the $ 1,200 worth of stimulus checks from the government have quite a loophole. Banks and loan sharks can confiscate the money before it ends up in your account – a wrinkle that favors debt collectors over the vulnerable the checks are meant to help.
Sens. Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) urge Congress to do so in the Next coronavirus package from Capitol Hill.
The plan is part of a wide range of proposals, shared exclusively with Vox, and released by the senatorial couple on Tuesday, to help consumers manage debt – be it mortgages and rentals, student loans, credit card debt, or car loans – during the Coronavirus Crisis and accompaniment Economic crisis.
“Consumer spending is driving our country’s economy, and we will get out of the current crisis,” the two wrote in their proposal. “But if Americans end up drowning in debt, our recovery will be hampered as people spend less on goods and services.”
Millions of Americans were in dire straits even before the global pandemic broke out, and millions more were spiraled. About 22 million people have filed new jobless claims in the last month and as economic shutdowns continue across the country and unemployment systems catch up, that number is likely to rise. And America was already heavily indebted into the crisis: US household debt hit a record $ 14 trillion in 2019.
Sometimes the word “consumer” can seem fuzzy, but the truth is, everyone is a consumer. “A consumer is anyone who pays a mortgage or a medical bill. It’s anyone in debt for student loans or credit card bills or car payments. This crisis affects us all. Tens of millions of Americans have registered as unemployed and many more could lose their jobs or not afford their bills, “Warren said in a statement to Vox. “Providing immediate assistance is an important safety net that is good for families and good for our economy.”
The pair of senators come up with six proposals to address this reality, building on the limited safeguards set out in the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act last month. Some – such as creditors not accepting discharge checks – address the failures of the first law. Others – like largely canceling student debt – have long been progressive goals. Still others are a decidedly Warren-esque response to the crisis facing the United States, such as increased oversight by the Consumer Financial Protection Bureau (CFPB).
Certainly, these proposals may not go far enough to protect people – in fact, lawmakers concede that families are likely to file for bankruptcy, whatever happens. And that’s if they make it into the law. republican have long been skeptical of the very existence of the CFPB and the idea of being too lenient with debt. Some in the GOP have accused Democrats to take advantage of the current crisis to advance a progressive agenda. And even within the Democratic Party, not everyone is on board with issues like student debt relief. However, Warren and Brown say the time for big ideas is now.
How Warren and Brown wanted to protect people from being crushed by debt during the crisis
The CARES Act, the $ 2.2 trillion stimulus package that went into effect in late March, offers consumers some protection but could go further. For example, it includes a moratorium on foreclosure and the right to deferment, which means an interruption in all payments for government-backed mortgages. It also protects tenants from eviction for 120 days provided they live in a building on a federally supported loan or are part of specific government programs. but 70 percent of home mortgages are secured by a federal agencywhich means 30 percent is private and left out.
Student loan debt was handled in a similar situation. The CARES Act suspended most federal student loan payments and set the federal student loan interest rate at zero percent leaves students out with personal loans, not to mention the idea of debt relief.
“So while the government Trillion dollars When large corporations were available, Congress offered Americans no relief with auto loans, credit card debt, payday loans, or any other debt, ”write Warren and Brown.
The couple put forward six proposals that Congress included in the Next coronavirus aid packageStill debated among Washington lawmakers:
- Protect incentive payments: The CARES Act does not specifically prevent debt collection agencies and banks from Seizure of stimulus payments to settle existing debts. Some states have called on the Treasury Department to intervene, but Warren and Brown are calling for protective measures to be included in the next coronavirus law.
- Take a debt break: The Senators want to enable consumers to suspend any debts they cannot pay during the crisis and be punished in an emergency – no interest, late fees or other penalties for non-payment. And when the crisis ends, they urge creditors to give people some time to catch up before they’re likely to pay back, and urge Congress to ban debt collectors from actions like garnishments, evictions, redemptions, and interruptions in utility debt collect.
You suggested Emergency Aid Act for Small Businesses and Consumer Collections with Senator Cory Booker (D-NJ), who would extend debt protection to small businesses.
- Keep an eye on the credit report: With many Americans likely to miss some payments due to the coronavirus crisis, Senators are calling on Congress to ensure their credit reports are not taken unfairly. “Nobody should be denied credit for a new home or car, prevented from renting an apartment, or failing a security clearance for a new job because of financial difficulties during the coronavirus pandemic,” write Warren and Brown. “If we want consumers to stimulate the economy and accelerate a recovery, we have to give them the tools to do so.”
- Protecting Student Borrowers: Warren and Brown are calling on Congress to largely scrap student loan debt to help stimulate the economy when people aren’t in the They now have a collective debt of $ 1.6 trillion, you can spend the money elsewhere. They also want to extend the protection of the CARES Act to private student loan borrowers.
- Bring in the CFPB: It is the job of the CFPB the government agency Warren designed and started in response to the latest economic crisisto act as custodians and stewards for American consumers. And beyond what Congress can do, the Senators are calling for the Bureau to be reinforced. The office was created so that consumers would “not be at the mercy of giant financial institutions” and have someone to look after them, but instead they fear that the Trump-elected leadership has weakened protection. Congress has the tools to monitor what is going on at the CFPB and it should use them.
They outline a number of steps the CFPB can and should take, including auditing financial institutions (even if they are not on-site), collecting and monitoring data, and focusing on industries that can be particularly bad actors – debt collection agencies, mortgage service providers, and Payday lender. It also has enforcement powers. Warren and Brown aren’t the only people raising the alarm about the CFPB – former CFPB director Richard Cordray warned of the threat earlier this month Coronavirus faces consumers and urged the office to step up.
- Help Americans File For Bankruptcy: Whatever the government does, some people inevitably will not be able to manage their debts and will end up filing for bankruptcy. And if and when, Warren and Brown want this to be a more accessible and affordable option. Her suggestions for how to do this include: getting rid of personal bankruptcy requirements (also a good idea in a pandemic regardless), lowering bankruptcy costs, easing red tape management and protecting homes, tax refunds and incentive benefits so that she can get away from it Creditors will not be accepted.
We are in an unprecedented moment in America. The pandemic has brought the economy to a standstill and millions of people are suffering from it. Debt is not a personal problem, it is a collective problem – the system is designed to put ordinary people at a disadvantage compared to powerful institutions. And when that’s over, people will be worse off financially the longer the recovery takes. But Congress has an opportunity to make it big in the next stimulus package, and proposals like this one they will adopt.