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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In the 1960s, the Mamas and the Papas had a hit with California Dreamin’. Lately, however, the Golden State’s vibe is all about California shrinkin’.

After nearly a decade of stalled population growth, California reported an actual dip of more than 182,000 residents fleeing the state in 2020. Why has the Golden State lost its luster? Lots of reasons, the departed tell reporters, but the most significant: cost of living.

“Right now, it costs 1.5 times as much to live in California as it does in the rest of the United States,” Fresno City College economics instructor Aaron Pankratz told Fox 26 News.

With transportation, housing costs, utilities, and groceries leading the way, California has a staggering cost-of-living index. Automobile-mad California boasts the nation’s highest gas prices. In March, driven by buyers craving a dwelling with more space and an actual yard, the median price for a house in California hit an eye-popping $758,990 — 24% higher than a year earlier.

“The housing market is on steroids and it’s mind-blowing to see such rapid growth lately,” Sacramento appraiser Ryan Lundquist wrote in an April 13 blog post.

California trails only Hawaii in the median price of a home, but its cost of living is second to none, according to a 2020 study by U.S. News. The same cartload of groceries that rings up at $90 in Texas costs $117 in Cali. Getting around in next-door Nevada costs $93.30; in California, it’s $122.20.

And it’s not like everyone in California is either a movie star, a Silicon Valley billionaire, or a stupid-rich Gen Z social media influencer. It just seems that way on Instagram. Instead, California’s median household income ($80,440) ranks sixth in the U.S. But behind that healthy wage is a dream-killing truth: The average Californian cannot begin to afford the average California house.

Moreover, for all its wealth, 5.15 million Californians live in poverty, a rate of 13% — slightly higher than the national average (12%).

California and COVID-19

Unemployment soared to a record high 16.4% in the spring of 2020 as COVID-19 cases climbed and substantial portions of the California economy were locked down. The state shed 2.4 million jobs, nearly a third of them in the leisure-and-hospitality sector. For more than a year, iconic Disneyland was the quietest place on earth.

California was slower than other parts of the country to rebound, too; during the final quarter of 2020, when unemployment nationwide shrank to 6.7%, California was at 8.4%.

But with infections and hospitalizations waning and vaccinations spiking, the forecast is for an especially robust recovery. UCLA economists project a historic year of growth in 2021, followed by at least two more years of sustained growth.

“This is a very ‘good news’ forecast,” Leo Feler, senior economist of the forecasting group based at UCLA’s Anderson School of Management, told the Los Angeles Times. “We have finally turned the corner.”

One sign of trouble ahead: In March, state officials reported a gain of nearly 120,000 payroll jobs at the same time nearly 40,000 dropped out of the labor force, bringing the total of jobless who have quit looking for work since March 2020 to 265,700.

Always consumer-friendly, the California Legislature acted aggressively to stem the worst of the pandemic’s effects on regular folks, helping supplement federal relief with programs for:

  • Unemployment insurance
  • Eviction protection
  • Mortgage relief
  • Small business and employer relief
  • Food assistance
  • Credit score protections

However, it’s important to remember that government assistance rarely fosters a happy, healthy, sustainable financial existence. Credit counseling agencies offer free consultations to learn more about managing and budgeting money.

Meanwhile, what Californians do have going for them — what they’ve always had going for them — are a broad assortment of consumer protection laws and regulations. These state interventions not only expand upon federal protections, but also tread where national laws don’t. Unlike the feds, for instance, California law outlines exactly when you can refuse to pay a credit card bill.

Credit Card Debt in California

Californians like their credit cards. They really, really like them. According to a Lending Tree study in early 2021, Californians carry more credit cards (5.9) and more debt on those cards ($6,729) than the average American.

On the other hand, that same study shows Californians appear to be managing their credit card debt responsibly. Their average utilization rate (32.7%) is fifth lowest nationally; they rank in the bottom third for paying late; and those with at least one maxed-out card (4.4%) is No. 41.

Residents of Oxnard, San Diego, Los Angeles, San Francisco, Sacramento, San Jose, and Riverside carried more than the national average ($6,569) in credit card debt. Fresno, Bakersfield, and Stockton residents come in below the national average.

One fascinating turn of events during the pandemic is what became of credit card debt. Unlike during the Great Recession, when jobless people lived off credit cards and debt spiked, the Year of COVID saw credit card balances plummet nationwide by a record $82.9 billion.

Californians helped drive the trend. Remember Oxnard? According to credit reporting agency TransUnion, residents there were No. 1 in household credit card debt reduction in 2020, shaving an average of $1,270 from their balances.

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

Nationwide, mortgage debt surged 7% in 2020, to a record $10.3 trillion, according to credit reporting agency Experian. California’s average mortgage debt jumped $8,000 (2.2%), to $371,981, a distant second only to borrowers in the District of Columbia ($437,976), and outpacing Hawaii, Washington, and Colorado.

Keep in mind, however, that historically low interest rates led millions of Americans — and no small number of Californians — to refinance mortgages using a cash-out option. Balances might have gone up (maybe to pay down high-interest credit cards), but at below 3%, monthly payments almost certainly went down. Freddie Mac estimates San Franciscans who refinanced are saving $4,106 a year. In Los Angeles, the savings top $3,900; and in San Diego, it’s $3,624.

Student Loan Debt

Surging college costs have hit Californians hard, resulting in skyrocketing student loan debt. Once among the fortunate laggards — as recently as 2016, Californians owed about 7% less than the national average — now they’re among the most burdened of the burdened.

Experian reports the average student loan balance in 2020 for Californians at $41,282, a 9% year-over-year bump, putting them third in the U.S. behind only the District of Columbia and Georgia.

California offers a variety of options to attend college on a budget. Through the California College Promise Grant, low- income students can get an enrollment fee waiver to attend any of the state’s 116 community colleges. Eligible California students can claim up to $14,226 in state-sponsored grants.

Nonetheless, roughly four million Golden State students rely on federal and private student loans, accounting for 8.6% of all national student loan debt.

Here, again, the state government is on the side of consumers: In September 2020, the Legislature enacted the Student Borrower Bill of Rights, standardizing loan-servicer practices and how payments are applied.

A third of California student borrowers owe less than $10,000. But more than 8% owe more than $100,000; 2.8% owe more than $200,000.

Californians younger than 25 owe the least ($14,117); Californians 35-49 are not just the cohort deepest in student debt, at an average of $47,824, they owe nearly $4,800 more than the national average for their age group.

Like the rest of America’s student loan debtors, Californians have benefitted from more than a year’s forbearance though federal programs designed to lighten the load of the pandemic. Before those programs kicked in, Californians were as likely as student borrowers anywhere else in the country to be current (85.1%) or at least 90 days past due (9.7%).

Despite higher amounts of student loan debt, Californians seemed more able to meet their monthly payments.

Auto Loan Debt

At 4%, Californians’ rise in auto loan debt was a tick higher than the national average (3%) in 2020, their balances $19,713) remained slightly below the national average ($19,865), according to Experian.

Californians joined the nationwide rage for refinancing auto loans in 2020, with those in Sacramento (6.86%), Bakersfield (6.67%), and Los Angeles (6.43%) ranking among the top 10 cities for interest-rate deductions.

In the fourth quarter of 2020, auto loan delinquencies nationwide stood at 2.72%.


Amid the economic crunch of the prolonged lockdown that came with COVID-19, one expected feature of financial hardship never made an appearance in 2020. United States Courts reports nationwide bankruptcy filings of every variety tumbled 38.1% in the 12 months ending March 31, driven by a 38.8% dive in nonbusiness bankruptcies.

California closely followed the national trend. Total bankruptcies were down 35%, putting the Golden State 11th overall. However, February saw a 7% one-month rise in filings, fueling analysts’ concerns about what’s to come in 2021.

Analysts cited a variety of reasons for the 2020 slide, from the federal government’s aggressive relief actions that included cash, hefty unemployment benefits, and prohibitions against eviction and foreclosure. Others noted the near freezing of in-person activity in the courtrooms where bankruptcies are meted out.

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 its federal cousin. 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.

The California Legislature amended the act, effective January 1, 2020, to include mortgage debt as consumer debt, and to delete an exception to the definition of “debt collector” for an attorney or counselor at law.

Signed into law in September 2020, the California Debt Collection Licensing Act requires licensure of anyone engaging in debt collection in California — even on their own behalf. The law becomes effective January 1, 2022.

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 five states have a shorter time period (three years), while some states (Massachusetts, New Hampshire) have statutes of limitations as long as 20 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 valid only 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 query the card issuer if you do not understand something.

Credit Scores in California

With an average FICO score of 716 (up eight points over 2019), California’s creditworthiness ranks 26th in the nation, according to the Experian National Score Index. The credit-reporting giant measures individual creditworthiness on a scale of 300 to 850. The national average score was 711.

Credit scores vary from city to city. In a WalletHub study released in March, San Francisco ranks first among large cities, in the top 98th percentile. San Jose, capital of Silicon Valley, ranks fourth in the 94th percentile. San Diego (11th, 83rd percentile) is just outside the top 10; Oakland (18th, 73rd percentile) makes it into the top 20.

Fresno, Stockton, and Bakersfield land in the bottom third of large cities.

Identity Theft in California

With 373 reports per 100,000 in population, California ranked 15 nationally for identity theft in 2020 — a record year for scammers. In raw numbers, says the Insurance Information Institute, that’s 147,382 claims, the most of any state, and 12,000 more than runner-up Illinois (No. 3 per capita). Kansas and Rhode Island ranked 1-2.

The state government maintains 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, (s)he can permit others to verify the information. This is useful when a victim is asked to prove (s)he was not responsible for crimes committed in his/her name, such as during a job application 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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