The Colorado General Assembly is now open for business to address the single most significant crisis that has ever affected our great state. Now that our lawmakers have the opportunity to pass legislation directed at the health and economic crisis, there is an opportunity to address one area that is calling out for leadership: protecting Colorado citizens’ income from extraordinary collection actions.
A dozen different states, through their governors, attorneys general, and courts, have created some form of protection from extraordinary collection actions, ranging from urging lenders to suspend repossessions to stopping all garnishment to prohibiting collection activity. The states creating these consumer-oriented protections are both crimson red and royal blue. So what has the leadership of our state done?
Nothing. While other governors and attorneys general were declaring that stimulus funds were exempt from garnishment, and that garnishments should not happen at a time like this, our governor and attorney general did nothing to protect Coloradoans from garnishment and extraordinary collection actions. At a time calling for local solutions, our leaders have an opportunity to lead and demonstrate their abilities to protect people who desperately need a voice.
So what needs to be done?
In a normal year, there are a hundred thousand debt collection lawsuits filed in Colorado county courts. These lawsuits, limited to $25,000.00 or less, are often to collect less than a thousand dollars for unpaid medical bills, old credit cards, and bank overdraft fees. Once the creditor has a judgment from the court, that creditor can force a person’s employer to turn over up to 20% of the person’s net wages to the creditor for up to six months before filing again for further garnishment. The creditor does not have to offer a payment plan before taking wages. The creditor only has to ask the court to issue a writ of garnishment, and a few weeks later, the employer is required to start paying up to 20% of the employee’s wages to the creditor.
Even in good economic times, a wage garnishment can be catastrophic. For a person living paycheck to paycheck, a wage garnishment is the death knell of financial security. Countless bankruptcies, evictions, foreclosures, and repossessions are the direct result of wage garnishment. With so many people working reduced hours and barely scraping by, a wage garnishment for an old medical debt or credit card bill could be the difference between paying rent and being evicted, buying food or starving, and owning a car or losing one to repossession. Any of these outcomes will continue to spiral, as people face plummeting credit scores and steep, compounding costs to regain what they have lost.
The next year promises to be anything other than a normal year. It will be worse. But the results do not have to be catastrophic. The legislature has the power to place limits on how debt collectors use garnishments. Before a debt collector can garnish someone’s wages, the debt collector should be required to make a serious effort to contact the person and arrange a voluntary repayment plan that does not cause the person to lose house and home. In these extraordinary times, old debts cannot be a higher priority than basic needs.
It is time for the legislature to lead on this issue. Wage garnishment is a creature of legislative creation. It is time for the legislature to step up and mandate that people have a chance to pay their debts before their wages are taken. Without these protections, families will suffer catastrophic consequences and our economy will take that much longer to recover.
