Some Pandemic Protections for Consumers Could Become Permanent

Consumer complaints to federal and state agencies exploded this year, fueled by a global crisis that financially stressed millions of Americans and disrupted thousands of businesses’ normal operations.

Now state legislators and consumer advocates across the country are pushing for permanent protections to address the gaps in consumer law exposed by the pandemic.

The COVID-19 crisis has put Americans at greater risk of defaulting on loans or falling behind on rent. State consumer protection offices and attorneys general have faced a deluge of reports about price-gouging, fake COVID-19 cures and online payment scams. The Federal Trade Commission has logged nearly 275,000 complaints from consumers, many of them seeking millions of dollars in refunds for canceled trips and services.

Officials in all 50 states and Washington, D.C., have taken emergency action to protect consumers during the pandemic. For example, 24 states and the District of Columbia enacted temporary measures to curtail aggressive debt collection, and at least 40 states and D.C. limited evictions of nonpaying tenants.

As those temporary protections expire, consumer advocates in many states want to enshrine them in law. There’s certainly precedent for such a shift: Some of America’s most significant consumer protections were enacted after the Great Depression and the Great Recession.

A woman walks past a personal finance loan office in Franklin, Tennessee. Officials in all 50 states and Washington, D.C., have taken emergency action to protect consumers during the pandemic, including enacting temporary measures to curtail aggressive debt collection. Some want to make the protections permanent. Mark Humphrey/The Associated Press

“I hate that we can only get better consumer protections after there’s been some kind of a crisis, like almost destroying the economy, or a pandemic, for example,” said Ed Mierzwinski, a senior director at the national advocacy group U.S. PIRG. “But we have found in the past that is when change happens.”

At least 23 states and D.C. have enacted or are considering new consumer protection laws because of the pandemic, according to a database maintained by the National Conference of State Legislatures.

“We’re having conversations, in Maryland and in other places, about the fact we can’t go back to ‘normal,’” said Marceline White, the executive director of the Maryland Consumer Rights Coalition. “‘Normal’ clearly wasn’t working for many, many Maryland consumers and their families … so we need to do something different.”

‘Not Easy Bills to Pass’

Maryland is one of several states considering changes to its eviction, foreclosure and debt-collection systems. White serves on a state recovery task force that is likely to push for new protections against eviction, including an extended timeline for the process, and a legal right-to-counsel for tenants.

The panel also is considering new regulations to limit wage garnishment and a requirement that creditors pursue an income-based repayment plan before a bill goes to collections.

Similar debt-collection changes are under discussion in Massachusetts and Texas. With the backing of more than 40 civic and community groups, Massachusetts has proposed a Debt Collection Fairness Act that would limit wage garnishment for debtors and reduce the possible window for collecting on a debt. While the bill’s sponsor, state Sen. James Eldridge, a Democrat, has introduced the legislation twice before, it gained new political urgency in the pandemic, he said.

“I think that, despite the federal CARES Act providing some stimulus and financial support to Americans, we saw that in reality the American social safety net has so many gaps at both the federal and state level,” Eldridge said. “We want to change that reality for families in Massachusetts.”

A woman walks past a personal finance loan office in Franklin, Tennessee. Officials in all 50 states and Washington, D.C., have taken emergency action to protect consumers during the pandemic, including enacting temporary measures to curtail aggressive debt collection. Some want to make the protections permanent. Mark Humphrey/The Associated Press

In Texas, advocates are also seeking to limit debt collectors’ ability to seize funds from debtors’ bank accounts—a long-standing issue that became more visible when indebted Texans scrambled to protect their federal stimulus payments, said Ann Baddour, the director of the Fair Financial Services Project of Texas Appleseed, a nonprofit public interest group.

But such a measure would face stiff opposition from creditors and business interests in the state, which already protects paychecks, homes and a wide variety of personal assets from debt collectors, said Craig Noack, a longtime creditors’ rights attorney and the president of the Texas Creditors Bar Association.

While creditor and debt collection groups agree that stimulus checks should be protected from garnishment, Noack said, long-term limitations on bank account garnishment would “slam the door on the only remedy truly available in Texas to recover on a valid judgment.”

“These are not easy bills to pass,” said Michael Best, a staff attorney at the National Consumer Law Center, a nonprofit organization in Boston. “There are industries that do not want to see the kind of reform we’re working on. But … I do think this has made [consumer credit protection] resonate as an issue. It’s given it more momentum.”

Scams and Cancellations

Improvements to other areas of consumer law also have been explored, though advocates say they’ve seen far fewer state-level bills on issues such as scams or airline ticket cancellations. One notable exception is New York’s recent membership-cancellation bill, which makes it easier for consumers to zero out ongoing or automatically renewing contracts, such as subscription services, equipment rentals and gym memberships.

In many cases, there is no legislation because existing laws already govern these issues, said Spencer Weber Waller, the director of the Institute for Consumer Antitrust Studies at Loyola University Chicago School of Law. Most states already ban price-gouging, for instance. In other cases, such as online payment scams or airline refunds, states have been limited by concerns about jurisdiction.

Under current law, conflicts between customers and airlines—a major flashpoint both before and during the pandemic—fall under the purview of the federal Department of Transportation. In October, 38 state attorneys general urged Congress to expand those enforcement powers and double down on existing refund laws.

Advocates also have called on the federal government to cancel student loan debt, increase funding for utility assistance programs and enact a permanent, national interest-rate cap for consumer loans.

“A lot of this has been driven, frankly, by consumer complaints—about abusive debt collection, about landlords who have not really abided by eviction moratoriums, about refunds for travel and vacations,” said John Breyault, vice president of public policy at the National Consumers League, a consumer advocacy group based in Washington, D.C.

“The question now is: Are we going to see a dramatically different consumer protection landscape coming out of COVID than we did going into it?”

The answer to that question, Breyault said, will depend in large part on state and national politics—and the shape of the recovery to come. More than 160,000 businesses have permanently closed since the start of the pandemic, according to a September report by Yelp, the online reviews service. That may make it politically difficult to push for more regulations on businesses.

But America has a long history of strengthening its consumer protections after disasters and emergencies, said Weber Waller, the Loyola professor. The Federal Deposit Insurance Corporation—the federal agency that guarantees bank deposits—was created in response to the Great Depression.

Nearly 80 years later, Congress established the Consumer Financial Protection Bureau, charged with regulating mortgages, credit cards and student loans, as part of a package of reforms aimed to address the roots of the 2008 financial crisis.

According to CFPB data, consumer complaints to the agency reached record highs this fall, with monthly complaints up more than 80% in November 2020 versus November 2019. In the past six months alone, more than 200,000 consumers have reported problems with a credit bureau, debt collector or credit card company.

“I do think a lot of these new bills have legs to move next session, because what’s the alternative?” said White of the Maryland Consumer Rights Coalition.

“Just on a straight-up policy level, I think there’s a pretty broad-based realization now that something has to shift.”