Consumer Debt in New Jersey

    New Jersey residents carry significantly higher amounts of debt than the average American. Most residents can handle large debts, thanks to above-average salaries and an unemployment rate that dipped to 5.4 percent in October of 2015.

    Still, the economic downswing of 2008 forced many people to fall several years behind on payments for major debts like mortgages. Debt consolidation plans helped some people hold on until the economy recovered, employment rose and their financial problems settled down.

    New Jerseyans manage to keep credit scores high and keep bankruptcy rates near average levels. They also have some of the best and most comprehensive consumer protection laws in the country, helping residents keep control of their finances and keep their personal information safe.

    Consumer Debt in New Jersey

    New Jersey residents have an average debt of $62,300 per capita, whereas the national average is significantly lower at $47,500. This is mostly made up of credit card, mortgage and student loan debt. Despite high debt levels, most residents can afford to stay on top of their bills. At $67,681, their median household income is the second highest in the nation.

    Credit Card Debt

    New Jerseyans had an average credit card debt of $3,690 per capita in 2011, the second highest in the country after Arkansas. The debt level was unchanged from 2010, but showed a slight decrease from 2006’s $3,780.

    Among those who carry credit card debt, the average debtor owed $7,608. This was the fourth highest in the country, behind Alaska, New Hampshire and Connecticut.

    Mortgage Debt

    Mortgage debt is higher in New Jersey than it is in nearly any other state. In January 2012, the average outstanding balance on a mortgage was $236,000. And while residents have high incomes, many are falling behind on their monthly payments; in May 2012, 9.46 percent of mortgages were at least 90 days delinquent.

    Part of the reason for high debts and delinquency rates is that home values have decreased. From 2006 to 2010, New Jersey homes lost 7.5 percent of their values, the 9th largest drop in the country.

    Despite all this, New Jerseyans have been able to avoid foreclosure in recent years. In 2011 particularly, mortgage lenders were forced to put nearly all foreclosures on hold.

    The delay was a direct result of a nationwide issue in late 2010 regarding widespread “robo-signing.” During this period, major lenders including Bank of America, JP Morgan Chase and Wells Fargo were accused of spending as little as 30 seconds reviewing the paperwork for each foreclosure. That resulted in countless homes wrongly entering foreclosure.

    When the practice came to light, courts in New Jersey and several other states deemed it necessary to more carefully review each foreclosure before it is finalized. Effectively moving the responsibility from mortgage holders to courts with few resources slowed the foreclosure process to a crawl. In 2010, 0.79 percent of mortgages entered foreclosure; the number dropped to 0.29 percent in 2011.

    Experts refer to these rates as artificially low, as they don’t reflect the number of delinquent mortgages. This is bad news for the economy as a whole, since it is slowing down the recovery of the housing market.

    In the first half of 2012, residents saw an uptick in foreclosure rates. There were 73 percent more foreclosures in March than there were in February. However, it still takes a long time for houses with delinquent mortgages to reach foreclosure.  At more than 2.5 years, New Jersey has the second highest average time to foreclosure in the country, behind New York. This is compared with almost a year nationwide.

    Student Loan Debt

    In 2010, 66 percent of graduating New Jerseyans had student loan debt, the 11th highest percentage in the country. Upon graduation, these students owed an average of $23,792, a 5 percent increase from the previous year but lower than the national average of $25,250.

    Of those who took out federal education loans to attend New Jersey schools, about 7.8 percent are in default. Although high, it’s actually lower than the national rate of about 8.8 percent.

    A 2011 study found that 74 percent of students at The Richard Stockton College of New Jersey graduated with debt, with each student owing an average of $30,843. This was more than students at any other public school in the state.

    The study found that Princeton University, a private nonprofit school, was on the opposite end of the spectrum. Only 23 percent of students graduated with debt, and those students owed an average of only $5,225. This is thanks to the school’s policy, enacted in 2001, to replace loans with grants.

    Bankruptcy

    Bankruptcy rates in New Jersey closely follow national trajectories. Still, the state’s personal bankruptcy rates consistently remain below the national average.

    New Jersey bankruptcies peaked in 2005, at one personal bankruptcy for every 138 adults. That means 0.72 percent of the state’s population declared bankruptcy. The 2005 peak was only slightly higher nationally. There was one bankruptcy for every 115 adults across the country, meaning 0.87 percent of the country’s adult population declared bankruptcy.

    In 2006, personal bankruptcy rates in New Jersey and the country as a whole plummeted.  Nationwide, only one person or couple filed for bankruptcy for every 394 adults. In New Jersey, the rate was even lower, with just one bankruptcy for every 498 adults.

    The drop didn’t signify an improved economy. Rather, it was simply a result of the previous year’s peak. By 2006, most of the people in serious financial trouble had already declared bankruptcy.

    Since the 2006 drop, bankruptcy numbers in the state and throughout the country have slowly risen and are roughly equal to pre-2005 numbers.

    Credit Scores in New Jersey

    Despite high levels of debt, New Jersey residents tend to keep their finances in order. In early 2012, consumers had an average credit score of 681, beating out every other state and surpassing the national average by 20 points. This is on the FICO scale, which ranges from 300 to 850. The unparalleled high score indicates that residents pay their bills on time and have well-established credit accounts.

    Consumer Fraud and Identity Theft

    Unfortunately, New Jersey ranks high for both consumer fraud and identity theft. The state is 17th in the country for consumer fraud, an umbrella category that includes crimes such as scams and false advertising as well as identity theft. In 2010, there were 310 cases of consumer fraud per 100,000 residents.

    The state ranked even higher for identity theft; with 77.4 complaints per 100,000 people, it ranked 12th in the country. This was an increase from five years earlier, when there were 75.5 complaints per 100,000 people and the state ranked 14th.

    Despite high fraud and identity theft rates overall, no metropolitan area within the state ranked especially high. This signifies that the crimes occurred relatively evenly throughout the state and were not centered in any one area.

    New Jersey Consumer Fraud Act

    The New Jersey Consumer Fraud Act (CFA) is considered one of the best pieces of consumer protection legislation in the country. It goes beyond protecting consumers, also containing provisions for businesses and for certain employees.

    General Provisions

    The CFA puts forth general provisions to protect consumers in the state.

    The following provisions are related to the advertisement or sale of merchandise or real estate:
    • Companies may not use deception, false pretense, false promise, fraud, misrepresentation or unconscionable commercial practice. They additionally cannot conceal, suppress or omit key information.
    • Companies cannot advertise items that are not actually for sale, and advertised prices must be accurate.
    • The price of an item must be attached to the item or in plain sight within the store. This is reiterated in the Unit Price Disclosure Act within the CFA.

    Miscellaneous Provisions

    Other specifications laid out by the CFA are more precise in their jurisdiction, covering only specific types of consumer transactions.

    Here are other provisions under the CFA:
    • For-profit companies must disclose that they are for-profit.
    • The CFA calls for an educational program aimed at informing senior citizens and people with disabilities of their consumer rights, subject to adequate funding.
    • It is illegal to solicit home improvement loans to senior citizens at their homes.
    • Unsolicited telemarketing calls are prohibited, except calls to people associated with the Division of Consumer Affairs.
    • It’s illegal to deliver unsolicited credit cards.

    Other State Laws on Consumer Debt

    Although the CFA is fairly comprehensive, there are some areas it doesn’t cover. Other New Jersey state laws pick up where the CFA leaves off, covering issues like debt collection, identity theft and the statute of limitations.

    New Jersey Fair Debt Collection Practices Act

    The New Jersey Fair Debt Collection Practices Act (FDCPA) fortifies the federal FDCPA and bans debt collectors from using unfair and dishonest practices. As with the federal law, the New Jersey FDCPA guidelines apply only to separate debt collectors and do not apply to original lenders. New Jersey’s version includes a few additional provisions.

    Identity Theft Prevention Act

    The Identity Theft Prevention Act, enacted in 2006, requires businesses to protect residents’ sensitive information. The main provision of the act requires businesses and public agencies to alert consumers if there’s been a security breach that could affect the confidentiality of their personal information such as Social Security numbers. The act also states that businesses must alert state police in this event.

    Additionally, businesses are banned from displaying customers’ Social Security numbers in any way, including printing them on mail or sending them over the Internet without encryption. Businesses must also destroy customer records if the businesses intend to discard them. This can be done by shredding, erasing or otherwise damaging records so that personal information cannot be read or accessed.

    Statute of Limitations

    New Jersey has a statute of limitations of six years on all types of loans, including those from written contracts and credit cards. If a consumer’s debt is more than six years overdue, the lender can no longer take action in order to collect the debt.

    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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