More in middle class seeking help with debt

More middle-class Americans are suffering financial pain and reaching out for help, according to new numbers from the Consumer Credit Counseling Service of Greater Atlanta.

The average annual household income of people who contacted CCCS last month was $49,308, an 18 percent increase over August 2007.

That’s “an amount far above historic levels for people seeking this service,” CCCS reported. The agency counsels people from all over the country.

“Rising unemployment, the continuing mortgage and credit crisis, and rising food and fuel costs are causing people with good incomes to seek help paying their debt,” CCCS president Suzanne Boas said.

“People with middle-class incomes are finding it more and more difficult to meet their financial obligations. Pay as you go is a rude awakening.”

During the first eight months of the year, CCCS conducted more than 37,000 budget and debt counseling sessions, a 39 percent increase over the same period last year, the agency said.

“No one’s immune from the broader decline in the financial markets,” said Ryan Sweet, senior economist with Moody’s Economy.com. “Very little is going right for consumers. There’s little doubt we’re in a recession.”

In August, unemployment hit 6.1 percent, an increase of 1.4 percentage points over 12 months, with most of the increase coming during the past four months. The credit counseling figures are a reflection of that change, according to Dorsey Farr, a principal at French Wolf & Farr, an Atlanta-based investment adviser.

“What you’re seeing is the impact of job loss over the last eight or nine months translating into credit problems. It’s catching up with folks who are higher income earners,” Farr said.

Sweet said the CCCS figures indicate to him that a greater proportion of those seeking help are homeowners instead of renters. And many homeowners are taking a drubbing in the financial markets, adding to their woes, he said.

Michael Reksulak, assistant professor of economics at Georgia Southern University, said some seeking counseling might be individuals who took on adjustable-rate mortgages a few years ago and are reeling as the loans ratchet upward while their wages stagnate.

“There are very rational people who said ‘this makes sense for me’” when they agreed to the loans, Reksulak said. “But if they try to refinance in the current situation and they have a blot on their credit report, that’s a problem. They couldn’t see this coming.”

Homeowners also are having a tougher time accessing home-equity lines of credit as home values plummet and bankers exercise greater caution. “This is limiting another source of income for the already-strained household,” Sweet said.

So credit cards balances and other expenses, instead of being paid down, are growing beyond the scope of manageability.

The average monthly housing cost for those who contacted CCCS in August was $1,423, a 25 percent increase compared to the same month in 2007.

Additionally, food and fuel costs went up to $638 last month, which is 20 percent higher than in January, the agency reported. “While people seeking help paid less for fuel in August than July, the amount spent on food continues to climb,” CCCS says.