Cummings, Merkley Introduce Legislation to Protect Workers from Predatory Debt Collectors

Washington, DC (July 7, 2016)—Today, Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, and Senator Jeff Merkley introduced the Wage and Garnishment Equity Act of 2016 (WAGE Act) to protect workers from losing their entire paychecks to wage and bank garnishments.

“Predatory debt collectors use loopholes in our laws to claim families’ wages, homes and vehicles,” Cummings said. “The WAGE Act would limit the amount a creditor can garnish from paychecks and bank accounts, restoring fairness to the wage garnishment process and allowing debtors to continue living a normal life.” 

“Our debt collection laws are woefully out of date and, as a result, working families are pressed to the wall by predatory debt collectors, unable to cover essential expenses for their families,” said Merkley. “It is way past time to update our garnishment laws to provide a fair pathway as families work their way out of debt.”

More than four million Americans had their wages garnished to service consumer debts in 2013.  Under current federal law, up to 25% of debtors’ wages may currently be taken through garnishment to pay off consumer debt such as credit cards, medical bills and student loans.  And federal law currently provides no protections for wages or other assets in bank accounts.

While many states have exemption laws in place to protect families’ most basic items, they are often not enough. Maryland exempts up to $1,000 in household goods and up to $6,000 in savings from garnishment, allowing debt collectors to seize a family’s home or vehicle; Oregon requires debt collectors to leave workers a minimum of only $218 in wages per week, leaving families below the poverty line; Vermont law allows families to keep one cow, two goats, three swarms of bees, but only a vehicle worth less than $2,500; and Pennsylvania provides protection for Bibles, military uniforms, school books and sewing machines, but only $300 worth of additional property. 

By failing to update debt protection laws, Congress has allowed debt collectors to drain entire accounts to settle a debt, leaving a family with nothing and destroying entire communities. 

The WAGE Act would modernize federal wage garnishment laws, and help protect workers from losing everything.  The Act would exempt workers making less than $580 a week from garnishment entirely, indexed to the minimum wage. It would lower the maximum garnishment rate from 25% to 15% for all workers.  It also protects a portion of the assets in a worker’s deposit accounts, and prohibits employers from taking adverse employment actions against employees subject to garnishment orders.

The Cummings-Merkley bill is endorsed by Americans for Financial Reform, National Consumer Law Center, Main Street Alliance, and other organizations.