Collections and recovery: What you need to know moving forward post-COVID-19

The COVID-19 pandemic has led to an economic crisis – how big of a crisis remains to be seen, but one thing seems to be certain, it’ll probably last far longer than the viral pandemic that caused it. Businesses have already been shuttered for months and more than 40 million people filed for unemployment since March.

Emerging from the pandemic and moving forward won’t be easy. Businesses that need to collect money owed are likely to encounter challenges in recovery.

Americans’ debt during coronavirus pandemic

The U.S. Federal Reserve bank reports total household debt increased by $155 billion in the first quarter of 2020. Furthermore, Creditcards.com reports 23% of adults carrying credit card debt added to it during the COVID-19 pandemic. Americans have lost their jobs and/or have experienced massive delays in receiving their unemployment checks.

As a result, many are skipping their payments for mortgages, cars, and other credit accounts due to hardships they’ve faced during the coronavirus health crisis. This puts lenders looking to collect on these past debts in a difficult position going forward.

The government places restrictions on lenders

In light of the economic struggles the COVID-19 pandemic has caused, it’s not surprising federal and state officials have placed restrictions on debt collection. The Coronavirus Aid, Relief, and Economic Security Act (CARES) placed temporary reprieves on certain kinds of debt for specified amounts of time, which will vary depending upon the type of debt. Limits were also placed on credit reporting. Furnishers of credit information are required to report accounts as current for consumers continuing to make payments or for those who are eligible for deferments under the CARES act. Once the President rescinds the national emergency declaration, this ends 120 days later.

Additionally, many states have enacted their own laws that directly affect debt collectors and what actions they are allowed to take during the pandemic. In some cases, these restrictions included halting debt collection calls, prohibiting new garnishment efforts, and initiating new collection lawsuits, along with other types of debt collection activity. However, this may soon change.

Massachusetts judge rules restrictions declared illegal

Massachusetts was one of the states that put heavy restrictions on debt collectors and the case went to court. A judge overseeing the case recently ruled these restrictions were illegal and debt collectors in Massachusetts can now resume legal collection efforts. The reasoning is that legal efforts do not violate social distancing requirements and it’s already illegal to engage in fraudulent activities to collect debt.

The COVID-19 pandemic has thrown chaos into various aspects of a business. To ensure no laws are inadvertently broken, any restrictions, recissions, and changes in collection and recovery should be watched carefully as the country begins to reopen.

MicroBilt has the tools to aid you in your collection and recovery efforts. To learn more about our suite of recovery and skip tracing tools, contact us today.