WASHINGTON–A growing number of Americans are skipping payments on mortgages, auto loans and other bills. While helpful in the short term, there are longer-term ramifications, especially given the absence of any federal guidelines, NPR reported.
“The problem is that these efforts aim to create a financial bridge to the future for people who've lost their income in the pandemic — but the bridge is only half-built,” NPR reported. “For one thing, the help still isn't reaching many people who need it.”
The NPR report noted many people have been unable to receive benefits owed them or are unaware of some of the relief available.
"We're paycheck to paycheck like most people," one person told NPR. "And when you take away that paycheck, especially for this length of time, we have to make the decision — a vehicle or food."
Loans in Forbearance
NPR cited the latest available numbers from TransUnion show about three-million auto loans and 15 million credit card accounts are in some kind of program to let people skip or make partial payments. “Those are probably low estimates,” NPR said.
The report further cited data from analytics company Black Knight, 4.75 million homeowners—or 9% of all mortgages–have entered into forbearance plans.
But looking ahead, advocates say people could run into big trouble because the terms of these hardship programs can be all over the map, NPR said.
"Credit cards, auto loans, installment loans, there are no federal guidelines," Aracely Panameño, a director at the nonprofit Center for Responsible Lending, told National Public Radio.
What are the Rules?
Panameño said when it comes time to make up for all those skipped payments, there are federal rules for repayment plans for home mortgages but not for many other types of loans. And that could create some dilemmas.
"You must have a capacity to catch up with your payments in an affordable way," Panameño said.
Chi Chi Wu with the National Consumer Law Center told NPR that without better protections, when it comes time to make up for the missed payments, "there's going to be a lot of people who could experience massive credit reporting harm.”
Wu is an attorney who focuses on consumer credit issues.
Under the rules for mortgages, consumer advocates say the vast majority of people hurt financially during the outbreak who entered a forbearance plan should have their missed payments moved to the end of the loan term, NPR said.
Hispanics, African-Americans Lagging
In the meantime, Panameño said her group did a national survey to see who was having trouble paying their bills after the pandemic struck.
"Twenty-five percent of Latinos had already fallen behind with their payments," she told NPR. "Twenty-eight percent of African-Americans had fallen behind. That compares to 12% of whites that had fallen behind."