President Trump has campaigned for a promise to help America’s men and women, to millions of Americans who have lost a good job, who have seen their wages stagnate, and who are drowning in debt. His proposals for tax reform and tax reduction, investments in infrastructure and regulatory assistance will help in the long term to restore economic growth. But the best short-term solution is to help people get out of debt and get back on their feet.
Americans now owe $ 1 trillion in credit card debt, more than at any time after the Great Recession. Half of American families live from wages to salaries, with small deposits for emergency financial situations. Millions of Americans are mired in debt, besieged by abusive debt collectors.
Congress could take one small step to ease the financial difficulties of millions of Americans and help them again become active participants in our economy. This one step will free people from the clutches of robbers of predatory debts and help millions of Americans struggling with debt to achieve financial stability.
This proposal would provide a tax credit to induce banks to stop selling their overdue debt to debt collectors and instead to donate debt to qualified non-profit organizations set up to work with consumers to solve their debt. According to the current legislation, large banks sell their delinquent debts to companies that buy debts that abuse, prosecute and sue consumers and never help them to resolve their debt and get back on their feet. This is bad for banks, and bad for consumers.
This small step would change the approach to consumer debt and help alleviate the financial problems of millions of Americans. This would help stop the abuse of debt collection, reduce foreclosures and bankruptcy, and help consumers improve FICO performance. By improving access to consumer credit, it would reduce predatory lending, payday loans and collateral. And, by easing financial difficulties, it would reduce family disagreements, substance abuse and other social problems.
Seventy-seven million Americans have at least one overdue debt in their credit report. The incredible 668 billion dollars of consumer debt are overdue, and 471 billion are seriously overdue (at least 90 days later). Almost half of American families say their biggest financial problems are too many debts, health care costs and low wages in this order. According to one national survey, six out of ten Americans say they are losing sleep at night, worrying about money problems, including how to get out of debt.
One of the main reasons for financial problems with consumers is the daily abuse of debt collectors. The CFPB reports that the main source of consumer complaints that they receive is an abusive collection of debts. The agency estimates that one in three Americans contacted the lender or debt collector last year. Ten million lawsuits to collect debts are filed every year against consumers by debt collectors.
This tax credit proposal would help create non-profit organizations specifically designed to help consumers resolve their debts, honestly, without bankruptcies or lawsuits. These non-profit organizations should offer free services that help consumers restructure and resolve their debts, including negotiating with the creditors about repayment plans and settlements. They will assist in finding new or better jobs, help identify private and public social service institutions and provide educational resources and money management tools to help consumers improve their financial prospects.
The problem of abuse of debt collection leads to a cooling of consumer spending and economic growth. It shut down millions of Americans from our economy. Most of the consumer debt falls on spending on basic necessities, such as food, clothing, shelter and recipes, rather than luxury goods. To help people get out of debt will allow them to get back on their feet and help to restore our economy.