Seniors Face Mounting Credit Card Debt, Report Finds

By Sarah Borchersen-Keto, CCH Washington Staff Writer

The number of Americans aged 65 and older filing for bankruptcy tripled between 1992 and 2001, making them the fastest growing age group appearing before the bankruptcy courts, according to a new report issued by Demos, a non-partisan public policy group. The report is based on an in-depth analysis of the most recent Federal Reserve Survey of Consumer Finances, as well as other sources.

The average credit card debt of older Americans increased by 89 percent during the 1992-2001 period to a self-reported average of $4,041, according to the report. Seniors in the 65-69 age group, or the newly retired, saw their credit card debt rise 217 percent to an average of $5,844.

"The rising debt levels of the nation's seniors are a signal that economic insecurity is becoming critical for yet another population of Americans," concludes the report, "Retiring in the Red."

Among seniors with income of less than $50,000, which is roughly 70 percent of all seniors, about one in five families with credit card debt are facing debt hardship, which involves spending over 40 percent of income on debt payments, including mortgage debt.

The report notes that a deregulatory revolution in the financial services industry has coincided with increased economic vulnerability among seniors. Usuriously high interest rates, sharp hikes in fees, lower minimum payment requirements, relentless credit extension, and aggressive marketing have all contributed to enabling financially vulnerable seniors to take on record levels of credit card debt.

Seniors have also seen the costs of basic needs, such as medical care and housing, rising considerably during the period under review. With virtually all medical expenses now payable by credit card, "there is evidence to suggest that deductibles, co-pays, dental and vision care, prescription drugs and other uncovered costs played a significant role in the increased credit card balances of many older Americans," according to the study.

The Demos report recommends that existing bankruptcy laws should be maintained for families in severe economic distress. Families filing for bankruptcy will face more barriers to financial recovery if Congress enacts the bankruptcy reform legislation it has considered for the past five years, the report states. Other recommendations made in the report include mandating reasonable late payment grace periods, combating predatory home mortgage lending, and enacting a national usury law.

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Posted February 18, 2004.