Elizabeth Warren and Sherrod Brown's Plan to Protect Consumers From Financial Ruin

By Emily Stewart, Vox

22 April 20

Congress has an opportunity to go big in the next coronavirus package, including protecting people from being crushed by debt.

he $1,200 stimulus checks from the government have quite a loophole. Banks and loan sharks can seize the money before it lands in your account — a wrinkle that favors debt collectors over the vulnerable people the checks are supposed to help.

Sens. Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) are calling for Congress to put a stop to it in the next coronavirus package out of Capitol Hill. 

The plan is part of a broad set of proposals, shared exclusively with Vox, that the pair of senators are releasing on Tuesday to help consumers manage debt — be it mortgages and rents, student loans, credit card debt, or auto loans — during the coronavirus crisis and accompanying economic downturn.

“Consumer spending drives our nation’s economy, and we will emerge from the current crisis,” the pair wrote in their proposal. “But if Americans are left drowning in debt at the end of it, our recovery will be hampered as people will spend less on goods and services.”

Millions of Americans were already in dire straits before the global pandemic hit, and millions more have been sent into a spiral. Roughly 22 million people have filed new jobless claims over the past month, and as economic shutdowns across the country continue and unemployment systems catch up, that number is likely to go up. And America was already heading into the crisis deeply indebted: US household debt hit a record $14 trillion in 2019.

Sometimes, the word “consumer” can feel fuzzy, but the truth is, a consumer is everyone. “A consumer is anyone who is paying a mortgage or medical bill. It’s anyone who has student loan debt or credit card bills or car payments. This crisis is affecting all of us. Tens of millions of Americans have filed for unemployment and many more could lose their jobs or be unable to afford their bills,” Warren said in a statement to Vox. “Providing immediate relief is an important safety net that will be good for families and good for our economy.”

The pair of senators are laying out six proposals to address that reality, building on the limited protections enacted in the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, last month. Some — like not letting creditors take people’s relief checks — address the first law’s oversights. Others — like broadly canceling student debt — are long-standing progressive goals. And still others are a decidedly Warren-esque response to the crisis the United States is facing, like ramping up the Consumer Financial Protection Bureau (the CFPB)’s oversight. 

To be sure, these proposals might not go far enough to protect people — the lawmakers even acknowledge that families will probably wind up filing for bankruptcy, whatever happens. And that’s if they make it into law. Republicans have long been skeptical of the CFPB’s mere existence and the idea of being too lenient on debt. Some in the GOP have accused Democrats of exploiting the current crisis to push forth a progressive agenda. And even within the Democratic Party, not everyone is aligned on issues such as student debt cancellation. Warren and Brown, however, say now is the time for big ideas.

How Warren and Brown want to protect people from being crushed by debt during the crisis

The CARES Act, the $2.2 trillion stimulus package signed into law in late March, provides some protections for consumers, but it could go further. For example, it entails a foreclosure moratorium and right to forbearance, meaning a pause on all payments, for federally backed mortgages. It also protects renters from eviction for 120 days, assuming they’re living in a building with a federally-backed loan or are part of specific government programs. But 70 percent of home mortgages are backed by a federal agency, meaning 30 percent are private and left out.

Student loan debt has been handled in a similar situation. The CARES Act suspended most federal student loan payments and put federal student loan interest rates at zero percent, but it leaves out students with private loans, let alone touching the idea of debt cancellation.

“So, while the government is making trillions of dollars available to large companies, Congress offered no relief for Americans with auto loans, credit card debt, payday loans, or other debt,” Warren and Brown write.

The pair lay out six proposals for Congress to include in the next coronavirus relief package, which is still being debated among Washington lawmakers:

• Protect stimulus payments: The CARES Act does not specifically prevent debt collectors and banks from seizing stimulus payments to pay off existing debts. Some states have called on the Treasury Department step in, but Warren and Brown are calling for protections to be included in the next coronavirus bill.


• Put a pause on debt: The senators want to allow consumers to put a pause on all payments of debts they’re unable to pay during the crisis and prevent them from being punished if they have to do so — that means no interest, late fees, or other penalties for nonpayment. And when the crisis ends, they’re calling for creditors to give people some time to catch up before they are expected to start paying again and for Congress to bar debt collectors from using measures such as garnishments, evictions, repossessions, and utility disconnections to collect debts.

They have proposed the Small Business and Consumer Debt Collection Emergency Relief Act with Sen. Cory Booker (D-NJ), which would extend debt protections to small businesses.

• Keep an eye on credit reporting: Because many Americans are likely to miss some payments as a result of the coronavirus crisis, the senators are calling on Congress to make sure their credit reports don’t take an unfair hit. “Nobody should be denied credit for a new home or car, prevented from renting an apartment, or fail a security clearance for a new job because they ran into trouble making payments during the coronavirus pandemic,” Warren and Brown write. “If we want consumers to stimulate the economy and speed up a recovery, we need to give them the tools to do so.”


• Protect student borrowers: Warren and Brown are calling for Congress to broadly cancel student loan debt as a way to help stimulate the economy, the idea being if people aren’t drowning in the collective $1.6 trillion in debt they are now, they’ll be able to spend that money elsewhere. They also want to extend CARES Act protections to private student loan borrowers.


• Bring in the CFPB: It is the job of the CFPB, the government agency Warren conceived and got off the ground in response to the last economic crisis, to act as a guardian and steward for American consumers. And beyond what Congress can do, the senators are calling for the bureau to step up. The bureau was created so that consumers “would not be left at the mercy of giant financial institutions” and would have someone to look out for them, but instead, they worry Trump-picked leadership has weakened protections. Congress has the tools to oversee what’s going on at the CFPB, and it should use them.

They outline a number of steps the CFPB can and should be taking, including financial institution examinations (even if not on-sight), data gathering and monitoring, and focusing on industries that can be particularly bad actors — debt collectors, mortgage servicers, and payday lenders. It also has enforcement powers. Warren and Brown aren’t the only figures sounding the alarm about the CFPB — earlier this month, former CFPB Director Richard Cordray warned of the threat coronavirus poses to consumers and called on the bureau to step up. 

• Help Americans who file for bankruptcy: Whatever the government does, inevitably, some people will not be able to manage their debts and will wind up declaring bankruptcy. And if and when they do, Warren and Brown want that to be a more accessible and affordable option. Among their proposals on how to do that: scraping in-person bankruptcy requirements (also a good idea in a pandemic regardless), reducing bankruptcy costs, making the bureaucracy easier to navigate, and protections for homes, tax refunds, and stimulus benefits so they can’t be taken by creditors.

We are in an unprecedented moment in America. The pandemic has brought the economy to a halt, and millions of people are hurting. Debt isn’t a personal problem, it’s a collective problem — the system is set up so that ordinary people are at a disadvantage to powerful institutions. And once this is over, the worse shape people are in, financially, the longer the recovery will take. But Congress has an opportunity to go big in the next stimulus package, and proposals like this are how they’ll take it.