Problematic Provisions of HEROES Act Addressed in House Committee Hearing


Committee members discuss impact of debt collection and credit reporting restrictions with economic experts.

7/23/2020 15:30

As Congress debates the next phase of coronavirus relief legislation to provide aid to consumers and businesses, the House Financial Services Committee revisited the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) ACT (H.R. 6800) during a hearing Thursday.

Members of the committee debated the purpose of the hearing since the HEROES Act was approved in the U.S. House of Representatives earlier this summer and is now being debated in the U.S. Senate.

“The HEROES Act provides critical relief and protections for all: renters, homeowners, people experiencing homelessness, consumers, students, small businesses, minority-owned businesses and non-profits, community financial institutions, and state, territory, tribal and local governments,” U.S. Rep. Maxine Waters, D-Calif., said in her opening statement at the hearing.

Ranking member of the committee, U.S. Rep. Patrick McHenry, R-N.C., asked for the hearing, “The HEROES Act: Providing for a Strong Economic Recovery from COVID-19,” to be reconsidered.

In his opening remarks, McHenry questioned the direction and focus of the hearing while some provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act helping consumers who are unemployed, such as extra monthly unemployment payments and eviction moratoriums, are ending soon.

“This hearing is a waste of time and many Americans are facing a fiscal cliff,” McHenry said. “We passed the bipartisan CARES Act, which was the right response at the right time. Let’s do that again. We can’t lose sight of the fact that if businesses don’t survive, there will be no jobs for workers to come back to.”

HEROES Act Concerns

ACA International continues to work to educate Congress, and specifically the U.S. Senate, about the troublesome provisions in the HEROES ACT and submitted a position letter to House Financial Services Committee in advance of Thursday’s hearing. ACA is pleased that several members of the committee understood and expressed concerns that ACA has been outlining in its advocacy efforts.

ACA appreciates that Congress considered our concerns about an outright ban on collections and did not include language limiting the ability to make phone calls in the HEROES Act approved in the House in May. However, the HEROES Act proposes several changes that would have a significant impact on the accounts receivable management (ARM) industry.

“The HEROES Act is a step backward. While it claims to assist consumers by prohibiting debt collection during the COVID-19 pandemic, the legislation instead threatens the debt collection industry’s ability to help its creditor clients, including the small businesses, community financial institutions, and hospitals that rely on them,” ACA CEO Mark Neeb said in the letter.

Numerous sections of the HEROES Act include provisions that would place restrictions on the collection of consumer debt during the COVID-19 pandemic and ultimately leave consumers are unaware of the options they may have to handle their debt obligations and deadlines for insurance corrections and charity care.

There are also proposed restrictions on credit reporting which, after exhausting other options, can be the best way to alert consumers of their outstanding debts. Moreover, consumers could be at risk if they are obtaining unaffordable credit and services during the delayed credit reporting timeframe if this legislation were to become law. Credit providers will not understand a consumer’s financial situation if they have an inaccurate credit report.

“With regards to this bill itself, the HEROES Act would suppress credit reporting information and make credit reports obsolete,” U.S. Rep. Blaine Luetkemeyer, R-Mo., said during the hearing. “Lenders depend on accurate credit reporting to determine the credit worthiness of borrowers. As someone who has sat across the table from consumers and made loans, [if] lenders are no longer able to depend on credit reports, they will be forced to increase rates to account for additional risk in their loans. This will only lead to decreased access to credit and specifically decreased access to credit for low-income borrowers. The CARES Act already protects borrowers from negative credit reporting resulting from loan accommodations. Federal financial regulators encourage lenders to work with borrowers during a pandemic.”

In questions for witness Steven Davis, labor economist and William H. Abbot professor of international business and economics at the University of Chicago Booth School of Business, U.S. Rep. Ted Budd, R-N.C., discussed debt collection restrictions in the HEROES Act.

“As we prepare for this recovery, I am concerned about the negative impact that a blanket moratorium on all debt collection activities will have on small businesses and on the economy as a whole,” Budd said, then asking Davis to discuss the negative impact on small businesses and the economy if lenders do not know if they will be paid back and can work with consumers on payment plans.

“It is the case that there is a temptation to look at one side of the balance sheet or the balance sheet for one party,” Davis said. “One person’s debt is another person’s asset. If we cancel that debt or we put a moratorium on repaying that debt, we are helping the debtor and we are hurting the creditor equally. That is a fundamental point to keep in mind. There is no magic bullet to stimulating the economy by cancelling people’s debts.”

Budd also noted remarks from former CFPB Director Richard Cordray about the importance of debt collectors in the economy:

“Responsible debt collectors that do their work with care are treating consumers with respect [and] are a natural and even essential part of the consumer marketplace.”

“I think this is especially true as we work to help consumers and small businesses recover from this pandemic,” Budd said.

Next Steps for the HEROES Act

The Senate is not expected to take up the full HEROES Act package from the U.S. House of Representatives and there will continue to be opportunities for Congress to remove the problematic sections. It is expected that Senate discussions on its version of the bill will begin moving forward this week and ACA is continuing its fierce advocacy in the Senate.

Read more on the potential impact of the HEROES Act in ACA’s summary: ARM Industry Thoughts on the HEROES Act and coverage from ACA here: ACA International Outlines Problems with House HEROES Act.

Meanwhile, the House and Senate are in session this week with some members of the House operating remotely. Members are allowed to vote by proxy.

Members of Congress are debating another relief bill, including additional stimulus checks for consumers, according to Forbes.

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