Consumer Debt

COVID-19 Information: What’s Changed? What Do You Need to Know?

Consumer Debt

Summary: All medical and student debt owed to the state and which has been referred to the AG’s office is suspended until April 16, 2020. If you are affected by COVID-19, you may apply for suspension of other state debt. However, if your debt is in active collection or is owed to someone other than the state, this does not apply.  If you can demonstrate financial hardship due to COVID-19, your banking institution must waive ATM and late credit card fees. If you have student loans, you will get significant relief but only if the Department of Education owns your loans. If you owe a debt and are getting a CARES Act (stimulus) payment, then that money cannot be used to pay most debts.

 

According to the New York State Attorney General Letitia James, your CARES Act payment may not be taken to pay off most money judgments. (The exception is child support.) If someone takes or tries to take this money to pay a debt, or if a bank tries to take it to pay off a debt, they may be prosecuted.

 

Some debt collection within New York has been suspended.  From March 17, 2020 through and including May 17, 2020 the state will suspend student and medical debts owed to New York State and which have been referred to the Attorney General for collection.  Additionally, during this period no interest will accrue and no fees will be collected.  The program has been extended once and more extensions will be considered.

 

Debtors may apply for the suspension of non-student and non-medical debt owed to New York State if people or their dependents have been affected by COVID-19, including by executive orders or other legislation designed to stop the spread. The application is available here.

 

Under Executive Order 202.9, issued March 21, 2020, the Superintendent of the Department of Financial Services (DFS) is empowered to issue regulations restricting or modifying ATM fees, late fees, and credit card fees.  These regulations will only be effective for the duration of the state of emergency.

 

The  DFS regulations are available here. In summary:

 

  • Financial institutions (other than U.S. Government institutions) must make applications for foreclosure forbearance widely available to individuals in New York who can demonstrate financial hardship due to COVID-19, and they must grant forbearance for 90 days, subject to their own safety and soundness standards
  • For any individual who can demonstrate financial hardship due to COVID-19, banking organizations must waive:
    • ATM fees
    • Overdraft fees
    • Late payment fees for credit cards
    • Banks may, and are encouraged to, offer other relief.

Institutions must inform their customers “widely” of this relief by April 3, 2020. They must develop reasonable criteria, promptly inform customers if they are missing information, and make a determination within ten days of receiving all information.

 

Under the CARES Act, which was signed into law on March 27th, 2020, people with student loans owned by the Department of Education will get significant relief.  As summarized by Staff Attorney Steve Nguyen:

1. From March 13th, 2020 to September 30, 2020, student loans owned by the Department of Education will automatically be set at 0% interest.
2. Loans owned by school institutions and commercial lenders, even if guaranteed by the Federal government, will not be adjusted.
3. Private student loans are unaffected.
4. From March 13th, 2020 through September 30th, 2020, monthly payments will be suspended via an administrative forbearance.
5. Suspended payments will still count towards monthly payments under an Income Driven Repayment (IDR), Public Service Loan Forgiveness (PSLF), or rehabilitation plan.
6. Auto-debit payments are automatically suspended. If a payment somehow went through during the suspension time period, you may request a refund.
7. IRS, Social Security offsets, and wage garnishments on defaulted accounts are automatically suspended. If an offset or garnishment went through during the suspension time period, that payment will be returned.