Consumers and the Debt Collection Business |

This article provides a brief overview of the state of the debt collection business. Why is this important to doctors and medical billing and collection practices? Because one of the main reasons this business is thriving is because of the medical debt incurred by consumers today.Medical Debt and BankruptciesAccording to: Medical Bankruptcy in the United States, 2007: Results of a National Study, by David U. Himmelstein, et. al., American Journal of Medicine, 2009:• 62.1% of all bankruptcies are related to a medical issue.• Bankruptcies that could be attributed to medical issues increased by 50% between 2001 and 2007.• 75% of medical debtors had health insurance.There is opportunity for savvy physician practices and medical billing firms to collect what is owed them.Booming Debt Collection IndustryCurrent data predicts a debt collection industry growth of 23% between now and 2016. Leading the way for these services will be doctor’s offices and hospitals.New technology is making it profitable for even small scale entrepreneurs to get into the debt collection industry, increasing the number of companies in the business. Debt collection agencies have recovered almost $40 billion in debt or about $133 for every person in the US. In fact, in 2005, US businesses forwarded $141 billion in delinquent consumer debt to collection. The agencies collected $51 billion of that debt keeping a profit of about 25%.To show how much money can be made from collecting consumer debts, consider this example. A Virginia based company, Portfolio Recovery Associates (PRA), bought debt worth $16.4 million in face value. The company paid $415.4 million for that debt which came out to about 2.5 cents on the dollar. PRA collected an average of 7.5 cents per debt dollar eventually posting a profit of $36.8 million in 2005.Because of this profit potential, small mom and pop business are finding it more likely that a collection agency will help them. Municipalities are also using collection agencies to help collect past due parking tickets and library fines.Consumer Debt and BankruptcyIn the beginning of 2009, US revolving consumer debt was about $950 billion, requiring consumers to spend 13.9% of their disposable income to service it.The number of bankruptcy cases commenced, terminated and pending has more than doubled over the last five years. Here are the statistics as of December for the prior 12 months over the last five years:2010- 1,593,0812009- 1,473,6752008- 1,117,6412007- 850,9122006- 617,660