April 16, 2020:
On April 14, 2020, the Governor of Washington issued an emergency proclamation temporarily prohibiting the garnishment of wages and other income to collect judgments, and the accrual of post judgment interest on such judgments for consumer debt throughout Washington State. Consumer Debt is defined in Washington code section RCW 6.01.060(2) as: “[A]ny obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.” According to the proclamation, the definition of consumer debt includes medical debt. The proclamation will remain in effect until 11:59 PM on May 14, 2020. Click here to review the Governor’s order.
So, what does this all mean? Judgment creditors and debt collectors who collect judgments on consumer debt in the state of Washington should take immediate steps to stop assessing post judgment interest and discontinue activities related to the garnishment of wages and other income to collect judgments on consumer debt until May 14, 2020. What is not expressly stated in the proclamation is the steps that can or should be taken to discontinue garnishment activities commenced prior to the proclamation or prior to the state of emergency.
The Wisconsin Department of Financial Institutions (DFI) is empowered to administer the Wisconsin Consumer Act (Act). On April 13, 2020, in the DFI issued a warning to third party debt collectors couched in terms of “Emergency Guidance on Prohibited Debt Collection Practices.” In addition to the sharp warning, the guidance document included a letter issued by the DFI regarding impermissible pre-crisis calls and a copy of the Act. Click here to review the DFI’s Guidance document.
Essentially the Guidance document calls out prohibited practices identified in Chapter 427 of the Act when attempting to collect payments under consumer credit transactions, including any “conduct which can reasonably be expected to threaten or harass the customer or a person related to the customer.” Wis. Stat. § 427.104(1)(h). The DFI explained,
But debt collectors who assume that business as usual will be acceptable during this public health emergency do needless harm to both consumers and themselves. Juries can impose severe consequences against those who engage in prohibited debt practices under the Wisconsin Consumer Act, including punitive damages and damages for mental anguish and emotional distress. Jurors too will have lived through this crisis, and will judge debt collection practices through the lens of this period of shared global hardship and sacrifice. Debt collectors who fail to respect those hardships should expect to be judged harshly.
So, what does this all mean? Not much for those debt collectors who are already adhering to the compliance requirements of Chapter 427. The Guidance document does not include any new prohibitions or compliance requirements. However, as a practical matter, it would be a good time for all who collect debt from Wisconsin consumers to review their communication frequency policies, the tone and content of their collector scripts, the verbiage, messages and tools provided on their consumer websites and of course their hardship policies.
Similar to Washington, the Governor of Illinois recently issued an Executive Order in response to COVID-19. The impetus for the Order is the State’s perceived need to take steps to protect its citizens from loss of income and wages experienced during the COVID-19 emergency and other actions which threaten to undermine their financial security, housing security and stability. To this end, under the authority vested in his position, the Governor proclaimed during the duration of the COVID-19 emergency the following actions are prohibited practices: the service of a garnishment summons, the service of a wage deduction summons, or a citation to discover assets on a consumer debtor or consumer garnishee. For a complete review of the Governor’s Order click here.
So, what does this all mean? The prohibitions in the Order apply to judgement creditors. However, third party debt collectors and collection attorneys acting on behalf of judgment creditors and who issue garnishment summons, wage deduction summons and supplementary proceedings should assume this prohibition applies to their activities.
Similar to Massachusetts, Ohio Attorney General Yost issued a statement indicating CARES Act payments are exempt from attachment, garnishment or execution under existing Ohio law. Click here to review AG Yost’s statement.
So, what does this all mean? This statement should not be a surprise to RMAI members given RMAI’s related guidance to its members on April 13, 2020. Given AG Yost’s statement, RMAI will repeat our guidance to our members that regardless of the state, to the degree the federal stimulus funds are ascertainable, RMAI asks its members to avoid soliciting those funds or otherwise attaching those funds for the purposes of satisfying a debt or money judgment.
Nebraska Attorney General Peterson issued a statement that “any attempt or threat by a creditor or a debt collector to garnish or attach funds provided through the CARES Act, if that property would have otherwise been exempt under Nebraska law, will be considered an unfair trade practice in violation of Nebraska’s Consumer Protection Act.” Click here to review AG Peterson’s statement.
So, what does this all mean? AG Peterson references RMAI’s April 13, 2020, guidance in his statement that all CARES Act funds are off limits for garnishments and attachments, with an exception for people behind on child-support payments.
This alert is intended for members of the Receivables Management Association International and is for informational purposes only and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.