Consumer Protection

Now That the Coronavirus Act Has Passed It’s Time to Address Critical Consumer Protection Measures

Consumer’s Financial Wellbeing is Critical to Their Physical Health

Washington, D.C. – Congresses’ sweeping legislation to address the economic and public health fallout from the COVID-19 pandemic leaves critical consumer health and financial issues largely unaddressed.

On March 20, 2020 CFA wrote to the President and Congress urging the adoption of a series of measures to address a wide range of consumer protection issues resulting from the coronavirus. While a few of the priorities identified by CFA were included in the final bill, including some measures related to paid sick leave and mortgage relief, most were not.

“Protecting consumers is not just a matter of economic justice, it is also the best way to protect the economy,” said CFA Executive Director Jack Gillis. “CFA will continue to fight to ensure that these critical measures are adopted. Enabling consumers to stay financially healthy is critical to staying physically healthy.”

“Congress must focus on a more comprehensive package to aid consumers. Many of the measures that are most needed were included in the House COVID-19 response bill, but the Senate failed to include them in their Senate bill. We look forward to working with members to ensure that these critical measures are quickly adopted,” said CFA’s General Counsel and Legislative Director, Rachel Weintraub.

The Good News: the bill did take limited steps, along the lines advocated by CFA, to:

Create a comprehensive national paid sick leave policy. Lack of paid sick leave threatens to nullify hard won gains from social distancing. CFA recommended adoption of a comprehensive national paid sick leave policy that must ensure that all employees (and their employers) and independent contractors, have the economic support they need to provide paid leave. With this bill and the Families First Coronavirus Response Act, Congress has provided up to 80 hours of paid sick leave for employees but there are significant gaps. Employers do not have to provide full pay, businesses with fewer than 50 employees and Federal employees of the executive branch can be exempted.

Protect homeowners and renters from economic hardship. CFA recommended forbearance be provided to economically distressed mortgage buyers and to halt evictions and foreclosures for people impacted by the COVID-19 virus. Congress adopted limited measures to address those concerns. On the plus side – impacted consumers with federally-backed mortgages – Fannie Mae, Freddie Mac, Federal Housing Administration, Veterans Affairs, or Rural Housing loans – can receive payment forbearance for 180 days, renewable for another 180.  Renters living in properties with federally backed mortgages can get rent relief if the owners seek and get forbearance on their loans. Temporary forbearance can be had without documentation or paperwork. On the other hand, the bill doesn’t cover the 15 million loans held in bank portfolios or in private label securities meaning that not all mortgage consumer will be treated the same. Also, there is no clear provision liquidity needed by nonbank servicers who provide the great majority of the FHA, VA and RHS loans through Ginnie Mae.

The bill does less to address other measures advocated by CFA to protect the financial well-being of the most vulnerable Americans. For example:

  • The bill provides limited assistance for student borrowers. The CARES Act exempts some, but not all, federal student loan recipients from making payments on those loans for six months, with the interest waived during that period. But borrowers will still need to make up the payments later. Holders of Perkins Loans, FFEL loans held by a bank or other financial institution, and private student loans are not eligible for forbearance. CFA continues to call for all student loan payments to be canceled for the duration of the crisis, with the government making payments on their behalf.

Missing from the bill are the following critical consumer protections:

  • The bill does not curtail high-cost lending schemes. CFA had called for new consumer protections against high-cost credit, such as payday loans, refund anticipation loans, and car title pawns, to prevent vulnerable COVID-19 impacted consumers from being trapped in a cycle of debt. The bill failed to address this concern and CFA continues to call for a 36% usury limit on such loans.
  • The bill fails to suspend debt collection or place a moratorium on negative credit reporting. The bill does little to protect consumers’ credit records during the crisis. The bill’s provision on credit reporting is actually weaker than the current industry standard for disaster victims.
  •  The bill fails to protect against utility shutoffs. CFA will continue to push for a moratorium on all utility shutoffs during the crisis.
  • The bill fails to maintain consumers’ access to affordable communications services. At a time when remote communications are more critical than ever, the CARES Act failed to provide broadband subsidies for low-income Americans and failed to require broadband providers to drop data caps, overage fees, and throttling practices for services needed during the crisis. Nor does it take any steps to require big data platforms to promote public interest messaging or to crack down on misleading advertising and price-gouging.
  • The bill does nothing for hotel customer and airline passengers while providing extensive financial assistance to corporations. It does not require the airlines to provide refunds or eliminate price-gouging change fees during the crisis. It also fails to address the airline industry’s lack of price transparency. Nor does it condition support for hotel chains on their agreement to honor requests for room and event cancellations without penalty.