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CFPB Details the Debt Struggle

It’s no secret that many Americans—especially during COVID-19—are struggling with debt, as reported today by The Consumer Financial Protection Bureau (CFPB) in an analysis of recent trends in settling debt and credit counseling.

Changes over time in the approach used by consumers have used these debt relief options for unsecured debt are reflected in the report.

"Even as we’ve continued to move forward with our other regulatory work, we’ve taken several steps in response to the COVID-19 emergency,” the CFPB said in its post by Susan Bernard, head of its regulations office, reported DS News.

The agency’s been "prioritizing activities aimed at protecting the stability of the financial sector and enhancing its recovery once the public health crisis has passed and guarding consumer financial well-being during following the COVID-19 emergency," continued the post.

Meantime, consumer advocates and others have urged the CFPB to put a hold on, for now, rulemaking initiatives unrelated to the pandemic, according to DS News.

Almost one in 13 consumers with a credit record had a minimum of one account reported by the creditor as settled or with payments managed by a credit counseling agency from 2007 through 2019, the CFPB stated. That was determined by tapping the Bureau’s Consumer Credit Panel, a nationally representative sample of around 5 million de-identified credit records maintained by one of three nationwide consumer agencies.

During the Great Recession, debt settlements ballooned dramatically, topping out at $11.4 billion, the report also shows. Over 50% of the settlements unfolded within a year of the account hitting delinquency. In the aftermath of the recession, while debt settlements and credit counseling are occurring less frequently, following changes in delinquencies and credit tightness, a recent uptick in settlements has occurred.

Economic downturns down the road might culminate in these trends rearing again. These efforts are a by-product of other recent work by the foundation. The Bureau undertook the work to fuel market conversations underscoring progress in options for consumers, unable to manage their unsecured debts any longer.

Meanwhile, the agency also outlined additional key rulemaking initiatives it anticipates making advances on in the months ahead, according to DS News.

Rules proposed last year that would shed additional light on consumer communication standards for debt collections are Included. They also would restrict certain collections practices. That would mark the first regulations ever issued under the Fair Debt Collection Practices Act, a four-decade-old federal law governing the industry.

It noted that final action on these draft rules is due to be initiated in October by the CFPB. “At a later date,” additional action will be taken to finalize a recent proposal trained on tome-barred debt disclosures.

This fall, the Bureau plans to propose new Home Mortgage Disclosure Act rules, which would address details lenders are required to report. What’s more, “in light of consumer privacy interests,” how the collected data is disclosed publicly.

“As consumers seek temporary relief from lenders, the pandemic is impacting the operations of financial companies that are eager to help their customers during this unprecedented time,” said CFPB Director Kathleen L. Kraninger.

About Author: Chuck Green

Chuck Green has contributed to the Wall Street Journal, Washington Post, Los Angeles Times, San Francisco Chronicle, Chicago Tribune and others covering various industries, including real estate, business and banking, technology, and sports.

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