Debt Collectors Get a Bailout in Democrats’ New Pandemic Relief Bill

The bill also lets borrowers delay payments if they are struggling during COVID-19.

Saul Loeb/CNP/ZUMA

The coronavirus is a rapidly developing news story, so some of the content in this article might be out of date. Check out our most recent coverage of the coronavirus crisis, and subscribe to the Mother Jones Daily newsletter.

House Democrats’ second emergency relief bill offers a welcome soft landing for the millions of Americans struggling to pay their bills in the face of a pandemic-induced recession. But that relief is a two-way street: Debt collectors, too, will received federal fundings to make up for lost revenue.

On Tuesday, the Democratic leadership in the US House released a $3 trillion, 1,815 page bill to help boost the economy as the nation remains under pandemic lockdown. The new bill would, if it became law, grant people experiencing financial hardship a forbearance on their debtsā€””with no additional documentation required other than the borrower’s attestation to a financial hardship caused by COVID-19.” The provision reduces the bureaucratic burden of proving their circumstancesā€”something banks and lenders likely have little time or energy for, now that 33 million Americans are out of work. 

But the cushion doesn’t just benefit out-of-work Americans. The Democrats’ legislation also establishes “a facility” within the Federal Reserve to make “long-term, low-cost loans” to debt collectors to “temporarily compensate” them until consumers’ payments resume. While this compensation would be extended to all creditors such as utilities and local government agencies, it also extends to companies that make a profit hounding poor Americansā€”especially Americans of colorā€”for unpaid debts will be prepared to resume business once the pandemic subsides.*

To be sure, the debt collection trade is facing trying times. Nearly a third of Americans didn’t pay their April rent, and that was a mere three weeks into the coronavirus crisis. Since then, more than 20 million Americans have lost their jobs. A number of banks are waiving overdraft fees for customers facing hardship, and credit card lenders have braced themselves for the likelihood that they won’t get paid until people are back to work.

It could be worse: After Americans started to receive their stimulus checks of up to $1,200ā€”a provision of the first emergency relief bill in mid-Marchā€”banks began to garnish those payments to pay off existing debts. Democrats included a ban of garnishment in their latest proposals.

*Clarification, May 12, 2020, 9:30pm: This post has been updated to clarify that the provision in the bill would benefit all creditors.

WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

The short of it: Last year, we had to cut $1 million from our budget so we could have any chance of breaking even by the time our fiscal year ended in June. And despite a huge rally from so many of you leading up to the deadline, we still came up a bit short on the whole. We canā€™t let that happen again. We have no wiggle room to begin with, and now we have a hole to dig out of.

Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

The upshot: Being able to rally $253,000 in donations over these next few weeks is vitally important simply because it is the number that keeps us right on track, helping make sure we don't end up with a bigger gap than can be filled again, helping us avoid any significant (and knowable) cash-flow crunches for now. We used to be more nonchalant about coming up short this time of year, thinking we can make it by the time June rolls around. Not anymore.

Because the in-depth journalism on underreported beats and unique perspectives on the daily news you turn to Mother Jones for is only possible because readers fund us. Corporations and powerful people with deep pockets will never sustain the type of journalism we exist to do. The only investors who wonā€™t let independent, investigative journalism down are the people who actually care about its futureā€”you.

And we need readers to show up for us big timeā€”again.

Getting just 10 percent of the people who care enough about our work to be reading this blurb to part with a few bucks would be utterly transformative for us, and that's very much what we need to keep charging hard in this financially uncertain, high-stakes year.

If you can right now, please support the journalism you get from Mother Jones with a donation at whatever amount works for you. And please do it now, before you move on to whatever you're about to do next and think maybe you'll get to it later, because every gift matters and we really need to see a strong response if we're going to raise the $253,000 we need in less than three weeks.

payment methods

WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

The short of it: Last year, we had to cut $1 million from our budget so we could have any chance of breaking even by the time our fiscal year ended in June. And despite a huge rally from so many of you leading up to the deadline, we still came up a bit short on the whole. We canā€™t let that happen again. We have no wiggle room to begin with, and now we have a hole to dig out of.

Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

The upshot: Being able to rally $253,000 in donations over these next few weeks is vitally important simply because it is the number that keeps us right on track, helping make sure we don't end up with a bigger gap than can be filled again, helping us avoid any significant (and knowable) cash-flow crunches for now. We used to be more nonchalant about coming up short this time of year, thinking we can make it by the time June rolls around. Not anymore.

Because the in-depth journalism on underreported beats and unique perspectives on the daily news you turn to Mother Jones for is only possible because readers fund us. Corporations and powerful people with deep pockets will never sustain the type of journalism we exist to do. The only investors who wonā€™t let independent, investigative journalism down are the people who actually care about its futureā€”you.

And we need readers to show up for us big timeā€”again.

Getting just 10 percent of the people who care enough about our work to be reading this blurb to part with a few bucks would be utterly transformative for us, and that's very much what we need to keep charging hard in this financially uncertain, high-stakes year.

If you can right now, please support the journalism you get from Mother Jones with a donation at whatever amount works for you. And please do it now, before you move on to whatever you're about to do next and think maybe you'll get to it later, because every gift matters and we really need to see a strong response if we're going to raise the $253,000 we need in less than three weeks.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate