Covid-19 Has Not Stopped Credit Card Companies From Pursuing Wage Garnishment
Recent reporting by ProPublica highlights the problems with wage garnishment from debt collectors that working Americans have faced during the current COVID-19 outbreak. As the country begins to reopen, however, relief from wage garnishment may not be right around the corner.
The Reality of Wage Garnishment during Covid
The report profiles a New York man, working the front lines at a hospital, whose wages were garnished by Capital One to collect on an alleged debt which the man argues was the result of identity theft. He had previously had the garnishment suspended with the help of a lawyer before the COVID-19 outbreak struck. Unfortunately, a court created scheduling conflict date allowed Capital One to resume wage garnishment in late March. New York had suspended all new wage garnishments during the COVID-19 outbreak.
Unfortunately, New York did not suspend existing wage garnishments. Few states, including Nevada, have suspended wage garnishment hearings. With the courts closed, the New York man and his attorney were eventually able to get the garnishment stopped and a hearing date scheduled for August of this year.
While courts being closed has proven to be a challenge for many of the estimated 4 million Americans being affected by wage garnishment, courts reopening does not necessarily mean that their financial worries are over. ProPublica notes that many debt collectors are waiting for the courts to reopen and people to get back to work.
Now is the time to get Ahead of Wage Garnishment
The most obvious fact is that for wage garnishment to be successful, the debtor must have gainful employment. Encore Capital, one of the nation’s largest debt buyers, according to ProPublica, is counting on the courts to reopen and Americans to return to work to sustain their profitability. Advocates are calling for a pause to debt collection and wage garnishment in the nation’s courts to allow working Americans to get back on their feet. Thanks to the hard work of many state legislatures, the one-time stimulus checks were not garnished. Unfortunately, the one-time payments were insufficient to carry them through their severe financial straits.
The Impact of Covid-19 on America Debt Problem
The ProPublica report notes that 48% of American homes have seen some income loss due to the COVID-19 outbreak. Debt.org notes that nearly 2 in 3 Americans have a credit card and that American credit card debt totals $13.86 Trillion, and the average credit card debt is $8,398.00. Advocates that ProPublica spoke to worry that as courts begin to reopen, they will face a large volume of litigation surrounding consumer credit card debts.
Many Lenders know that courts can often be their most effective option in collecting money on the lender’s schedule. Starting in the 1990s, lenders and debt collectors became more likely to pursue collections through the court system, and now they are inundated. Capital One is one of the most litigious lenders that ProPublica found in writing their report. Unfortunately, for many Americans hard hit by the economic impact of COVID-19, the economy reopening will not bring the financial relief they need, leaving the overburdened courts as the one venue to fight back against unreasonable debt collection practices.