt.
About half of Latinos who reported an issue in the debt collection process disputed the debt in collection. Nearly half (48%) of Latinos contacted about a debt cited an issue (such as whether the debt was theirs or the amount owed is correct) and, of these consumers, 23% disputed their debt in collection. Among White consumers, 52% cited an issue with a debt and 28% disputed their debt in collection.
The CFPB has the power to help ameliorate the financial distress of millions of American consumers, including millions of Hispanics. In the five years that the consumer agency has been collecting complaints, the Bureau has received about a quarter of a million complaints regarding debt collection practices, more than any other financial service or product. Promulgating strong debt collection regulations will be important to ensure that Latinos, and all consumers, are better served by the debt collection industry.
EDITOR’S NOTE: This content originally appeared on NCLR Blog.