Monthly Accounts Receivables Roundup for April 2021

“Is the U.S. Student Loan Program Facing a $500 Billion Hole? One Banker Thinks So.”

That’s the headline from a recentWall Street Journal article on a 144-page report by a former JP Morgan executive Jeff Courtney who calculates that more than $500 billion of the U.S. government’s $1.6 trillion student loan portfolio could be defaulted on.

The article notes that the half trillion dollars of default would exceed what taxpayers lost on the saving-and-loan crisis 30 years ago. While time will tell if his calculations are correct, the article says “If Mr. Courtney is right, there are big implications for taxpayers and families alike.

While defaulted student loans can’t cause the federal government to go bankrupt the way bad mortgage lending upended banks during the financial crisis, they expose a similar problem: Billions of dollars lent based on flawed assumptions about whether the money can be repaid.”

“A Side Effect of the Pandemic: Soaring Medical Debt.”

That’s the troubling word from a CBS News report, which begins: “Medical debt ranks among the top causes of personal bankruptcies across the U.S., with people often struggling to handle unexpected health care costs even when they are covered by health insurance. But that problem has deepened during the coronavirus pandemic.

Data show a growing number of Americans being pursued by debt collectors over their medical bills during the last year.” The report cites figures from Credit Karma showing “an additional $2.2 billion in overdue medical debt from January 2020 through March 2021, reaching about $47 billion in total—the highest point in at least 16 months” and from Lending Tree which found that the share of personal loan inquiries to pay for medical expenses was 50% higher in the last full week of 2020 than in the year-ago period.

The article speaks of consumers facing a “triple-whammy,” noting: “Millions of people suffered income losses last year, hindering their ability to pay for medical care. Others lost their jobs—and health insurance—adding to struggles with medical care payments. And the nation’s 32 million cases of COVID-19 have caused a spike in health care costs, with some of that borne by consumers as they struggle with huge bills.”

Good News from Small Businesses

Accounting Today carries the encouraging headline: “U.S. Small Biz is Recovering after COVID-19 Sucker Punch.” The article reads: “Small businesses in the United States are on the road to recovery, according to a new report from accounting software giant Intuit.

As of March 31, 2021, most industries saw better revenue than they did the year before the pandemic.” Intuit pulled anonymized data from one million small businesses (out of approximately 29 million that use the company’s QuickBooks platforms) to produce the Intuit QuickBooks Small Business Recovery report. The article quotes an Intuit executive as saying: “From bowling alleys to dentists, and from coast to coast, no small business was immune to the challenging circumstances that COVID-19 presented this year.

Despite these challenges, our data shows that small businesses are on a path to recovery, demonstrating the resilience and tenacity that small businesses embody for all of us. The spirit of resilience and recovery is evident across the entire QuickBooks platform.”

CFPB Issues Interim Rule Applicable to FDCPA Debt Collectors During Eviction Moratorium

A recent article from insideARM provides a good overview of the CFPB’s interim final rule that “requires ‘debt collectors’ as defined under the FDCPA who seek to evict tenants for non-payment of rent to provide written notice to tenants of their rights under the Centers for Disease Control and Prevention (CDC) Order that establishes an eviction moratorium.”

The article notes that The CDC Order has been extended three times, most recently through June 30, 2021. The article reads in part: “The interim rule also prohibits FDCPA debt collectors from misrepresenting tenants’ eligibility for protection from eviction under the moratorium.  The rule becomes effective on May 3, 2021 and comments on the rule must be submitted by May 7, 2021.

In its discussion of the rule, the CFPB states that the rule is based on its interpretation of FDCPA sections 807 and 808.  Those sections, respectively, prohibit a debt collector from using false, deceptive, or misleading representations or means to collect a debt and from using unfair or unconscionable means to collect a debt.”

Covid Will Leave Scars in World Economy Even After Recovery . . . But the U.S. Looks Good

That’s the take-home lesson from a recent report from Bloomberg reading “Just as some patients recovering from Covid-19 suffer long-lasting symptoms, it’s becoming clear that the same will be true for the global economy once this year’s V-shaped rebound fades.”

Things look bleak for much of the world, with Bloomberg reporting: “All told, the decline in gross domestic product last year was the biggest since the Great Depression. The International Labor Organization estimates it cost the equivalent of 255 million people full-time jobs. Researchers at the Pew Research Center reckon the global middle class shrank for the first time since the 1990s.”

For the U.S. things look brighter: “With US GDP next year forecast to be even bigger than projected before Covid-19, propelled by trillions of dollars in stimulus, the International Monetary Fund’s projections show little residual scarring from the pandemic for the world’s No. 1 economy.”

Beyond the Social Security Number . . . Moving Selfies to Prove Identity

FICO/ blog has an interesting post “Six Steps to Using Biometrics to Open & Manage Accounts Digitally” describing how technology can protect against fraudsters opening bogus accounts online.

One of the most intriguing suggestions is using smartphone cameras to provide photo ID—including tracking the person’s movements to guard against someone holding up a static photo. Should be interesting: “Turn left, now tug your ear …”

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Ray Peloso, Chief Customer Officer at Ontario Systems, brings 25 years of diverse consumer lending experience, having held executive leadership roles at Royal Bank of Scotland, Capital One, Citibank, MBNA and Katabat. Ray’s prior expertise in consumer credit and lending underpins a clear vision and understanding of the challenges faced by our clients in today’s rapidly evolving digital economy.

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