Consumer Debt

Consumer debt in this country is at an all time high. Between the years 1986 and 2006, the total consumer debt grew by over 300%, from $607 billion to $2.3 trillion. During the same time period, revolving consumer credit debt -- mostly in the form of credit card debt -- increased over 6 times, from $130 billion to $835 billion.1

There are many reasons for this. Consumer access to credit has grown. There has been a steady increase of mailed, unsolicited credit card applications, an increase in television and print ads which depict credit cards as a simple way to at least look wealthy and content, and an increase in internet advertisements that flash on the screen to entice the consumer to apply for more credit.2

In addition to the credit card advertisements, the consumer is constantly bombarded with ads in television and the print media that show happy people who apparently became that way because they bought certain products. The consumer is told over and over again: “You will be happy if you spend more money. The more you spend, the happier you will be.” Too often this myth goes unchallenged.

There is a definite gap between the availability of credit and the level of financial literacy among consumers. That is to say, while access to credit has increased, the level of financial literacy in our country has stayed the same or even decreased. This means that most consumers do not fully understand what they are signing up for when they apply for credit cards.

In an effort to offset this, the Truth in Lending Act was passed in 2000, which requires lenders to inform borrowers of the terms of the credit they are seeking. Unfortunately, most of the information is in fine print and written in “legalese.” Also, since most consumers are not familiar with the terminology, many get discouraged quickly and stop even trying to read the terms and conditions.

All of this has led to the largest consumer debt in our history.

At Debt Counseling Corporation, it is our job, our mission, to help change this. As a Credit Counselor here, you can and will make an important difference in people’s lives.

1 Federal Reserve Statistical Release G.19 Historical Data, available at http://www.federalreserve.gov/releases/G19/hist/cc_hist_mt.html. Statistics quoted from this site as of 10/09/06.

2 Susan Block-Lieb, Karen Gross and Richard L. Weiner, Lessons from the Trenches: Debtor Education in Theory and Practice, Fordham Journal of Corporate & Financial Law, Volume VII, No. 2, 2002.

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