Consumer Debt in California

California’s economy is pricey and volatile, but residents are trying to make it more stable. Housing costs always will be a problem, but mortgage debt has dropped 17% in the last five years. Credit card debt is down 20% in the same time as residents get better at managing debt and dealing with credit problems.

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Unemployment & Foreclosure

California has come a long way since the Great Recession, when its unemployment rate was among the highest in the nation and thousands of foreclosed homes choked the state’s housing market.

The change is dramatic. The state jobless rate, which hit 12.2 percent in late 2010, has plummeted to 5.5 percent – not much greater than the state’s historic low of 4.7 percent set in 2000.  As people returned to work, the housing market stabilized and empty houses sold and were reoccupied.

The Golden State had the nation’s largest number of foreclosures in 2016, with nearly 50,000 filed during the first eight months of the year. But California is the nation’s most populous state, with nearly 37 million residents, so it sets records in many categories. When foreclosure filings are measured on a per capita basis, California ranks 30th among the states.

Foreclosures fell as property values rose and jobs returned, but for many Californians still trying to repair personal finances following a devastating national downturn, the need for debt-management programs and credit counseling remains acute. It is always important to remember that money problems can be ameliorated with help. Credit counseling agencies offer free help to learn more about managing and budgeting money.

What Californians do have going for them, however, are several statewide laws and consumer protections.  These laws not only expand upon federal protections but also tread where national laws don’t. California law, for example, outlines exactly when you can refuse to pay a credit card bill.

Credit Card Debt in California

Like most Americans, Californians rely heavily on credit cards and rack up substantial amounts of debt.

California borrowers averaged $5,196 in credit card debt during the first quarter of 2015, close to the national average of $5,143, according to TransUnion, the credit rating agency.

San Francisco residents fared even better, with each consumer carrying an average of $7,033 in credit card debt. This study showed that San Diego was on the opposite end of the spectrum as San Francisco. At an average of $4,673 each, San Diego residents ranked 10th in the country for the highest amount of credit card debt per capita.

By another measure, the average credit card debt in the United States was only $4,200 per person at the beginning of 2011. This measure took into account every individual rather than merely every consumer.

Consumer Debt in California

In addition to credit card debt, Californians predictably carry significant amounts of mortgage, student loan and auto loan debt.

Mortgage Debt

In the second quarter of 2016, the average amount Californians owed on their homes was $334,925, according to TransUnion. That was the highest state average in the nation, and 2 percent more than the average a year earlier. Nationally, mortgage debt averaged $192,749.

The good news for California homeowners is that real estate values have soared since the housing bubble burst at the outset of the Great Recession. In August 2016, the median price of an existing single-family detached house in the state was $526,580, up nearly $30,000 from a year earlier and more than double the value in February 2009, the nadir of the recession. Prices have nearly recovered to their all-time high set in 2007 of $526,530.

Student Loan Debt

As college costs continue to rise twice as fast as general inflation, each class graduates with more debt. While California is no exception to rising student loans, its students do tend to graduate with less debt than is typical across the country.

More than 70 percent of students nationwide, who graduated in 2016, had student loan debt that averaged $37,173. California students had thousands of dollars less debt. Students left college with an average of $28,950 in student loan debt and less than half of graduating seniors had education debt.

Compared to the rest of the country’s consumers, California graduates work to pay down their loans more slowly but also more responsibly over the years.

Toward the end of 2015, the average California consumer had outstanding student loan balances totaling $21,382. This was 20 percent higher than the $8,000 national average.

Despite higher amounts of student loan debt, Californians seemed more able to meet their monthly payments. More than 11 percent of student loans nationwide were delinquent, meaning the borrowers were at least 30 days late on payments. At the same time, only 10.4 of Californians’ student loans were delinquent.

Auto Loan Debt

Californians’ auto loans are more on par with the national average than their student loans.

In the second quarter of 2016, the average Californian had an auto loan balance of $18,324, 2.5 percent more than the average during the same quarter of 2015. The delinquency rate on loans in the state was 0.82 percent, a 11.9 percent year-over-year increase.

By contrast, the average car loan balance in the United States was $18,177 in Q2 2016 with a delinquency rate of 1.11 percent.


Bankruptcy filings have declined dramatically in California as the state economy improved following the recession. There were 80,391 filings in 2015, down from 251,396 personal bankruptcies in 2010. There were about 12 percent fewer filings during the first half of 2016 than during the same period a year earlier.

Bankruptcy filings closely track other economic indicators. When people lose jobs during a recession, bankruptcies increase. The recession that began in 2007 had a particularly severe impact, since people had taken advantage of easy credit prior to the downturn. When they lost their jobs, mortgage interest rates ballooned and the housing market tanked, many developed debt repayment problems that were impossible to solve without turning to the bankruptcy courts.

Bankruptcy around the country and in California peaked in 2005. For the country, it foreshadowed the looming financial crisis. And for California, this meant unprecedented numbers of bankruptcy in the following years.

The 2006 low translated to 37,107 personal bankruptcy filings in California that year. A number so low hadn’t been seen since 1980, when there were 39,452 filings.

California State Laws on Consumer Debt

California has a long-standing reputation of passing laws to further the rights and protections of its citizens. Consumer debt is no exception. California has numerous laws in effect to protect residents in matters pertaining to consumer debt. Some work in conjunction with federal laws or add to federal protections, while others are specific to the state.

California/Rosenthal Fair Debt Collection Practices Act

The California/Rosenthal Fair Debt Collection Practices Act provides all the same provisions as a certain federal law. As with the federal Fair Debt Collection Practices Act (FDCPA), California’s state version prohibits debt collectors from harassing or misleading a debtor.

However, federal law applies only to hired debt collectors and does not apply to the original creditors. California’s law applies to anyone attempting to collect a debt, thereby furthering consumer protection.

Statute of Limitations

California has a statute of limitations of four years for all debts except those made with oral contracts. For oral contracts, the statute of limitations is two years. This means that for unsecured common debts like credit card debt, lenders cannot attempt to collect debts that are more than four years past due.

The four-year statute of limitations is among the shortest in the country. Only six states have a shorter time period (three years), while some states have statutes of limitations as long as 15 years.

Refusing to Pay a Credit Card Bill

Federal and state laws work together to regulate when consumers in California have the right to refuse to pay a credit card bill. There are two situations in which consumers can exercise this right.

You can refuse to pay when there is a billing error on your credit card bill. This could be an unauthorized charge, goods or services that were not delivered in a timely manner or were not delivered at all, or goods or services that were misrepresented.

In the case of a billing error, you have 60 days to write a letter to your card issuer about the situation. The 60 days begin on the date of the first credit card statement on which the error appears. Upon receiving your letter, the card issuer may ask for further information or may request that you send the product back to the seller.

You may claim a billing error even if you have already paid the bill in full. In that case, you are eligible for a refund.

You also can refuse to pay when there are claims and defenses regarding a credit card bill. You may dispute a charge under “claims and defenses” if it is a billing error of more than $50.However a “claims and defenses” dispute has further requirements.

The additional requirements of a “claims and defenses” dispute are:

  • The seller must be located in California and within 100 miles of your home.
  • You must make a solid effort to obtain a refund before beginning the dispute.

Further, this type of contest is only valid for charges that have not yet been paid. For example, assume you buy a $300 item and have a further $100 of merchandise on the same credit card bill. Assume you pay off $150 of the total $400 bill. Only $250 is left to contest, rather than the original $300 cost of the item.

You have a full year to take advantage of claims and defenses rather than the 60 days allotted for normal billing errors.

Where California Laws Stop

California law does not limit the amount credit card issuers can charge for ATM transactions, cash advances, delinquencies, overages, stop payments and transactions. It also does not impose a mandatory grace period before interest begins to accrue.

This means that consumers should be extra cautious when they open new credit card accounts in California. Be sure to read all the fine print, and ask questions of the card issuer if you do not understand something.

Credit Scores in California

With an average credit score of 661.4, California’s creditworthness ranked in the top third of all states in 2015, according to the Experian National Score Index.

Experian is one of three large national agencies that monitor consumer credit. It measures individual creditworthiness on a scale of 300 to 850, and its 2015 rankings placed California 16th among the states. The national average score was 669.

Credit scores vary from city to city. The statistical area that includes Riverside in Southern California was the third lowest ranking metropolitan area in the country with an average score of 624. None of the state’s metro area were in the nation’s top 10.

Identity Theft in California

California’s annual identity thefts consistently outnumber those of any other state, though in 2014 seven other states surpass California in the per capita rate of such theft.

In 2014, there were 39,982 reported identity thefts in the state. California consistently ranked among the top 10 states for per capita identity during the decade beginning in 2005. Florida had the worst identity theft problem in 2014, followed by Washington and Oregon.

The state government keeps an Identity Theft Registry to protect victims of identity theft from further harm. The database keeps track of individuals who were victims of identity theft and were wrongly linked with a crime as a result.

Once a victim is on the list, he or she can permit others to verify the information. This is useful when a victim is asked to prove that he or she was not responsible for crimes committed in his or her name, such as during a job interview process.

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].


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