Consumer Debt

A Consumer Debt is an outstanding debt held by a consumer for the purchase of consumer goods.

• Context:
  • It can be composed of Secured Consumer Debt (such as mortgage debt) and Unsecured Consumer Debt (such as credit card debt).
  • It can range from being a Productive Consumer Debt to being a Unproductive Consumer Debt.
  • It can range from being Nondelinquent Consumer Debt to being a Delinquent Consumer Debt (Ratclifee, McKernan et al., 2014).
  • It can be used to calculate a Consumer Leverage Ratio.
  • It can be negatively correlated to Employee Wage.
  • It can lead to Bankruptcy.
  • …
• Example(s):
  • a Credit Card Debt.
  • a Personal Loan.
  • a Home Mortgage.
  • …
• Counter-Example(s):
  • Total Household Debt, which includes Mortgage Debt.
  • Government Debt.
  • Corporate Debt.
• See: Consumer Debt Trends.

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References

2014

• (Ratclifee, McKernan et al., 2014) ⇒ Caroline Ratcliffe, Signe-Mary McKernan, Brett Theodos, Emma Kalish, John Chaleking, Pefinga Guo, and Christoper Trepel. (2014). “Delinquent Debt in America.” In: Urban Institute
  • ABSTRACT: Roughly 77 million Americans, or 35 percent of adults with a credit file, have a report of debt in collections. These adults owe an average of $5,178 (median $1,349). Debt in collections involves a nonmortgage bill — such as a credit card balance, medical or utility bill — that is more than 180 days past due and has been placed in collections. 5.3 percent of people with a credit file have a report of past due debt, indicating they are between 30 and 180 days late on a nonmortgage payment. Both debt in collections and debt past due are concentrated in the South.

2012

• http://en.wikipedia.org/wiki/Consumer_debt
  • QUOTE: In economics, consumer debt is outstanding debt of consumers, as opposed to businesses or governments. In macroeconomic terms, it is debt which is used to fund consumption rather than investment. It includes debts incurred on purchase of goods that are consumable and/or do not appreciate.

    In recent years, an alternative analysis might view consumer debt as a way to increase domestic production, on the grounds that if credit is easily available, the increased demand for consumer goods should cause an increase of overall domestic production. The permanent income hypothesis suggests that consumers take debt to smooth consumption throughout their lives, borrowing to finance expenditures (particularly housing and schooling) earlier in their lives and paying down debt during higher-earning periods.

    Both domestic and international economists have supported a recent upsurge in South Korean consumer debt, which has helped fuel economic expansion. On the other hand, credit card debt is almost unknown just across the sea in Japan and China, because of long-standing cultural taboos against personal debt. Theoretical underpinnings aside, personal debt is on the rise, particularly in the United States and the United Kingdom. However according to the US Federal Reserve the US household debt service ratio is at the lowest level since its peak in the Fall of 2007.

2009

• (Ruben, 2009) ⇒ Matthew Ruben. (2009). “Forgive Us Our Trespasses? The Rise of Consumer Debt in Modern America." Proquest Discovery Guide.
  • QUOTE: Mortgages traditionally represent the largest proportion of consumer debt. An oft-repeated statistic holds that the average American now owes more than he or she makes annually. Factoring in mortgages, total household debt stood at $13.9 trillion in 2008. (Federal Reserve Board)

1993

• (Lea et al., 1993) ⇒ Stephen E. G. Lea, Paul Webley, and R. Mark Levine. (1993). “The Economic Psychology of Consumer Debt.” In: Journal of Economic Psychology, 14(1). doi:10.1016/0167-4870(93)90041-I
  • ABSTRACT: Questionnaires were distributed to groups of people with either no debt, mild debt, or serious debt to a public utility company. Serious debtors were found to differ from the Non-debtor group on economic, sociological, and psychological variables: economic resources, economic need, social support, attitude forming variables and attitudes all made independent contributions to the prediction of group membership and the extent of self-reported debt. Mild debtors were generally intermediate between Non-debtors and Serious debtors. Debt was strongly correlated with economic factors. Many results indicated that debt is a consequence of adverse family economic conditions: Serious debtors were of lower socioeconomic class, had lower incomes, were less likely to own their own homes (and much less likely to own them outright), had more children and were more likely to be single parents. They were also younger. Social and psychological factors were also found to be related to debt: Serious debtors were less likely to claim Nonconformist, Agnostic or Atheist religious views, and they had slightly more permissive attitudes towards debt, although no group showed a general tendency to approval of debt. They knew more other people who were in debt, and they were less likely to think that their friends or relations would disapprove if they knew they were in debt. Multivariate analyses showed that economic, social and psychological variables all had independent correlation with debt. These results suggest that debt is stronly influenced by adverse economic circumstances, but that social and psychological factors are also important. The conditions for the development of a self-sustaining ‘culture of debt’ do exist.

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