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Consumer Debt in Massachusetts

Massachusetts residents are some of the most fiscally responsible American citizens. They carry average amounts of credit card debt and student loan debt and above-average levels of mortgage debt, but they have among the highest incomes in the country, enabling them to repay their debts without declaring bankruptcy or losing their homes to foreclosure.

The ability to repay, combined with good payment habits, builds healthy credit histories. This has given Bay Staters the second-highest average credit score in the country.

The Massachusetts government also helps ease financial troubles for residents. Its laws aim to use federal laws as a foundation and add consumer rights. While the protections are ordinary, they do help to limit rates of consumer fraud and identity theft.

Consumer Debt in Massachusetts

Massachusetts residents have high levels of consumer debt, especially in the form of mortgages. But unlike many Americans, Bay Staters seem to live within their means and don’t take out more debt than they can pay off. So while residents carry typical amounts of credit card debt and student loan debt, as well as costly mortgages, there are very few bankruptcies and foreclosures in the state.

Credit Card Debt

Credit card debt in Massachusetts is on par with the rest of the country. From 2010 to 2011, the United States brought its average credit card debt down 17 percent, from about $7,800 to $6,474. In the same time period, Massachusetts residents’ credit card debt dropped a comparable 18 percent, from about $7,840 to $6,429. The following year, however, the state backtracked on a small part of that progress, with the average debt increasing slightly to $6,541.

But residents have the sixth-highest incomes in the country, with a median household income of $62,072. So while debtors in other states may struggle to make their monthly payments, Bay Staters are better off; their monthly payments may be comparable but will account for a smaller percentage of their paychecks.

Mortgage Debt

Massachusetts mortgage holders have the sixth-highest mortgage debt in the country, owing an average of $224,661 each. But this is far from bad news for Bay Staters.

Because of their high incomes, Massachusetts homeowners can generally afford their monthly mortgage payments. In fact, Massachusetts foreclosure rates are lower than average. In July 2012, 0.09 percent of Massachusetts homes entered into foreclosure, compared to 0.15 percent of homes nationwide.

Bay Staters also have the fifth-highest home values, with a median value of $334,100. While this reflects a 10 percent loss of value over the last several years, homes are still worth more than their mortgages. This shows that most residents’ mortgages are not underwater and that the homes are still a safe investment.

Student Loan Debt

Massachusetts residents who value education are in for a sizeable amount of debt. About 63 percent of the state’s 2010 graduates had student loans, and these individuals graduated with an average debt of $25,541. This was just above the national average of $25,250.

Since then, student loan amounts have only increased. A 2012 report stated that new graduates in Massachusetts had $29,037 in student debt. Nationwide, however, the average remained stable at $25,257.

Bankruptcy

Relatively few Massachusetts residents file for bankruptcy. In 2005, when bankruptcies peaked in the state and throughout the country, Massachusetts rates remained significantly below average.

The state still only had 26,308 personal bankruptcies, or just one personal bankruptcy filing for every 196 adults. That same year, one bankruptcy was filed for every 115 adults in the United States. This means the in-state rate was barely more than half the national rate.

After the 2005 peak, bankruptcy rates plummeted. There were only 8,000 bankruptcies in Massachusetts in 2006, a number so low that it hadn’t been seen since 1990. This was simply the result of the previous year’s influx; most of the people in financial trouble had already filed for bankruptcy in 2005.

Since then, bankruptcy numbers have risen but remain much lower than the national rate.

Credit Scores in Massachusetts

In early 2012, Massachusetts residents had an average FICO credit score of 680, on a scale of 300 to 850. This was second only to New Jersey, which came in at 681.

High scores are the norm throughout Massachusetts, and no area of the state was exceptionally lower. Boston, however, came in higher than the rest of the state, and most of the rest of the country. Of 143 U.S. cities, Boston had the seventh-highest credit score.

Consumer Fraud and Identity Theft

Massachusetts ranks right in the middle for both fraud and identity theft. For every 100,000 residents, there were 62 identity thefts in 2010, ranking Massachusetts 25th in the country. The state also ranked 25th in consumer fraud, with 289 fraud complaints per 100,000 residents.

These numbers appeared steady even in metropolitan areas. The Boston area, for example, experienced 62 identity thefts and 299 consumer fraud incidents per 100,000 people.

One potential reason for the low rates is state protections for consumers. State law says that if any company or individual keeps personal information on file, the entity must immediately report any security breach to the Massachusetts Attorney General’s Office. The organization or individual must also notify anyone whose information may have been compromised. This law allows residents to take preemptive measures to protect themselves against identity theft.

Massachusetts State Laws on Consumer Debt

The Massachusetts state government provides basic consumer rights to residents. Most of the state laws reiterate federal ones and add their own provisions in order to further consumer protections. The main laws protect residents from unfair debt collection practices, unfair trade practices, discrimination and excessive seizure of property.

Massachusetts Fair Debt Collection

Massachusetts has its own state version of the federal Fair Debt Collection Practices Act (FDCPA), which limits the actions of debt collectors. The state version prohibits certain unfair practices by both creditors and hired debt collectors, whereas the federal version only applies to debt collectors. Massachusetts’ law is also more specific in many respects, thereby extending residents’ rights.

Exempt Property

Under federal law, valuable property may be seized from a borrower and sold in order to pay down the borrower’s overdue debts. Federal law likewise limits the property that can be seized, exempting basic essentials such as clothing, furniture, appliances and tools of the trade, up to certain values.

The Massachusetts version of this federal law was updated in early 2011 to exempt even more property from seizure. It protects up to $500 worth of books, a certain amount of livestock, cemetery plots and an automobile.

Unfair Trade Practices

As with most states, Massachusetts has its own statewide version of the Federal Trade Commission Act. It prohibits unfair and deceptive acts and practices in the marketplace, as well as unfair methods of competition. The state law exists solely to strengthen and enforce the federal one.

Mortgage Discrimination

Massachusetts’ antidiscrimination law is very broad and extends to mortgage lenders and other entities involved in real estate transactions. These individuals or companies cannot discriminate based on characteristics such as age, handicap, nationality, race, religion, sex or sexual orientation.

Statute of Limitations

The Massachusetts statute of limitations is six years for any debt, regardless of whether it is a credit card debt, written contract or oral agreement. So, if more than six years have passed since a debt became due or since the debtor last made a payment, the lender no longer has the opportunity to take collection actions.

Credit Card Laws

Customers may not be charged more because they choose to pay with a credit card. However, sellers may opt to give customers a discount for paying in cash or by another means. Such a discount must be disclosed clearly and must be offered to all eligible customers.

Gift Certificate Laws

Gift certificates and store credits, which may be acquired when customers return items, cannot expire for at least seven years from when they are issued. Most gift cards also must be good for at least seven years after purchase. Gift cards can come with fees such as activation or transaction fees. These costs must be stated conspicuously.

Bill Fay

Author

Bill Fay

Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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