A chunk of the $1,000 to $5,000 cash payments people received to help them buy food and pay for rent during the early months of the coronavirus crisis actually went to pay down credit cards, according to a new audit.
While the payments funded by taxpayers came because of reports people were going hungry and homeless because of the work shutdowns forced by the pandemic, the Government Accountability Office said many consumers used the money to improve their credit scores instead.
“We found that many people likely used their pandemic stimulus payments to pay down their credit card balances. Pandemic assistance was also associated with better credit scores and fewer delinquencies,” the government’s chief auditor said.
“We estimated that median nominal revolving balances declined from approximately $1,737 in April 2020 to $1,529 in December 2021, or about 12%,” the agency added.
Liberal lawmakers used the report to rip credit card companies, even though several suspended payment rules during the crisis.
“Unfortunately, now that this financial assistance has expired, large financial institutions are filling the void by trapping working families into massive credit card debt and predatory loans that come with usurious interest rates and exorbitant fees. That is absolutely unacceptable,” Sen. Bernie Sanders (I-VT) said.
In a joint statement, Sen. Sheldon Whitehouse (D-RI) added, “We know that legislation passed during the depths of the pandemic recession enabled our economy to bounce back faster and stronger than predicted because these investments kept families afloat and improved their financial well-being. We can invest in creating an economy that works for the many and not just the wealthy few, and we can ensure that people keep more of their money — so less lines the pockets of corporate debt servicers — by placing reasonable caps on consumer interest rates, as so many states have tried to do.”