What implications does the coronavirus have for consumers and consumer protection ?

by Jeff Sovern

The coronavirus is already having an impact on consumers and consumer protection. Some initial observations:

  • The FTC and FDA have sent warning letters to companies reportedly making deceptive or unsupported claims about their products' ability to treat the coronanvirus. It's good that they're on the job.
  • There have been reports of discrimination against Asians caused by the virus, though I don't know if any of those incidents have taken place in the consumer context.
  • My searches for coronavirus, virus, and covid-19 didn't produce any relevant hits on the CFPB's web site. The virus does seem likely to have consumer financial implications, however. For example, as people with student loans are laid off or suffer declines in income, they need to decide what to do about their student loan payments.  Those who qualify for Income Driven Repayment would be better off opting for that over forbearance, and they need to be told that; the CFPB has sued at least one student loan servicer, because, the Bureau claims, the servicer has a history of not so advising borrowers when IDR is in the borrower's best interest.
  • Some consumers will probably turn to payday lenders, and many of those will get caught in debt traps if their income doesn't bounce back quickly, and maybe even if it does. Consumers need to be warned about that risk.
  • If people borrow more or miss payments, credit reports will be less favorable. But drops in credit scores attributable to the virus may not be correct in indicating that particular consumers are more of a credit risk, because the cornoavirus seems like such an idiosyncratic event (at least, we hope it is). If that's true, will credit scores go down more than they should and be less predictive?
  • More people will have debts go into collection, which could lead to more violations of debt collection laws. 
  • If the US follows Italy and closes non-essential businesses, it will be interesting to see what effects follow from closing brick and mortar financial service providers (e.g., storefront payday lenders, pawn shops, check-cashing outlets, and the like), though some financial services should still be available online and even in Italy some bank branches have reportedly stayed open.
  • Businesses that collect information about consumers may be able to figure out which consumers have the virus, which will have privacy implications. For example, Google knows what things people search for on its search engine, where people go if they have Google Maps on their phones, even when they are not using the app (did someone go to a doctor, hospital, drugstore?), and so on.

This is just a quick survey off the top of my head. If you have any other thoughts, please add them in the comments.

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