Jacksonville has a debt problem.
Not the kind being debated between City Council members during budget season.
It’s more personal. The kind that affects households daily. The type that makes a tough situation tougher as bills accumulate, go unpaid and ultimately end up in collections.
According to a recent Urban Institute study, Jacksonville is among the worst in the U.S. when it comes to debt in collections. The national rate is 35 percent of people with credit files.
Jacksonville’s rate? 45 percent, good for fifth worst in the country.
“I think everyone I have talked to is shocked at the percentages,” said Jim Kowalski, Jacksonville Area Legal Aid executive director.
The nonprofit firm will use a toolkit released last week by a national consumer watchdog to help educate the public on the issues.
Kowalski said those who monitor such situations realized Jacksonville was “very high” based on the backlog of debt collection cases filed in the county court.
But 45 percent? “Shocked,” he said.
The July study, “Delinquent Debt in America,” said debt in collections signals financial distress. On average, the figure is $5,178. Jacksonville’s is $6,331.
It classifies delinquent debt as nonpayment of a bill — credit cards, medical or utility bills for example — that end up negatively affecting credit scores. Those hits can remain for up to seven years.
Legal Aid’s consumer unit has four full-time attorneys that often work on credit- card and foreclosure cases for low-income people.
Kowalski said one example of a credit card case could be someone’s debt being sold several times, but paid off by the borrower. Although paid, people still end up being sued again and can stay in collections for years.
The answer to the debt-collections problem, he said, isn’t necessarily more attorneys.
Educating consumers on financial counseling is key, Kowalski said, and can prevent cases from reaching the legal system.
Last week, the Consumer Financial Protection Bureau announced a nationwide effort to partner with national and local organizations for financial education for low- to moderate-income people.
Kowalski said Legal Aid will work with the group on the goal through an online kit it provided. The 278-page “Your Money, Your Goals” curriculum for case managers includes information about financial education and monetary literacy to help clients become “financially empowered.”
In addition, the Legal Aid will continue working with Florida’s Attorney General and other enforcement agencies to combat predatory schemes.
Money consumers spend on paying high-risk, high-interest loans is money that isn’t being spent in the local communities, Kowalski said. It often leaves the state.
As for some of the higher-risk actions, Kowalski said payday loans, “buy here, pay here” car lots and cash schemes advertised on TV often can lead to credit problems. Those programs often appeal to the working poor that often don’t have access to traditional credit.
There are efforts by nonprofits for earlier credit education, but more is needed.
“We’ve got to start in the schools,” Kowalski said. “The more education we do there, the fewer lawyers we’d need.”