The coronavirus (COVID-19) has hit American consumers hard, putting many of them temporarily out of work. Relief efforts have been made on a state-by-state basis to assist consumers.
New York residents have been given a 30-day freeze period from state-owned medical debt and student loan debt collections. Another similar announcement came from the mayor of Chicago with respect to city debt through April 30, 2020. The Department of Education has suspended collections on federal student loans, and they are encouraging private student lenders to do the same.
Federal legislation has been proposed that would prevent debt collectors from pursuing a number of collections actions to push a consumer to pay on a debt, including shutting off someone’s utilities or garnishing wages until at least 120 days after a major disaster or emergency has ended.
Debt collectors are pushing back hard. They argue that debt collection is ‘essential’ to the financial health of consumers and an important industry for helping medical providers and other lenders. They also claim that suspending collection of debt would put an undue burden on their industry.
The fact that approximately 3.3 million new unemployment claims have been made indicates that consumers need help. Postponing collection proceedings, including wage garnishment, will arguably give consumers the relief that they so desperately need during this stressful time.
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