Medium Post: Congress must provide immediate relief for consumers. Here’s how.
The coronavirus outbreak poses a major challenge to public health and to the economy. An unprecedented 22 million Americans filed for unemployment in the last four weeks, yet bills keep coming and debts keep piling up. A part of our policy response to the crisis must include solutions that help those teetering on the edge of financial ruin.
For millions of Americans, a $1,200 stimulus check will not even cover one month of basic expenses, including rent and mortgage payments, food and clothing, car loans, medical costs, credit cards, and utility costs.
Consumer spending drives our nation’s economy, and we will emerge from the current crisis. But if Americans are left drowning in debt at the end of it, our recovery will be hampered as people will spend less on goods and services.
Indeed, consumer debt has kept American families and consumers underwater for a long time. In fact, in 2019, total household debt passed $14 trillion. The average household with a credit card has over $8,000 in credit card debt alone. Americans are getting crushed, and high credit card interest rates and fees have long made it impossible for the average consumer to get out from under this burden.
Congress included some protections in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, but much more must be done to ensure that everyone has access to relief. Homeowners with federally-backed mortgages who are experiencing hardship due to COVID-19 qualify to delay mortgage payments through forbearance. Renters are protected from eviction for 120 days, but only if they live in a property with a federally-backed loan or participate in certain federal programs. These were important steps. But CARES mortgage relief leaves out an estimated 30 percent of single-family homeowners, not all renters are protected, and all homeowners and renters will need to get back on track when the protections expire. For homeowners, that will likely mean a loan modification to keep payments affordable, and for renters, it will mean making up missed payments or facing eviction.
Congress also automatically suspended most federal student loan payments and set federal student loan interest rates to zero percent until October. But the CARES Act left out millions of student borrowers, including those with a combined more than $100 billion in private loans, and did not provide a dime of urgently needed student debt cancellation. So, while the government is making trillions of dollars available to large companies, Congress offered no relief for Americans with auto loans, credit card debt, payday loans, or other debt. And, debt collectors and banks can still snatch away your stimulus check to pay off those types of debts.
If Congress is serious about helping Americans weather this crisis and rebuild our economy, the next coronavirus aid package must include comprehensive consumer relief.
First, if we really want stimulus payments to help Americans survive, we need to stop predatory debt collectors and banks from ripping these funds out of the hands of consumers. If the Treasury Department will not act to safeguard this aid, Congress should include protections in the next coronavirus package.
Second, we must provide immediate relief for all consumers who are struggling to pay their bills during this global health crisis. No one should have to choose between putting food on the table and paying a bill. And, when Americans come up for air after this crisis, they shouldn’t find they’ve amassed thousands of dollars in interest and fees on debt they are unable to pay because they lost their job.
This is simple. We can start by allowing consumers to put a pause on all payments. Americans should have the option to keep paying their debts if they have the means, but they shouldn’t be punished if they can’t do so. That means no accrued interest, late fees, or other penalties for nonpayment of a debt. And when this crisis does pass, consumers should have additional time to catch up on their payments.
We also need to prohibit debt collectors from using predatory and intrusive measures to collect a debt. That means a pause on garnishments, evictions, repossessions, and utility disconnections. And all proceedings against debtors should be immediately halted. Nobody should lose their home, their car, or their internet during a global pandemic — it’s not just a moral imperative, it’s a public health necessity.
We partnered up with Senator Cory Booker on the Small Business and Consumer Debt Collection Emergency Relief Act to provide consumers with these essential protections. Our bill also extends this relief to small businesses, millions of which are shuttered and facing debt payments that could prevent them from re-opening after this crisis. This isn’t just about helping Americans survive the crisis — it’s about making sure people can pick up the pieces and get on with their lives after the danger to public health is over.
Third, we can make sure Americans don’t have a permanent mark on their record due to a global crisis that was out of their hands. We do that by ensuring that consumers don’t take an unfair hit to their credit because of any negative entries on their credit reports during the crisis. Nobody should be denied credit for a new home or car, prevented from renting an apartment, or fail a security clearance for a new job because they ran into trouble making payments during the coronavirus pandemic. If we want consumers to stimulate the economy and speed up a recovery, we need to give them the tools to do so.
Fourth, we must protect the financial lives of millions of student loan borrowers. We should broadly cancel student loan debt to stimulate our economy. This will ensure Americans don’t have a massive student debt load waiting for them on the other side of this emergency and help a generation of Americans who never fully recovered from our last economic crisis participate in stimulating our economy through this crisis. We must also extend the CARES Act protections for many federal student loan borrowers to all student loan borrowers, including private student loan borrowers. In addition to broadly cancelling student loan debt, that means allowing all borrowers to suspend payments without fees or consequences, halting wage garnishment and other involuntary debt collection, and expanding loan modification and affordable repayment options.
Fifth, the Consumer Financial Protection Bureau (CFPB) needs to do its job and put consumers first. Congress can and should enact additional protections for consumers. But we also have an entire agency dedicated to that mission. The CFPB was created so that consumers would not be left at the mercy of giant financial institutions and would have a dedicated agency to look out for them. But instead of providing assistance and relief for American families, President Trump’s handpicked leadership at the CFPB has weakened protections for consumers — enabling predatory lending, watering down credit reporting protections and fair lending laws, and making it easier for credit card and debit card companies to rip off their customers. In the coming weeks, Congress needs to use its oversight tools to hold the CFPB accountable.
The Bureau must use its supervisory authority to monitor and detect consumer abuses. We know some corporations will see this pandemic as an opportunity to exploit and rip off their customers. That’s why it’s vital that the CFPB not use the pandemic as an excuse to be less vigorous in its examinations, even if these exams cannot be conducted on-site. The Bureau can still demand that financial institutions provide data to monitor compliance with fair-lending and other consumer financial laws. The Bureau can also actively monitor and focus its resources on industries that are ripe for consumer abuses, including debt collectors, mortgage servicers, and payday lenders.
The Bureau must also use its enforcement powers to the greatest extent possible to punish companies that violate the law. The Bureau should immediately issue guidance to clarify that lenders that do not properly abide by the credit reporting provisions in the CARES Act will be penalized, including lenders that do not properly indicate that a loan is in forbearance. The Bureau should also make clear that it considers certain debt collection practices — such as attempts to offset or garnish stimulus payments — unfair and abusive and a violation of the Fair Debt Collection Practices Act, and vigorously pursue any debt collector or bank that attempts to seize these payments. And the Bureau should also be working hand in hand with federal and state officials to ensure that consumers are informed of their rights under the law.
Sixth and finally, we need to help Americans who are forced to rely on bankruptcy as a last resort. You can tell a lot about a country by how it treats people when they’re at their lowest. Unfortunately, this crisis will likely leave countless families with no other options than to declare bankruptcy. We must provide immediate relief from debts in order to do all we can to prevent that from happening, but we also need to prepare for the worst-case scenario. And we do that by making consumer bankruptcy a more accessible, affordable option.
We can start by transitioning away from all in-person bankruptcy requirements. Nobody should have to risk life and limb just to secure an in-person signature or meeting when there are feasible electronic and telephonic alternatives.
But we should go further: it should not cost an arm and a leg for consumers to file bankruptcy. Congress should add protections for homes, tax refunds, and any present and future stimulus benefits for Americans so that these assets can’t be seized by creditors. Student loan borrowers should be able to get out from under debilitating debt if they file for bankruptcy. And the morass of burdensome paperwork requirements and filing fees must be reduced to help consumers navigate the painful process of restarting their lives.
The coronavirus outbreak does not have to mean financial catastrophe for millions of Americans. Congress provided some relief in the CARES Act — this is a problem we know how to begin solving. We must act quickly to provide comprehensive consumer relief for all Americans in the next coronavirus package.
By: Senators Elizabeth Warren (D-MA) and Sherrod Brown (D-OH)
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