Thad Allender/Journal-World Photo Illustration Credit card debt

Increasingly, those walking into Marciana Vequist’s office bring with them some heavy financial baggage – credit card debt, mortgages that are more than the house is worth and stacks of unpaid bills.

But Vequist isn’t a financial counselor. She’s a psychologist.

“This is getting to be worse and worse,” said Vequist, who has worked at Bert Nash Community Mental Health Center for four years.

Her patients aren’t the severely or persistently mentally ill. Many are working adults with families who have simply gotten in over their heads.

For some, the unpaid bills have kept them up at night. Others have slipped into a sense of hopelessness and don’t know where to begin.

“They are having a normal reaction to the situation,” Vequist said. “I’m glad (they) are here at the mental health center, but these symptoms aren’t going to be relieved until the problem is relieved.”

Even before the economy took a turn downhill in the past year, many Americans were struggling with debt. The statistics are startling. Here are some numbers from www.creditcards.com:

¢ As of January, U.S. consumer debt was $2.52 trillion.

¢ The average consumer has a total of 13 credit obligations, ranging from department store charge cards to a mortgage.

¢ With the median U.S. household income at $43,200, the typical family’s credit card balance is now almost 5 percent of their annual income.

¢ More than 8 percent of households owe $9,000 or more on their credit cards.

Some chalk up the rise in consumer debt to a disposable culture with little impulse control, raising kids who want to graduate straight from college to their parents’ lifestyles. Others place the blame on the prevalence of the “Bad Credit? No Problem” loans and retailers who peddled credit for anything from big-screen TVs to RVs.

A slow slide

As a certified credit counselor, Robert Baker said 10 years ago it would the be the “DINKs” – Double Income, No Kids – couples who would come in with debt woes. They were the professionals who just happened to let their spending get out of hand. They came in with the disposable income needed to pay off the debt.

It’s far different today.

Very often it’s the essentials, not the extras, that are being charged, said Baker, who works with the nonprofit Housing & Credit Counseling Inc. When gasoline prices rise, people put it on their credit card. When the holidays arrive, groceries are charged.

Late fees have risen from $15 to $20 to $39, Baker said. Teaser rates to entice people to obtain cards have gone up or away completely. And credit card companies aren’t as willing to lower rates when they hash out a repayment plan for late-paying borrowers.

“People’s balances have gone up, and they continue to go up because now people aren’t using it for disposable charges or travel but essential charges – it is getting hard to pay those cards off no matter what you do,” Baker said.

Samira Hussein, a professor of business administration at Johnson County Community College and personal finance instructor at Kansas University, has financial horror stories to tell.

Some students – yet to embark on professional careers – have $2,000, $3,000 and even $30,000 in credit card debt. She’s seen people liquidate their 401(k) to get rid of debt or ignore it by leaving bills unopened.

Most of the time, it’s a slow slide rather than one catastrophic plunge into debt.

“They have all the good intentions. ‘You know I was going to pay it off in full, but this month my kids need new shoes or this month is a bad month because Christmas happened. And I am going to pay it off when I get the tax refund, or when my wife gets a job.’ You give yourself assurances,” she said.

Just as a person balloons from being 10 pounds overweight to 50 pounds, so does a family’s debt expand.

“It’s a lifestyle shift,” Hussein said.

Lawrence bankruptcy attorney John Harper has seen an upswing in clients in the past year.

Credit card debt ranks right up there with medical bills among the reasons Harper’s clients give for filing for bankruptcy. And the stakes have become higher, with debt in the tens of thousands of dollars.

“Credit is the great American opiate,” Harper said. “It allows people to live up to what they think they should be living instead of looking at reality and saying, ‘We can’t afford this.'”

Easy access

When Visa and MasterCard were introduced in the late 1950s, Hussein said the intent was to provide a means of payment for those traveling and not wanting to carry cash.

The concept has been morphing for years, but the real changes came in the past two decades.

From mortgages with no down payment to credit card vendors lined up at college campuses, lending standards have lowered, said Bob DeYoung, KU’s Capitol Federal professor of financial markets and institutions.

For starters, it has become easier and faster for banks to get credit information. Ten to 15 years ago, it would have been too costly and time consuming for lenders to find the financial data needed to determine whether low-income or young households were credit-worthy, DeYoung said.

Today, banks just dial up a credit score.

The past two decades also saw the advent of banks making loans – from credit cards to mortgages – and then selling them off in financial markets to parties that packaged them up and were better able to accept the risks.

“As these things have changed, a lot more people have gotten access to credit that didn’t use to have access to credit,” DeYoung said.

People also stopped going to one local bank for all their consumer loans, said Maley Wilkins, community president at Peoples Bank. The government offered student loans; national chain stores provided financing for furniture and electronics; and car dealerships made auto loans, all at lower rates than what banks could offer.

Wilkins has seen a shift in financial philosophy. Households have become focused on whether their monthly income can cover their standard of living as opposed to building wealth.

It’s a philosophy that sees more recurring debt for cars, cell phones, furniture, electronics and homes.

“There is a large segment that says, ‘The monthly payment is much more important to the way I live my life than having it paid for,'” Wilkins said.

Reining it in

While consumer debt has become easier to acquire, it also has become more costly. The consequences of bad credit extend far beyond the wallet.

Credit reports are being used by landlords, employers, utility companies and insurance agents.

“They make decisions on your future for a whole variety of things based on your credit report. It is not just lenders,” said Baker, the credit counselor.

With the recent foreclosure crisis and subsequent credit crunch, higher credit scores are being required for loans. Even the good ones don’t guarantee premium interest rates.

The difference between a credit score of 740 and 715 (still in the very good to excellent range) could increase the mortgage payments on a $200,000 house by $33 a month. Over the lifetime of a 30-year loan, that’s $11,800.

Tom Koenig, a home lender for Central National Bank, said those standards, passed down by Fannie Mae and Freddie Mac, weren’t in place six months ago.

It’s an example, he said, of how the poor lending practices have affected those with a good credit history.

Baker said the recent economic turmoil might be a chance to rein in the out-of-control lending rampant in the past decade.

“There is only so far you can go before you have to bring things back in,” Baker said.