An estimated 77 million Americans currently have a debt in collections, roughly 35% of consumers with credit files reported to a major credit bureau, according to a joint study from the Urban Institute and Encore Capital Group's Consumer Credit Research Institute. Payscout, a payment service provider, commissioned the study.

Researchers noted that the numbers are basically unchanged from 2004, when the Federal Reserve studied the issue and found that 36.5% of people with credit reports had debts in collection.

While collection agencies are heavily regulated and unpopular among most Americans, Payscout CEO Cleveland Brown points out that they are a necessity to the economy. According to a previous study by ACA International, in 2013, agencies recovered about $55.2 billion in total debt, of which they earned close to $10.4 billion in commissions and fees, leaving nearly $44.8 billion in debt returned to creditors.

The industry, according to the study, thus saved the average U.S. household $389 in 2013; an amount that represents dollars households would have spent if businesses had been forced to raise prices to cover bad debt. In terms of total direct and indirect employment, the industry provides nearly 231,000 jobs, with a total payroll impact of $12.4 billion. U.S. debt collection agencies in 2013 directly contributed an estimated $724 million of federal tax, $400 million of state tax and $287 million of local tax, for a total tax impact of more than $1.4 billion.

The positive impact of collections is expected to increase in the near future, according to the study. The Bureau of Labor Statistics anticipates that between now and 2016, the debt collection industry will experience a 23% rate of growth, much faster than the average for all industries. According to the Bureau, much of the increased demand for debt collection services will come from doctors' offices, hospitals and government agencies, including the IRS.

"Companies and institutions could make their own collections but most business entities don't have professional collectors on staff," says Brown. "A bookkeeper may feel uncomfortable or embarrassed calling a good customer to collect an invoice, or she may simply not have time. Even when she does make the calls, she may not have the skills needed to work through proffered delays or objections and set up a payment schedule. A collections professional can greatly increase the business's chances of payment."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.