Mark Herring: Friend of the Poor, Scourge of Lenders

Mark Herring

by James A. Bacon

Attorney General Mark Herring is at it again — acting to protect the poor by government fiat without regard to unintended consequences.

In a press release release today, Herring claims credit for backing a law backed by Del. Hala Ayala, D-Woodbridge, that will ensure that federal COVID-relief payments don’t “get swept up by debt collectors and creditors.” The law exempts the first $1,200 of any COVID-relief payment from garnishment.

“The most recent round of federal payments represents a lifeline for so many Virginia families who are still struggling to make ends meet because of the economic impacts of the COVID pandemic,” said Herring. “Virginians should not have to worry about creditors or debt collectors taking all of their much-needed stimulus money and I’m glad Delegate Ayala and I were able to work together to get this important legislation passed.”

The press release also quotes Ayala: “Thousands of Virginia families are still struggling to support themselves during this uncertain economic time and they need this stimulus funding to go towards food, rent, utilities and other necessities. This past year has forced us to come up with creative solutions in order to support Virginians and their families.”

Let’s see now. Virginians thrown out of work by the COVID crackdown are entitled to Medicaid and food stamps. The last I heard, Temporary Assistance for Needy Families was still a thing. Virginians are still entitled to unemployment insurance payments (although those many be running behind). They received a dollop of money in COVID relief last year, and they’re getting another dollop this year. Here in Virginia many low-income households are getting off from paying their electric bills. Meanwhile, all manner of private philanthropies have mobilized to provide food and shelter.

Now, thanks to Herring and Ayala if people fall behind in their rent payments, car payments, and other loans, creditors will find it harder to get their money back. That’s great for the poor people…. for a time. But creditors respond rationally to new realities. From the creditors’ perspective, the risk premium just rose for poor people. A foreseeable consequence of the debt moratorium is that creditors, whether landlords, used car dealers or credit card companies, will tighten up credit for low-income people whom they perceive as risky. 

Luckily, poor people always have payday lenders to fall back upon. Oh… I forgot, Herring has been campaigning against payday lenders, too. He backed new caps on what they can charge for their “predatory” loans, likely causing the industry to contract.

The benefits of the $1,200 debt moratorium are visible to all. Any resulting credit squeeze is not. The nice thing about being a do-gooder is that your humanitarian intentions are the only thing that count, not actual real-world consequences.