Slipping Through the Cracks: Policy Options to Help America’s Consumer During... (EventID=111302)

Video Description

Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Thursday, March 11, 2021, from 10:00 a.m. (ET) Consumer Protection and Financial Institutions Subcommittee Chairman Perlmutter and Ranking Member Luetkemeyer will host a virtual hearing entitled, “Slipping Through the Cracks: Policy Options to Help America’s Consumer During the Pandemic." ___________________________________ Witnesses for this one-panel hearing will be: • Ashley Harrington, Federal Advocacy Director and Senior Counsel, Center for Responsible Lending (CRL) • Robert E. James, II, President, Carver Development CDE, and Chairman, National Bankers Association • Carla Sanchez-Adams, Attorney, Team Manager of Survivor-Centered Economic Advocacy Team, Texas RioGrande Legal Aid • Valarie Shultz-Wilson, Managing Partner, Shultz&Co Non-Profit Management Consultants • Joel Griffith, Research Fellow, Financial Regulations, The Roe Institute for Economic Policy Studies, The Heritage Foundation ___________________________________ Overview In the United States, the COVID-19 pandemic (pandemic) continues to be a health and economic crisis. COVID-19-related deaths have surpassed more than 522,000 and there have been nearly 29 million infections. As the virus forced the closure of many businesses, workers were faced with historic levels of unemployment, and the February unemployment level remained elevated at 6.2 percent while the labor force participation rate has declined.2 Small businesses are facing more bankruptcies and worse financial conditions than the worst quarter during the fallout of the 2008 financial crisis.3 Through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (Response and Relief Act), and other legislation and executive actions, Congress is working to provide relief to consumers faced with adverse financial conditions resulting from the pandemic. Most recently, the House of Representatives approved H.R. 1319, the American Rescue Plan Act of 2021, to provide, in part, additional support for consumers, workers, and small businesses. However, some consumers have been unable to access support, or relief measures have not addressed their specific financial needs. This hearing will explore gaps in consumer protections during the pandemic and evaluate possible policy responses to ensure all consumers and small business owners can get through this period of uncertainty and share in the economic recovery. This hearing will also address existing racial and economic disparities that have been dangerously exacerbated by this pandemic. Background The CARES Act was signed into law on March 27, 2020, and created many consumer protections aimed at helping individuals, families, and small businesses get through the health and economic crisis. While the law and subsequent agency actions established consumer rights to be granted certain terms of forbearance for federally insured mortgages, the same consumer rights were not extended to privately held, non-federally insured mortgages. The CARES Act also affects credit reporting. This law requires credit furnishers to report to the credit bureaus that consumers are current on their credit obligations if they have entered into a forbearance agreement, or other payment relief program, and are meeting the terms of such an agreement with their lender. However, the only consumers eligible to take advantage of this provision had to be current on their accounts before the emergency pandemic period. There is not a prohibition on creditors reporting information that negatively affects a consumer’s credit score, even if the reason a consumer missed a payment is directly related to a pandemic hardship, leaving many people unprotected.8 The CARES Act also requires federal banking regulators to allow lenders to suspend certain accounting requirements related to loan modifications and Troubled Debt Restructuring (TDR) classification, giving lenders more flexibility to work with borrowers who may find themselves unable to keep up with payments, without requiring the lender to hold more capital against possible losses. This provision was extended through December 31, 2021 in the Response and Relief Act.10 While this accounting flexibility may incentivize lenders to provide forbearance or payment flexibility to customers, it does not require lenders to grant such relief. In addition, the CARES Act created the Paycheck Protection Program (PPP), which provides forgivable loans to small businesses and certain non-profit organizations through Small Business Administration (SBA) certified lenders, including banks and... Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=406266