The Folly of Credit As Pandemic Relief

68 UCLA L. Rev. Disc. 126 (2020)

20 Pages Posted: 29 Apr 2020 Last revised: 24 Jun 2020

See all articles by Pamela Foohey

Pamela Foohey

Indiana University Maurer School of Law

Dalié Jiménez

University of California, Irvine School of Law; Harvard Law School - Center on the Legal Profession

Christopher K. Odinet

University of Iowa - College of Law

Date Written: April 29, 2020

Abstract

Within weeks of the coronavirus pandemic appearing in the United States, the American economy came to a grinding halt. The unprecedented modern health crisis and the collapsing economy forced Congress to make a critical choice about how to help American families survive financially. Congress had two basic options. It could enact policies that provided direct and meaningful financial support to people, without the necessity of later repayment. Or it could pursue policies that temporarily relieved people from their financial obligations, but required that they eventually pay amounts subject to payment moratoria later.

In passing the CARES Act, Congress primarily chose the second option. This option reflects a belief that offering people credit can bring them meaningful relief because it assumes that people will have the ability to pay back the loan as it becomes due. The assumption that people will be able to repay credit masquerading as “relief” in the wake of the pandemic is a serious error that will have enduring negative consequences.

In short, Congress got the balance between providing true money versus what amount to credit products to Americans fundamentally backwards. But given that, unfortunately, the effects of the pandemic likely will continue for months, if not years, it is not too late for Congress to adopt a family financial well-being approach to relief that provides meaningful, widespread, and expanded direct payments to households in distress.

Keywords: coronavirus, covid-19, CARES Act, consumer credit, debt, social provision, direct payments, rebate relief, foreclosure moratorium, eviction moratorium, unemployment benefits, mortgage servicing

JEL Classification: D10, K36

Suggested Citation

Foohey, Pamela and Jiménez, Dalié and Odinet, Christopher K., The Folly of Credit As Pandemic Relief (April 29, 2020). 68 UCLA L. Rev. Disc. 126 (2020). Available at SSRN: https://ssrn.com/abstract=3588355

Pamela Foohey (Contact Author)

Indiana University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States
812-855-1257 (Phone)

Dalié Jiménez

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States

HOME PAGE: http://www.law.uci.edu/faculty/full-time/jimenez/

Harvard Law School - Center on the Legal Profession ( email )

1585 Massachusetts Avenue
Wasserstein Hall, Suite 5018
Cambridge, MA 02138
United States

Christopher K. Odinet

University of Iowa - College of Law ( email )

130 Byington Road
Iowa City, IA 52242
United States

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