We sat down with Rich Cordray, author of the book “Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy,” to discuss what consumers can expect in 2021 and how to protect themselves in the wake of the COVID-19 pandemic. Cordray was born in Columbus, Ohio and served as Ohio’s 49th Attorney General and was the first Director of the Consumer Financial Protection Bureau (CFPB) from 2012 to 2017.
Ohio Legal Help (OLH): What do you foresee as the challenges and/or trends for consumers in 2021?
Richard Cordray (RC): I think there are two main situations that we face. Number one would be the ongoing effects of the pandemic, and number two would be the economic fallout from the pandemic. The effects of the pandemic continue to be that people are affected very differently across different parts of our society. People who can work from home are maintaining their income, and in some cases, they are actually saving money since they aren’t commuting or spending as much as before the pandemic. They are perhaps in better economic shape than they were before.
However, there’s also a large group who are in the face-to-face economy and they have lost hours, become unemployed, or been laid off, which makes for a difficult time. Although we’ve had extraordinary fiscal stimulus and relief both with the stimulus checks and the enhanced unemployment benefits, there are a lot of people who have fallen behind. For people who get behind on bills, there are all kinds of problems they then face. They have to worry about paying their mortgage or rent to maintain their housing, keeping up with paying their utilities, and getting behind on paying credit card bills or other debts. They get harassed and pushed around by debt collectors. We’ve had some moratoria in effect for foreclosures and evictions, but those will be coming off and I think consumers are going to need a lot of protections in the coming year.
OLH: How can consumers protect themselves financially in 2021? What steps should consumers be taking now?
RC: I think consumers need to continue to be very careful. Consumers have tried to save where they can if their income is holding up and have tried to pay down debts. They are being careful with their budgeting, which is important because we just don’t know how long this will last.
At the same time, they need to be keeping a close eye on what the government is saying about special protections during the pandemic, stimulus payments, and other means of assistance. If they owe debts, they need to try to work with their creditors in order to get as much accommodation as possible. Once we are out of this and the economy reopens, there could be a real boost to the economy as households recover and people gain more confidence about spending the money some have saved. Also, consumers should be aware that the CARES Act provided some credit reporting protections – if your credit was battered in circumstances through no fault of your own, they are supposed to make accommodations for that.
To learn more about protecting your credit, visit the CFPB's page on credit reports here.
OLH: How is all of this affecting seniors?
RC: We are all concerned about the health and social impact on seniors. We, as a community, need to be looking out for our neighbors by respecting the pandemic above all. In terms of consumer finances, many seniors are planning to live on their savings once they have retired. With interest rates down near zero percent, it makes it much harder to do that. There are now seniors who are potentially having to go back into the work force or move in with their children because the plans they may have laid carefully to live off their savings are now not working out. The same thing happened in the 2008 Great Recession and it made economic recovery more difficult for many seniors.
OLH: What other parallels do you see to the 2008 Great Recession and the fallout for consumers and COVID-19? What differences do you see?
RC: That’s a great question. I gave a community address in the fall at Boston College Law School about the comparison of the 2008 Great Recession and the financial crisis with the 2020 COVID-19 pandemic and the resulting economic downturn. There are some parallels, but notably there are differences.
The 2008 crisis was caused by problems in the mortgage industry. It led to a rash of foreclosures and millions of people lost their homes. That was the cause of that economic crisis. Second, the response to that crisis was slower and more lingering. Congress was less willing to provide relief directly to people, even though the Federal Reserve provided a lot of relief to banks that did not pass through effectively to local communities. There was a lot of heartache and hardship in the country, and it made recovery harder.
The difference this time is there was not weakness in the economy going into the pandemic. It was a global pandemic that shut down the economy. It is possible that the economy may come out of this in decent shape, but the big issue is income reduction and job loss and how much damage they have done.
There is not a foreclosure problem right now since there have been lessons learned and there are moratoriums in effect. The issue is whether people can hold out until the economy is fully open again and they have their jobs back. The stimulus has flattened the curve of economic misery, but until we come out of this pandemic, we won’t know for sure whether people will have made it or not. We have some looming problems. For example, there is a debt collection problem and debt collectors are more aggressive because they know it is harder for people to make payments. We need to be monitoring debt collectors very closely right now to make sure they are abiding by the legal constraints of their behavior. We also need to make sure consumers know about their rights and options.
OLH: If a consumer does owe debt, where would you recommend they start?
RC: Typically, the place to start is to reach out to whom you owe the debt, whether that is a mortgage payment or late rent to your landlord. However, you can’t fail to pay and just expect that it will be wiped clean; there will be a reckoning down the road. If you can make your payments, you should continue to do so. If you do fall behind, you need to have a plan for how to get out of it when you are able.
For more information on managing debt, go here.
OLH: How has trending data been important in determining how policymakers can help consumers?
RC: I think data is critically important if we are going to diagnose and find ways to help consumers. One of the things the CFPB does is they provide public information on their website about the most common consumer complaints. When you have aggregated data about consumers, it gives you a much better antenna into what the problems really are rather than just assuming you know, which often leads to errors. If we are going to use all of our resources effectively to help consumers, we have to be able to accurately identify the most urgent problems.
OLH: What are the top 3 things consumers should do during the next year ahead?
RC: My top 3 tips for consumers:
- Try to be careful with your money and save if you can. I know it’s hard right now.
- Right now there are opportunities to skip payments, but be careful. The debt doesn’t go away. For example, make sure if you have a forbearance for your mortgage, you’re communicating with your servicer. If your credit card company has deferred payments, make sure you understand when payments have to start again.
- Unscrupulous businesses and scammers often prey on people during an economic crisis. If you have a consumer complaint, make sure you file it with the CFPB at www.consumerfinance.gov.