The primary reason for this rise in debt, wage stagnation and growing unemployment is due to the economic response to the COVID-19 pandemic, and the policies that have been instigated by the Trump administration. While other economies have attempted to drive a ‘new deal’ (such as the infrastructure building program announced in the U.K. by Boris Johnson), the U.S.’s preoccupation with free-markets limits the extent that the government is prepared to intervene in order to create economic stimulus.
While many U.S. states have individually made moves to stop debt collectors and creditors from seizing CARES Act stimulus checks and protect citizens from evictions and foreclosures, wage garnishment remains one costly possible outcome for U.S. citizen with unpaid debt.
Levels of debt, according to the Consumer Financial Protection Bureau (CFPB), is to the extent that one-in-four consumers (28 percent) with a credit report in the CCP have at least one third-party collections tradeline on their file.
To assess the extent of any measures being taken, Ascent, a Motley Fool company, has released a report capturing every state’s wage garnishment laws for consumer debt, as well as any changes due to the COVID-19 pandemic. Federal law allows garnishment of up to 25 percent of a debtor’s disposable earnings. Some states follow federal guidelines, while others have their own rules and exemptions.
For example, with individual state responses, ten states and Washington, D.C. have either suspended wage garnishment or blocked new wage garnishments during the COVID-19 national emergency. In addition, four states do not allow wage garnishment for consumer debts.
It also stands that 36 states have not changed the laws on wage garnishment for consumer debts during the novel coronavirus pandemic.
These figures indicate that more needs to be done in terms of state and government intervention, not least with consumer debt relief options to help to take to help them get out of debt. This needs to be joined up and nationally coordinated. In short, a social democratic framework is needed.
