Impact of the shutdown exemplifies importance of communication with consumers.
In a letter to House Financial Services Committee Chairwoman Maxine Waters, D-Calif, ACA International commented on the federal government shutdown while noting the benefits of consumer-creditor communications during times of financial hardship.
Waters last week penned a letter to leaders at financial services industry trade associations and credit bureaus seeking information about their efforts to help consumers impacted by the shutdown. ACA International responded to the letter, thanking House Financial Services Committee leadership for the recognition that problematic consequences can result from not addressing unpaid debt. ACA also urged the committee to consider the importance of an ongoing dialogue with consumers facing financial hardship.
Chairwoman Waters wrote:
“As a result of the shutdown, affected borrowers, through no fault of their own, are facing immediate hardship in making timely payments on debts such as mortgages, student loans, car loans, business loans, or credit cards. Furthermore, once negative information is reported to consumer reporting agencies, affected employees are likely to see a reduction in their credit scores. This may limit their ability to access credit or result in their being offered higher rates and more costly terms on credit in the future. Prudent workout arrangements that are consistent with safe-and-sound lending practices are generally in the long- term best interest of the financial institution, the borrower, and the economy.”
ACA highlighted that it agrees with some of Waters’ concerns, particularly the benefit of making payment plans or workout arrangements with consumers.
“ACA members have long worked to engage in open communication with consumers about their financial situations to help provide solutions for resolving debts. Consumers need the information that ACA members provide them to maintain their financial health, and open communication can often lead to the most favorable outcome for them,” Neeb writes in response to Waters’ letter. “Without the ability to communicate with consumers about payment plans and other more favorable outcomes, creditors are often left with no choice but to engage in litigation or negative credit reporting. ACA members too generally believe this should be a last resort, and in the case of the federal government shutdown, it would be critical to understand the financial hardship these employees are faced with, and to engage in a dialogue about what can be done to avoid any adverse actions that impede the ability to access credit.”
Read the complete letter from ACA International CEO Mark Neeb.
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