Consumers Suffer from Harsh Debt Collection Laws
In the majority of states, debt collectors can garnish up to 25 percent of a debtor’s paycheck. Passed in 1968, the law has been especially harsh for consumers in recent years given the state of the U.S. economy.
Conrad Goetzinger and Cassandra Rose of Nebraska are prime examples of consumers just barely getting by due to wage garnishments. The engaged couple each make around $13/hour, so garnishments of 25% leaves them with barely enough money to put food on the table.
The majority of Goetzinger’s debt comes from a laptop loan he took out after high school. Goetzinger never paid the debt off, and is still paying the price many years later.
Rose fell into debt after racking up medical bills exceeding $20,000 for an MRI and ER visit to remove kidney stones. Rose knew when she got the bills that it would take her years to pay them off. Debt collectors eventually sued her and are now garnishing her wages.
For struggling consumers like Goetzinger and Rose, the worse part about wage garnishments is that in many circumstances, if a paycheck is deposited into a bank account, debt collectors can legally clear out accounts as long as they are within the garnishment limits.
Goetzinger found this out the hard way. He attempted to pay for various expenses using his bank account, not realizing that his funds had disappeared. Goetzinger unknowingly racked up overdraft fees into the hundreds and eventually was forced to close the account.
Many feel that the 25% wage garnishment is outdated and too harsh on struggling consumers.
In some states, such as Nebraska, debtors can find relief from the the “Head of Family” law. The law restricts wage garnishments to 15% for those providing for their family. In Rose’s case, she only found out she was eligible for the reduced garnishments long after she had been suffering from 25% wage garnishments.
Many debtors whose wages have been garnished do not know about the state law because creditors are not required to inform them. An added caveat is that in states where the “Head of Household” law applies, there can only be one per home. Thus, in the case of Goetzinger and Rose, only Rose is eligible for the reduced garnishments.