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Thursday, April 01, 2010

NY Times on Wage Garnishment

by Calculated Risk on 4/01/2010 11:54:00 PM

From John Collins Rudolf at the NY Times: Moves to Garnish Pay Rise as More Debtors Fall Behind (ht Ann)

One of the worst economic downturns of modern history has produced a big increase in the number of delinquent borrowers, and creditors are suing them by the millions.
...
Bankruptcy can clear away most debts. Yet sweeping changes to federal law in 2005 — pushed by the banking lobby — complicated that process and more than doubled the average cost of filing, to more than $2,000. Many low-income debtors must save for months before they can afford to go broke.
I'm surprised there isn't a move to rework the Orwellian-named "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". We definitely need a consumer financial protection agency. Look at this example from the Times story:
Ruth M. Owens, a disabled Cleveland woman, was sued by Discover Bank in 2004 for an unpaid credit card. Ms. Owens offered a defense, sending a handwritten note to the court.

“After paying my monthly utilities, there is no money left except a little food money and sometimes it isn’t enough,” she wrote.

Robert Triozzi, a judge at the time, heard the case. He found that over a period of several years, Ms. Owens had paid nearly $3,500 on an original balance of $1,900. But Discover was suing her for $5,564, mostly for late fees, compound interest, penalties and other charges. He called Discover’s actions “unconscionable” and threw the case out.