Paying off debt is stressing out New Yorkers
John Byrne/New York Post
3 September 2016
Paying off personal debt is now the leading cause of financial stress in New York, according to a new GOBankingRates.com survey.
And consumer advocates say some of the blame must belong to “loan shark” credit card companies — and to the jackboot tactics employed by bankers when borrowers fall behind.
They call it “legally sanctioned daylight bank robbery.”
Banks are flooding New York consumers with more credit cards, student loans and auto financing — all of which have no regulatory restrictions, as opposed to bank mortgages — just as more consumers are in arrears and personal debt surges, experts tell The Post.
“I have personally spoken to thousands and thousands of New York City residents alone who are dealing with debt collection problems,” said Susan Shin, legal director at the New Economy Project, an advocacy group in New York that operates a hotline for troubled debtors.
“We’ve gotten calls from a lot of people who are experiencing harassment from debt collectors,” Shin said, noting how new rules have helped to reduce the massive volume of “threatening” lawsuits to debtors. But still, “the sheer numbers today can be very distressing,” she added.
The Empire State is now among the states with the highest percent of credit card balances at least 90 days late.
The GOBankingRates study concluded that paying off debt was the No. 1 cause of financial stress for individuals in New York, where the overall debt balance per person hovers at around $50,000 (a sum that includes mortgages and student and other loans).
“Given that the cost of living is so high in New York, it’s understandable that finding room in a household budget to pay down debt is a source of stress,” said Cameron Huddleston, a personal finance expert at GOBankingRates, a personal finance website.
Others have a more sinister explanation. Shin said some credit card companies are able to legally flout New York’s usury laws designed to cap interest rates.
“It’s a felony if a card company charges above 25 percent interest in New York,” she said. “But a lot of card companies are able to get around this if they are domiciled outside the state — interest rates as high as 29.99 percent are routine here now on some cards, rising to 36 percent if the card holder is falling behind.”
And while personal debt cuts across all income categories, some of the worst cases are being reported from neighborhoods with high concentrations of low-wage workers and unemployment.
For instance, more than 1 in 5 consumers in the Bronx are pummeled by some kind of consumer distress, according to the Federal Reserve Bank of New York. That borough leads all other New York City boroughs in high delinquency rates for mortgages, student loans, auto loans and credit cards.
“We see a lot of sad cases, from people who have been evicted from a rental property to others who have had their home foreclosed,” said Argelis Sanchez, operations manager in New York at debt counselor GreenPath Financial Wellness, a nonprofit mostly serving consumers with low to moderate incomes.
“We also see a lot of cases of people who have trouble with their student loans — coming out of college into a job market with stagnant salaries, and with $40,000 in loans, is tough,” Sanchez said.