NPR and ProPublica collaborated to produce two related pieces that ran this week on the recent increase in creditors and debt collectors’ use of wage garnishment and bank account attachment when consumers fall behind on paying their debts. The debts are often unexpected medical expenses or credit card bills that piled up after a major life event reduces consumers’ ability to pay. Now, creditors are obtaining judgments that they can use to garnish as much as a quarter of consumers’ income and to seize funds from consumers’ bank accounts. ADP, the largest payroll services processor in the country, estimates that almost 5% of American consumers earning between $25,000 and $40,000 per year face wage garnishment as a result of consumer debt.
Unseen Toll, Wages Of Millions Seized To Pay Past Debts
Old Debts, Fresh Pain: Weak Laws Offer Debtors Little Protection
These stories highlight nationwide examples of a problem that Legal Aid’s Consumer Law Unit sees all the time. Much of the time, consumers want to pay their debts, but circumstances beyond their control – such as being laid off or dealing with a family emergency – make them unable to do so. These consumers are often struggling to pay for basic necessities while still trying to pay off their debts. Wage garnishments and bank account attachments have a dramatic impact on low-income consumers’ finances leaving many unable to provide for basic necessities, such as housing, food and medical care.
The District, like many states, has outdated and unforgiving laws allowing creditors to seize up to 25% of a debtor’s wages, the highest rate permitted by federal law. Given the high cost of living in the District, legal reform lowering the garnishment cap is urgently needed to preserve a living wage for consumers struggling to make ends meet.