In these trying times, various legislative proposals have sought to shut down collection agencies during the coronavirus pandemic.
For example, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, has released plans for a legislative package that would shutter such agencies during the crisis. In addition to providing cash infusions to households, the plan would “suspend all consumer … credit payments (mortgages, car notes, student loans, credit cards, small business loans, personal loans, etc.) during the pandemic.” Borrowers who do not make payments “should not accrue any interest or fees during the payment suspensions period ….”
More significantly, “[t]here would be a total moratorium on negative reporting during the pandemic and for 120 days thereafter.” And even after the pandemic ends, “consumers could add their names to a database for continued protection ….”
Most importantly, the legislation would also “prohibit debt collection, repossession, and garnishment of wages during the pandemic” and “would ban the collection of all consumer debt, including medical debt, and prohibit the garnishment of wages or repossession of assets during the pandemic, and for 120 days after the pandemic ends.”
While undoubtedly well intentioned, such legislation is misguided and would have devastatingly counterproductive ramifications. Even amidst the turmoil and uncertainty currently plaguing the county, professional debt collectors are a necessary resource for consumers. Consumers require assistance and direction as to how to pay or dispute a bill, clarification concerning the source of a debt, information regarding available payment plans which could halt collection efforts, and identification of potential identity theft. In the medical community, for example, debt collectors serve hospitals and other providers of medical services and explain to patients how they can access charity care and other financial assistance if they cannot afford care or are currently out of work as a result of the crisis.
If collection agencies are not empowered to remain open, consumers will lose a critical resource to assist them. Indeed, most creditor companies are currently confronted with unprecedented levels of communications from consumers who need them to continue to provide services. Such companies are turning to the receivables industry to assist them in managing their suddenly increase call volumes and overflows.
Debt collectors are needed today more than ever. Shutting them down in a perceived attempt to protect consumers would have the opposite effect of disenfranchising them at a time when they need assistance the most.