Lax laws allow debt-collectors and creditors to push Ohioans into poverty by failing to protect a living wage and other assets from garnishment or seizure, according to a national study released today.
The study from the National Consumer Law Center ranks Ohio among the states it says need to increase the amount of wages and assets that can be shielded to allow low-income families to meet basic needs.
“The economic downturn has strained families to the breaking point, and the growth of the debt-buyer industry makes them increasingly vulnerable to seizure of essential wages and property,” the group says in its report.
Overall, Ohio and 23 other states received a “C” for preserving the basic finances of families with troubling debt, with nine states ranked better and 17 worse. The National Consumer Law Center, a nonprofit advocacy group, is affiliated with consumer lawyers across the nation.
Laws supposedly designed to prevent creditors from forcing families into poverty are inadequate because aggressive debt collectors increasingly seek court judgments and orders to seize property and parts of paychecks, the report said.
Ohio received two “F” grades for protecting only the federal minimum of 75 percent of wages from court-ordered garnishment to pay off debts and protecting only $425 in a basic bank account from seizure.
The state also received a “D” for allowing debt-collectors to haul away and sell vehicles valued at more than $3,450.
Ohio fared better with grades of “B” for protecting $125,000 in home equity from creditors (an amount increased in March from $20,200) and preserving $11,525 in household goods from seizure and sale.
Linda Cook, a senior attorney with the Ohio Poverty Law Center, said state laws should protect more of the income of low-wage earners and permit debtors to more easily keep vehicles essential to commuting to jobs — and paying debts.
“We could be more protective of our citizens,” she said. “If we want people to be self-sufficient and reasonably support their families, we have to address this and protect families’ basic needs.”
Arnold White, a Columbus bankruptcy lawyer, said lawmakers responded to the wealthy by allowing a couple who co-own a house to exempt $250,000 in equity from debt-collection, but nothing to help the average working man and woman hang on to their limited assets and cash.
“In today’s economy, the lower-working-class employee needs every break he can get. The odds are so stacked against them ... this is not good for Ohio and for those who are suffering,” he said of the asset-exemption amounts.
The report noted that a full-time, minimum-wage worker in Ohio is left with $235 a week if 25 percent of his or her wages is lost to a garnishment order — an amount less than half of the federal poverty level for a family of four.
The report’s authors recommend that states increase wage exemptions to allow a living wage; permit debtors to keep average-value vehicles and median-value homes; prevent the seizure and sale of necessary household goods; and permit $1,200 to be shielded in a bank account.
ACA International, the largest trade group for the debt-collection industry, criticized the group’s report as an attempt to financially benefit “its primary audience — consumer attorneys.”
“NCLC simply indicts state laws, and not debt collection, and seeks to eliminate the ability of a creditor or debt collector to recover a rightfully owed consumer debt,” ACA Chief Executive Officer Pat Morris said in a statement. Garnishments and property seizures are a “last resort” after other attempts to work with debtors have failed, he said.
Officials of the federal Consumer Financial Protection Bureau, directed by former Ohio Attorney General Richard Cordray, could not be reached for comment because of the federal government shutdown. Cordray also could not be reached.
By Randy Ludlow - The Columbus Dispatch, Ohio (MCT)
©2013 The Columbus Dispatch (Columbus, Ohio)
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