Home Consumer debt Year of COVID-19 Led to Record Consumer Debt and Collection Complaints | Covid 19

Year of COVID-19 Led to Record Consumer Debt and Collection Complaints | Covid 19


After more than a year of COVID-19, the country’s collective ability to cope with the dual health and economic crisis has diminished the ability of many consumers to remain financially stable. While the February National Employment Report from the Bureau of Labor Statistics showed a net gain of 379,000 jobs and white unemployment fell to 5.6%, there was no corresponding improvement. for black and Latino workers. Instead, unemployment was higher at 9.9% and 8.5% respectively.

Unemployed workers generally receive unemployment benefits, the amount and duration of which vary from country to country. Although the United States Department of Labor estimates the 2021 national average for state unemployment benefits to be $ 346.46, fifteen states have weekly benefits below $ 300 and include localities with large workers. color, including: Arizona ($ 238.23); Florida ($ 233.59); Louisiana ($ 192.98); Mississippi ($ 190.27); Missouri ($ 253.87); North Carolina ($ 222.14); and Tennessee ($ 222.89).

Moreover, since most workers receive their health insurance through their employers, the unemployed often lose this insurance as well as their income. It is one thing to get sick, but it is an aggravated difficulty when you are sick and unemployed at the same time.

As black America faces yet another uneven economic recovery, a recent annual report to Congress on the Fair Debt Collection Practices Act (FDCPA) corroborates this claim. This consumer law governs debt collection practices, legally prohibiting debt collection companies from using abusive, unfair or deceptive practices to collect overdue bills for mortgages, credit cards, medical debts. , personal debts or other household debts. It does not include protections for commercial debts.

Released in early March, the 2020 report, jointly prepared by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) reveals striking findings on consumers’ financial stress. In the first quarter of last year, consumer debt reached $ 14.3 trillion. In the 3rd and 4th quarters of 2020, non-housing debt increased by $ 15 billion and $ 37 billion respectively.

Complaints about credit and consumer reports made up over 58% of complaints received, followed by debt collection (15%), credit cards (7%), checks or savings (6%) and mortgage loans (5%).

As of April 2020, consumers began submitting more than 3,000 complaints with keywords related to coronaviruses almost every month. Consumers submitted around 32,100 complaints mentioning the coronavirus or related keywords in 2020. In total, 70 million consumers – one in three with a credit report – have been contacted by at least one creditor or collector trying to collect one or more debts.

The 2020 tally for all CFPB complaints – across all credit areas – was around 542,300, an increase of almost 54% from the roughly 352,400 complaints handled in 2019.

“The pandemic has been one of the most disruptive long-term events we will see in our lifetimes,” said Dave Uejio, acting director of CFPB. “Not surprisingly, the shockwaves it sent across the globe were deeply felt in the consumer financial market… In 2020, the Bureau received more than 540,000 consumer complaints. For seven of the nine months since March 2020, the Bureau has handled a record volume of complaints. ”

Acting FTC President Rebecca Kelly Slaughter also characterized her agency’s efforts over the past year. “The FTC has moved quickly to root out a number of illegal COVID-related scams, has sued to block or unwind an unprecedented number of mergers, and has taken a number of other tough enforcement actions across the board. of his assignments, ”Slaughter said.

Last year, the FTC filed or resolved seven debt collection cases against 39 defendants and obtained $ 26 million in judgments. Likewise, two CFPB judgments ordered nearly $ 15.2 million in consumer redress and $ 80,000 in civil fines.

In addition to the CFPB and the FTC, the Asset Funders Network (AFN), an alliance of philanthropists dedicated to equitable wealth creation and economic mobility, also recently released a guidance note that one third of households having medical debt also have student loan debt. and 43% of families with legal debts also have medical debts.

Entitled “Medical Debt and Its Impact on Health and Wealth: What Philanthropy Can Do to Help,” the brief takes a close look at medical debt and who is most affected by it. The AFN has also identified three specific drivers of medical debt: unpredictable medical emergencies, insufficient health coverage and high personal expenses.

According to the AFN, more than one in five adults experiences unforeseen medical expenses in a year. When medical emergencies arise, household expenses average $ 3,000 per person per year, with more than a third of these expenses attributable to the insured’s medical expenses. For the uninsured, medical debts pile up even faster, and often in states that haven’t extended Medicaid coverage to low-wage workers.

The brief states in part that “medical debt has a disproportionate impact on communities of color, perpetuating and exacerbating the racial wealth gap by draining cash flow that other households without medical debt can save or invest. Racial inequalities in income, wealth and insurance coverage play a role in the prevalence and burden of medical debt… Non-elderly black adults are 1.5 times more likely, and non-elderly Latin adults are Americans and Native Americans are 2.5 times more likely to be uninsured than uninsured white adults. With less access to insurance, people of color are more likely to face higher medical bills and difficulty paying their medical bills. “

“In many southern states, people of color disproportionately lack health insurance coverage, in large part because their state has not implemented the Medicaid expansion,” the brief continues. “Individuals in the South are also more likely to work in agriculture or other low-paying jobs that do not provide employer-sponsored health insurance… Of the 13 states where more than one in five adults has of medical debts in collection, seven states have not implemented the Medicaid expansion, and in 11 states, people of color make up more than a quarter of the population.

Earlier this year, the Center for Responsible Lending (CRL) also took a public position on debt collection – specifically wage garnishment and direct debit protection.

“Systemic racism has fostered a debt collection landscape in which people of color are more likely to be contacted by collectors and more likely to be affected by lawsuits resulting in wage garnishment and bank withdrawals.” , says CRL. “State laws differ in terms of how much money is ‘protected’, or cannot be seized by a debt collector, to leave money for a family’s basic needs. Federal protection is urgently needed.

The current federal poverty line of $ 17,240 for a single adult with a dependent child has not changed since 1969. This official poverty line also does not take into account regional differences in the cost of living or cost. childcare services which represent a significant budgetary cost for all working parents.

To remedy debt collection foreclosures of all available financial resources, CRL advocates that families be protected from debt collectors by allowing consumers to keep $ 12,000 in a bank account over a three month period to cover food, housing, transport and medical care.

“The COVID-19 crisis has resulted in high levels of unemployment across the country and the recovery will take months, if not years,” says CRL. “The federal government must protect $ 12,000 in a bank account and approximately $ 1,000 in wages per week, to help families establish and strengthen their financial security. “

Charlene Crowell is a senior member of the Center for Responsible Lending. She can be contacted at [email protected]