Tomorrow, the DC Council will vote for a final time on the Wage Garnishment Fairness Act of 2017, a bill that would reform District law governing garnishment of employees’ wages for collection on civil judgments. Introduced in November of last year, the bill would protect low and moderate-income District residents by placing reasonable limits on this often-debilitating debt collection method. We urge the Council to vote for the bill one final time and resist any efforts by the debt collection industry to weaken the bill via last-minute amendments.
As my colleague, Jennifer Lavallee, explained in her June testimony before the Council’s Committee on the Judiciary and Public Safety, wage garnishment is a procedure used by creditors to collect on civil money judgments. These judgments are often obtained in debt collection actions involving credit card debt, housing-related debt, medical bills, and consumer loans. When a creditor serves a writ of garnishment on an employer, the employer is required to turn over a portion of an employee’s paycheck each pay period until that debt is satisfied.
Unfortunately, the District’s wage garnishment law – which dictates how much money an employer has to withhold – is based on a federal minimum standard and hasn’t been updated since 1971. The law’s formula is inflexible, has not kept up with changes to the District’s minimum wage, and does not reflect the District’s high cost of living in 2018. These flaws, combined with a lack of procedural protections, leave District residents exposed to excessive and debilitating garnishments, including at the hands of third-party debt buyers who have engaged in illegal collection practices. The result is that low-income District residents struggle to pay for housing, food, medical costs, and other basic necessities of life, all while as much as a quarter of each of their paychecks is deducted and sent to a creditor.
Over the years, Legal Aid attorneys have seen first-hand how the District’s outdated garnishment law has affected members of our client community, as clients have struggled to support themselves and their families when, overnight, their paychecks are reduced to satisfy a writ of garnishment. In our experience, workers who have the ability to pay their debts do so by settling with creditors voluntarily. Ultimately, garnishment is often used against workers who simply cannot afford to settle due to their low incomes, or who, due to procedural defects, are unaware of a garnishment until it’s too late. Consider the experiences of these two Legal Aid clients (whose names have been changed to protect their identities):
Wanda Clark: No denying her hardship, but no granting her relief
Ms. Clark is a 34-year-old single mother living in Ward 7. She supports three children with her employment income of less than $2,700 per month from her full-time job with the DC government. When the amount of her paychecks suddenly plummeted due to a garnishment order, she went to court to file a motion asking the court to stop the garnishment and explaining that she simply could not make ends meet with the amount of her wages that were being taken each pay period.
There was no legal path for the court to grant Ms. Clark the relief she so desperately needed. The garnishment order was based on a consent judgment she had entered into in a small claims debt collection case ten years earlier, for a debt she didn’t even think she should owe. The amount of the garnishment was set by DC law. With the help of a Legal Aid attorney, she was eventually able to negotiate a reduced garnishment amount to alleviate some of the hardship, but only because the plaintiff was willing to do so voluntarily. The reduced garnishment still left her with less than $2,500 per month to try to pay for housing, food, and other basic living expenses for her family of four.
Charlese Wilson: When Garnishment Reveals a Decade-Old Case
Ms. Wilson is a low-income resident of Ward 5, working full-time in a leasing office. Back in 2007, she financed the purchase of a car. Shortly thereafter, her brother was arrested in the car and the vehicle was impounded. Ms. Wilson stopped receiving bills, and she eventually stopped making payments. The financing company then sued her in a debt collection action – but the process server used an incorrect address and never actually gave her the court papers. Knowing nothing about the case, Ms. Wilson failed to appear in court, and a default judgment was entered against her.
Nearly ten years went by without her having any knowledge that the case even existed. But one day, her employer told her that her wages would be garnished. Even though she took home less than $2,000 per month from her job, approximately a quarter of each paycheck was going to be sent to the judgment creditor instead of being available for her to pay her rent, utilities, and other necessary expenses.
Confused, worried, and desperate not to lose her income, she sought help from Legal Aid. Her attorney was ultimately successful in getting the default judgment vacated for improper service of process, and the case was dismissed. But the case took three months to resolve in litigation. If her employer had not given her the advance notice of the garnishment, and if she or her attorney had not been able to take such prompt action, she would have been struggling to make ends meet with a dramatically reduced income that whole time.
It doesn’t have to be this way. Over the years, more than 30 states have updated their garnishment laws to offer greater protection than the federal standard for their workers. This includes four states that do not allow garnishment for typical consumer debts: North Carolina (if the employee is supporting a family), Pennsylvania, South Carolina, and Texas. The District is far behind the times and its low-income workers are paying the price.
The Wage Garnishment Fairness Act of 2017 would help the District to catch up to most of the rest of the country in its wage protections. The Act would:
- Update the District’s garnishment formula to ensure that garnishments are calculated based on DC’s minimum wage, rather than the federal minimum wage;
- Protect workers from garnishment if their disposable wages are less than 40 x the District’s minimum wage, and gradually increase the percentage of wages garnished for workers earning above that threshold;
- Allow workers who are facing financial hardship due to garnishment to ask the court to modify their garnishment by protecting a portion of their earnings; and
- Require that workers get advance notice before their wages are garnished.
At a November first vote on the bill, the Council voted unanimously to pass it, a welcomed development for District workers who have suffered under the District’s outdated law. We hope that the Council will maintain its commitment to District workers by voting tomorrow for final passage of the bill.