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The U.S. poverty rate has surged over the past five months, with 7.8 million Americans falling into poverty, the latest indication of how deeply many are struggling after government aid dwindled, the Washington Post reported. The poverty rate jumped to 11.7 percent in November, up 2.4 percentage points since June, according to new data released today by researchers at the University of Chicago and the University of Notre Dame. While overall poverty levels are low by historical standards, the increase in poverty this year has been swift. It is the biggest jump in a single year since the government began tracking poverty 60 years ago. It is nearly double the next-largest rise, which occurred in 1979-1980 during the oil crisis, according to James X. Sullivan, a professor at Notre Dame, and Bruce D. Meyer, a professor at the University of Chicago’s Harris School of Public Policy. Sullivan and Meyer created a Covid-19 Income and Poverty Dashboard to track how many Americans are falling below the poverty line during this deep recession. The federal poverty line is $26,200 for a family of four. The economists say the sharp rise in poverty is occurring for two reasons: Millions of people cannot find jobs, and government aid for the unemployed has declined sharply since the summer. The average unemployment payment was more than $900 a week from late March through the end of July, but it fell to about $300 a week in August, making it harder for the unemployed to pay their bills.

A growing percentage of U.S. homeowners are looking to delay making mortgage payments, the latest sign that the economic recovery is hitting a snag, Bloomberg News reported. In the first week of December, the proportion of mortgage borrowers that started seeking forbearance relief rose to its highest level since August, according to the Mortgage Bankers Association. And call volume at the companies that collect payments rose to the highest level since April, a sign of growing distress among homeowners, the trade group said yesterday. With long-term unemployment rates rising and COVID-19 cases surging, “it is not surprising to see more homeowners seeking relief,” Mike Fratantoni, chief economist at the MBA, said in a statement. The increasing number of homeowners that have started seeking mortgage forbearance comes even as the economy has shown signs of recovery, underscoring how uneven the turnaround is. U.S. household net worth reached a fresh record of $123.5 trillion in the third quarter, while almost 4 million workers have been unemployed for more than 27 weeks. Homeowners are delaying payments under a U.S. forbearance program that started in March and allows mortgage borrowers to take a break for as long as a year without penalty. The total percentage of loans that are in forbearance edged lower to 5.48 percent in the week ended Dec. 6, from 5.54 percent the week before. Yet the number of borrowers looking to enter forbearance rose to 0.12 percent of all the loans mortgage servicers collect payments for, the most since August, the MBA said.

The Federal Trade Commission recently took action against a Missouri collection company and its owners, alleging that they collected more than $24 million from consumers, largely by placing “bogus or highly questionable” debts on their credit reports, the New York Times reported. “The defendants used this illegal ‘debt parking’ to coerce people to pay debts they didn’t owe or didn’t recognize,” Andrew Smith, director of the FTC’s bureau of consumer protection, said in prepared remarks about the agency’s settlement with the company, Midwest Recovery Systems. The FTC said in a related blog post that the case was its first legal challenge to debt parking under the Fair Debt Collection Practices Act. In debt parking cases, collectors don’t contact the consumer before reporting the debt to credit bureaus. That means people learn about the debt only when it is flagged as they are applying for a mortgage or a car loan or even a job. Because they don’t want to lose the loan or the job offer, consumers may feel pressured to pay off the “bad” debt quickly. Midwest Recovery received thousands of complaints from consumers each month, the FTC’s complaint said. When the company itself investigated the complaints, it found that as many as 97 percent of the debts were inaccurate or not valid, the agency said.

President-elect Joseph R. Biden Jr. is facing pressure from congressional Democrats to cancel student loan debt on a vast scale, quickly and by executive action, the New York Times reported. Biden has endorsed canceling $10,000 in federal student debt per borrower through legislation, and insisted that chipping away at the $1.7 trillion in loan debt held by more than 43 million borrowers is integral to his economic plan. But Democratic leaders, backed by the party’s left flank, are pressing for up to $50,000 of debt relief per borrower, executed on Day 1 of his presidency. More than 200 organizations — including the American Federation of Teachers, the N.A.A.C.P. and others that were integral to his campaign — have joined the push. The Education Department is effectively the country’s largest consumer bank and the primary lender, since 2010, for higher education. It owns student loans totaling $1.4 trillion, so forgiveness of some of that debt would be a rapid injection of cash into the pockets of many people suffering from the economic effects of the pandemic. Many economists, including liberals, say higher education debt forgiveness is an inefficient way to help struggling Americans who face foreclosure, evictions and hunger. The working poor largely are not college graduates — more than 70 percent of currently unemployed workers do not have a bachelor’s degree, and 43 percent did not attend college at all, according to a report by the Committee for a Responsible Federal Budget.

Congressional Democrats yesterday introduced legislation overhauling the U.S. bankruptcy system to make it friendlier to consumers while opening the door to student-loan cancellation, among other proposals, the Wall Street Journal reported. Sen. Elizabeth Warren (D-Mass.) and House Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) said that the proposed bill would streamline bankruptcy filings for individuals and families and reduce filing fees while addressing racial and gender disparities in how bankruptcy laws are applied. Some Democrats, including Sen. Warren, for years have been keen on changing the nation’s consumer bankruptcy laws, which last underwent a major amendment in 2005. President-elect Joe Biden’s election victory raised the odds of a significant revision, though any such proposal would face obstacles in a closely divided Senate. Control of the upper house, which now has 50 Republicans and 48 Democrats, will be determined by the two pivotal Georgia runoff races on Jan. 5. The Consumer Bankruptcy Reform Act of 2020 follows a framework put forth by Sen. Warren during the Democratic presidential primary that was later endorsed by President-elect Biden on the campaign trail. The legislation would create a new consumer bankruptcy option, chapter 10, replacing the current chapter 7 and chapter 13 routes individuals use to either liquidate or restructure their debts. Chapter 10 would let filers wipe out all unsecured debt, with narrow exceptions such as child support or debts incurred by fraud. Borrowers could also create repayment plans specific to different types of debt, including medical and credit card debt, as well as home mortgages and car loans. (Subscription required.)
https://www.wsj.com/articles/democrats-warren-and-nadler-float-consumer…

Click here to read the full bill text.
http://ct.symplicity.com/t/wrn/903126e8d662ad20ab57861668e9c2c7/3769411…

Joe Biden promised he would push to cancel a significant portion of Americans’ student debt during his presidential campaign. Fulfilling this promise entails politically fraught decisions over how to do it and who would benefit, the Wall Street Journal reported. Biden, a Democrat, campaigned on forgiving hundreds of billions of dollars of student debt, starting with a $10,000 write-off for all 43 million Americans with federal loans. Some congressional Democrats and activist groups are pushing him to go further, forgiving most or all of the $1.6 trillion in student debt. Student debt is the largest type of debt held by Americans after mortgages. The amount has tripled since 2007. Defaults are high. Many economists say that canceling at least some debt would boost the U.S. economy by reducing borrowers’ bills, leaving them with more money to spend on homes and cars, or even starting businesses. To move forward, the Biden administration has to choose how broad or targeted to make the debt reductions, risking helping groups seen as undeserving and widening political fault lines between those with college degrees and those without.

After showing signs of momentum, consumer borrowing slowed in October, according to Federal Reserve data released yesterday, MarketWatch.com reported. Total consumer credit increased $7.2 billion. That’s an annual growth rate of 2.1 percent. This was down from a $15 billion gain in September. Economists had been expecting the strength in September to continue and had penciled in a $17 billion increase, according to Econoday. Revolving credit, like credit cards, fell 6.7 percent in October after a 3.2 percent jump in the prior month, which was the first gain in the category since the pandemic struck in March. Nonrevolving credit, typically auto and student loans, rose at a 4.8 percent rate after a 4.7 percent rate in September. Separate data from the New York Fed found that credit-card balances fell by $10 billion in the third quarter after a record $76 billion decline in the second quarter. The data does not include mortgage loans, which is the largest component of household debt. Mortgage originations came in at $ 1 trillion in the third quarter, the second largest quarterly increase on record, the New York Fed said.

The Trump administration on Friday suspended all federal student loan payments through the end of January and kept interest rates at 0 percent, extending a moratorium that started early in the pandemic but was set to expire at the end of this month, the Associated Press reported. By extending payments by one month, the administration is effectively leaving it to the Biden administration or Congress to decide whether to provide longer-term relief to millions of student borrowers. The measure was included in a March relief package and the White House extended it in August, but its fate was in doubt amid stalemate over a new relief bill. In announcing the extension, Education Secretary Betsy DeVos rebuked Congress for failing to act. “The added time also allows Congress to do its job and determine what measures it believes are necessary and appropriate,” DeVos said in a statement. “The Congress, not the Executive Branch, is in charge of student loan policy.” Under the measure, students will not be required to make payments, their loans will not accrue interest and all collection activity will halt until the end of January. Last month, the American Council on Education and dozens of other higher education associations urged DeVos to extend the relief, saying that the recent surge in COVID-19 cases would likely lead to even more economic turmoil. President-elect Joe Biden has not directly addressed the moratorium but on Tuesday called for immediate relief including “relief from rent and student loans.” He has also supported proposals to erase up to $10,000 in student debt for all borrowers as part of a future virus relief package.