Exploring the Association Among Debt Collection Experience, Financial Access and Physical Health

Background. Americans consistently rate financial stress is one of their top stressors. One source of financial stress for people with overdue bills is debt collection. Unmanageable debt and debt collection activity can ultimately result in negative financial status such as lowering of credit score, item repossession, and/or home foreclosure. In addition to the stress of an inability to pay a debt, stress from debt collection experience can result in negative health impacts because the experience can involve experiencing rude, aggressive, and hostile behavior and language, excessive contact, threats of payment deadlines, attempts to collect old debt not actually due, and illegal harassing activity.

This study explores the association between debt collection experience and physical health, with potential moderating impact of financial access. This study breaks new ground in exploring the association between debt collection experience and physical health, and tests whether typology of financial access (i.e., ownership of financial products and services) buffers the association of the two. Previous studies found that those with higher financial access experience better financial services and well-being. However, a relationship among debt collection, financial access, and health has not been substantiated.

Method. Using the 2022 Financial Health Pulse Survey, this study explored the association among debt collection experience, financial access, and health. A two-step approach of latent class analysis (LCA) was applied. Financial access was categorized, and linear regression was applied

Results. Results show that survey participants can be classified into three financial access classes; Investors, Working class, and Thinly Banked. The majority was the Investors (51.5%), followed by Working Class (37.3%) and Thinly Banked (11.2%). Survey participants in all classes who have debt collection experience have lower physical health than those who do not have debt collection experience regardless of financial access level. Thinly Banked class members who were contacted by a debt collector reported the lowest physical health (coef=-0.53, p < 0.001). Working Class members who were contacted by a debt collector had lower physical health both compared to not contacted by debt collectors (coef=-0.38, p < 0.001). Likewise, those in the Investors who were contacted by debt collectors also has lower physical health than those who were not contacted (coef=-0.20, p<0.05). Overall, our study found that regardless of financial access class membership, those contacted by debt collectors reported statistically lower physical health, but the health impacts were stronger for those who have lower financial access.

Discussion. Findings unique to this study suggest that debt collection experience is negatively associated with physical health for all classes, with the strongest negative association for those with the least financial access. Therefore, financial access may play a role buffering the negative impact of debt collection to health. should gain capacity to engage with their clients about their debt collection experience and seek to provide resources to minimize any associated detrimental health experiences