More Americans filed for unemployment last week than in any week in our history. AT 3.3 millionThis is nearly five times the record set in 1982 and far outperforms any week during the Great Recession of 2008-2010.
Many of us have friends who have lost their jobs, and it’s not just the numbers. Catering workers, retail workers, odd-job workers and the self-employed are among those made redundant or whose working hours are drastically reduced, with no definitive answer as to when they can. expect to return to normal working hours. Many will struggle to pay their credit cards, student loans, utilities, and other bills on time, if at all.
The direct effects of the COVID-19 pandemic range from uncomfortable to devastating – mentally, physically, socially and financially. While it’s hard to look past short-term solutions at a time like this, we need to make sure we protect Americans in the long term as well. One potential long-term effect is the deterioration of the credit scores of millions of Americans.
Don’t let the coronavirus ruin credit scores
While it is understood that preventing the spread of the coronavirus should be everyone’s top priority right now, the side effects of a crisis of this magnitude must also be addressed. Our financial system is on autopilot when it comes to the negative financial ramifications of missed payments, so we call on Congress to prevent credit bureaus from reporting negative information during COVID-19
Under the current system, credit bureaus deal with delinquencies caused by lost income due to a global crisis. the same as those resulting from poor financial management. So our recently unemployed or underemployed friends who suddenly can’t make payments – through no fault of their own – will receive lower credit scores. This will impact their ability to access credit and obtain reasonable interest rates. It could also trigger a vicious financial cycle that could deny them jobs and housing.
for years after the pandemic.
Historically, every company or lender has been able to unilaterally decide whether to allow measures such as late payments and forbearance. We have seen it in almost every financial disaster of the past half century. But now is not the time to rely on voluntary emergency regulation, as consumers already face increased financial pressure.
It’s time to get serious:We will have a devastating recession economy until coronavirus testing is widespread
For decades, the US Public Interest Research Group and other consumer groups have worked to help Congress get the three major credit bureaus under control: Equifax, Experian, and TransUnion, which have never been fully accountable to anyone. is. Restrict negative credit reports failed even during natural disasters and government shutdowns. With a global pandemic now added to this list of crises, the failure to protect American consumers cannot continue.
Prevent downward credit spirals
Tens of millions of Americans’ lives have already been turned upside down by the coronavirus. Millions of their credit reports will spiral downward during a pandemic unprecedented in the life of anyone under 100. Bad credit history will haunt them for years to come.
That is why we urge Congress to adopt the Workers’ Credit Disaster Protection Act. Representatives and Senators owe it to their constituents to ensure that they do not bear any long-term financial burden as a result of COVID-19.
Extend unemployment benefits:We helped unemployed workers survive the great recession. Here’s what to do about the coronavirus.
The Workers’ Credit Disaster Protection Act offers triple protection for consumers, spanning 120 days from the completion of the declaration of national emergency or the passage of the bill, according to the latest date. The three elements are: preventing lenders from reporting negative information, preventing credit bureaus from including negative information in consumer credit reports, and in the event that negative information is still being reported, requiring bureaus to delete this information.
It is not known when the story of the coronavirus outbreak will be written. Hopefully, the people who can protect the financial future of Americans with their votes are among the heroes of this story.
Ed Mierzwinski is the senior director of the United States Public Interest Research Group for Federal Consumer Programs and Sabrina Clevenger is a member of the US-PIRG on Consumers. Follow Ed on Twitter: @edmpirg