So I’ve got some initial thoughts, assume all disclaimers that this doesn’t represent my firm or any group and so on, just little old me.

First let’s talk about what these provisions mean. First one says that when consumers request *forbearance*, debt collectors should grant it. https://twitter.com/steelewheelz/status/1260288795808686081

Second one says that the Fed will loan the amount of these deferred payments to the debt collectors, and they don’t have to pay them back until the consumer starts making payments again.

It’s essentially trying to preserve the status quo using Fed powers.

This is the irony of calling Republicans conservative and Democrats not. Democrats are much more modern conservatives, especially once “culture” issues like gay marriage went their way. Their general goal and especially with the economy is maintaining the status quo.

That’s worth critiquing in itself. There are plenty of ethical reasons to say, for example, people should be bailed out but debt collectors should be told “tough luck.” If firms exist by public charter, and should be at whim of popular needs.

But let’s assume status quo is goal.

There are so many problems with this scheme it has literally had me tensed up since I read it. First off how are we going to let people know about this? Through the debt collectors? Folks if debt collectors were reliable conduits of truth I wouldn’t have a job.

Particularly in concerned with debt collectors misrepresenting what forbearance means (why I emphasized it earlier). The student loan world gives us an illustration of how debt collectors may not accurately represent the consequences of forbearance: https://law.justia.com/cases/federal/district-courts/new-york/nywdce/1:2018cv01086/119657/13/

But even more concerning is the prevalence of “double dipping” in the debt collection industry. Debt collectors, especially the low level ones (as opposed to the big debt buyers who hire them out), have tight profit margins. There’s a lot of pressure to obtain cash flow.

That pressure is usually put on callers and other low level employees. These employees have terrible working conditions: making poverty wages, sometimes stuck in a soul sucking call center, often given quotas. It’s no wonder they’re the ones who usually wind up snitching.

And like with the Wells Fargo fake account scandal, they’re also the ones taking a lot of the direct actions of the debt collectors. They make the misrepresentations, they make the threats, etc. It’s accepted and even condoned.

So if this gets implemented (and admittedly that’s a longshot, I think the Republicans will fight this whole bill on “principal” aka on deranged conspiracy theories and so forth), I worry debt collectors will double dip. Lie and say consumers are in forbearance to get loans.

What happens when that happens? Not clear how this would be administered other than the Fed providing the funds. Currently debt collection is very unregulated because of the CFPB’s political gridlock, regulation is generally left up to private attorneys like me.

Can’t say I’m happy for that new potential source of business. For every one person I help, hundreds will not be. I know because I see the documents. Unlike the CFPB though I can’t go searching for someone who got screwed over. That’s “unethical” solicitation

And to wrap this up let’s assume that the debt collectors all come to Jesus for some reason and the program goes exactly as planned. Where does that leave working people? Forbearance is like holding a hose - the water doesn’t go away, it builds up and shoots out all at once.

The terms for forbearance are laid out much more clearly for the mortgage relief (though still this same firehose problem). But assuming the terms of forbearance are the same or worse than the mortgage relief, it will create major problems at the tail end once forbearance ends.

The net net here is that the burden will fall mostly on debtors. Their temporary relief is offset by the debt post-pandemic being compounded. Whereas debt collectors will be better off - the Fed will guarantee them income. Fed payments are 100% reliable unlike impoverished people

So returning to the beginning critique, it should be clear that the status quo this would maintain is not keeping the scales of inequality balanced. To the contrary, it maintains the status quo of debt collectors surviving this pandemic at the expense of the rest of us.

Oh and here’s two ideas for alternatives. What we should actually do is a debt jubilee, a hard reset on consumer debt obligations, wipe everyone’s slate clean. It used to be very common to do this both periodically (per the Bible every 7 years) and in times of crisis.

The government has the power to do this. If the federal government wanted to, it could pass a law tomorrow to buy and forgive all the debt.

I know people will say that’s not possible with Trump as president, so here’s a more “realistic” alternative. Give aid through debtors rather than through debt collectors. Basically set it up like Medicaid reimbursement for health providers.

Debtor sends government paperwork and government pays the regular monthly installment. Debt collectors get paid. If you’re interested in stimulating the economy this is also the way better option because people can use their money for things other than servicing their debt.

If I’m in forbearance, I’m going to be penny pinching because I know what’s coming down the pipeline. With forbearance that has already happened, preliminary surveys show that’s the reaction, and to even make payments on the debt while in forbearance.