The Predatory Debt Collection Protection Act is a Voter Initiative effort that is currently collecting signatures with a goal of being on the ballot in Arizona this fall. The goal of the Initiative is to revise Arizona law to protect more assets from being sold to pay off debt collectors, ensuring Arizonans keep more of their bank accounts and wages and limiting interest rates that trap families in an unending cycle of debt.
Because the ability to earn a living wage and have access to sufficient resources to provide a sturdy family environment and ensure that families can make healthy choices, the Arizona Public Health Association Board of Directors is urging our members to vote to support the initiative.
Below is excerpted language from the Grand Canyon Institute’s Predatory Debt Collection Protection Initiative Policy Paper. We urge you to read the full policy paper and the voter initiative language before you vote whether to affirm the Board’s recommendation.
We Need Your Vote by 6/30/22 In Order to Submit Language to the Voter Guide
Across Arizona, 30% of people with a credit file have debt in collections. This tracks closely with the national average of 29%. How these consumers experience the collections process can vary widely, due to minimal protections afforded by federal and state Unfair and Deceptive Acts and Practices laws. The absence of greater protections puts consumers at risk of predatory collection practices that can be financially devastating due to low thresholds for income and property protected against being seized by debt holders.
Medical debt stands out in the discussion of consumer debt. It is estimated to be the largest source of bankruptcies in the United States and exceeds $140 billion. Medical debt generally arises out of necessity, due to a medical emergency or persistent healthcare needs. Sixteen percent (16%) of Arizonans with a credit file have medical debt in collections, with a median amount of about $1,000 according to the Urban Institute based on an analysis of consumer credit files.
However, this understates medical debt, since it is not reported to credit agencies until it is 180 days past due and it is not always immediately moved into collections and debt moved to a collection agency is not always reported to credit agencies. Further, some medical debt is also disguised as credit card debt.
Further exacerbating the precarious situation that some debt holders find themselves in, an analysis of the civil court system finds that debtors almost never have legal representation, while creditors do, creating a legal imbalance. This is a growing concern given findings by the Pew Charitable Trust in 2020 of an alarming increase in the use of courts to collect on debts by businesses since the early 1990s. According to one study from 1993 to 2013, the share of civil claims for debt in state courts more than doubled from less than 12% to 24% of claims.
The protections in the Predatory Debt Collection Protection Act will provide greater protections for the issues raised above, bringing Arizona much more in line with the recommendations provided by the National Consumer Law Center to enable those in debt to pay off what they owe without placing them in a position where their ability to meet their daily living needs are not impacted by the loss of housing, transportation, or other resources. The Act also provides low asset Arizonans by limiting the ability of landlords to withhold security deposits and folk’s paycheck to paycheck by limiting the amount of wage income that can be garnished. The formula is calibrated to protect wages, so the person doesn’t get pushed below the federal poverty level.
The Predatory Debt Collection Protection Act initiative along three themes:
- The Initiative’s Impact on Arizona Law and Comparisons to Other States
- The Initiative’s Impact on Medical Debt
- The Initiative’s Impact on Debt Collection through the Courts
Because defendants owe money normally, their primary protection is the strength of the law that protects their earnings and assets. The Predatory Debt Collection Protection Act will significantly limit the occurrences of wage garnishment and when it occurs the amount will be less. The Predatory Debt Collection Protection Act will act as a de facto lawyer to help limit access to wage garnishments or direct removals from bank accounts.