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Report Gives California ‘B’ Grade for Allowing Debt Collectors to Push Families into Poverty During the Pandemic

FOR IMMEDIATE RELEASE

 Bank levy protections offered by California’s newly implemented SB 616, co-sponsored by Western Center, boosts California from ‘C’ grade in 2019

SACRAMENTO — As millions of families suffer job loss or struggle to pay bills during COVID-19, states have an important role in protecting them from seizure of essential wages and property to pay old debts, or to protect against seizure for debts that have already been paid or result from fraud or error. A new report from the National Consumer Law Center, No Fresh Start 2020: Will States Let Debt Collectors Push Families into Poverty in the Wake of a Pandemic?, surveys exemption laws to protect wages, assets in a bank account, and property from seizure by creditors in the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands. The report gives California a ‘B’ grade, up from last year’s ‘C’, making it one of the most improved states in the country.

One significant reason California is recognized as one of the most improved states is because of Senate Bill 616 by Senator Bob Wieckowski, which protects the first $1,788 dollars in a person’s bank account from consumer bank levies; the law went into effect in September. Western Center proudly co-sponsored SB 616 with the California Low-Income Consumer Coalition, East Bay Community Law Center, and the California Asset Building Coalition; and earlier this month, Western Center honored Delilah L. Clay of Manatt, Phelps & Phillips, LLP’s Sacramento office for her pro-bono service, which contributed to the passage of the bill.

“In California, we like to say we lead the country with progressive policies,” said Jessica Bartholow, a Western Center policy advocate who has pursued consumer justice legislation for several years. “The reality is that when it comes to consumer protection, that hasn’t been the case. But things are changing, as evidenced by this year’s ‘most improved state’ recognition following the enactment of several new consumer laws. We’re combing the 2020 report to see what other states are doing and how we can emulate the better policies that are out there.”

Other improvements made in California include a new homestead exemption, which protects against home loss during bankruptcy, and establishes a new state entity charged with licensing debt collectors and protecting consumers from abusive and illegal debt collection practices. California also now prohibits foreclosures on a person’s principal residence for any consumer debt under $75,000, unless the home was collateral for the debt when it was accrued.

“By reforming their exemption laws, states will not only protect families from destitution but will promote economic recovery by enabling families to spend their money in state and local communities,” said Carolyn Carter, National Consumer Law Center deputy director and author of the report.

Strong exemption laws are important for many reasons, but particularly because weak protections exacerbate the racial wealth gap. Communities of color are disproportionately burdened by debt, subject to judgments in collection lawsuits, and subject to wage garnishment. Because of longstanding discrimination, Black and Latinx households have less wealth and less of a safety net to draw on during challenging times, like during a global pandemic.

Key recommendations from the report include automatic updating of exemption amounts for inflation, and making them self-enforcing, to the extent possible, so consumers don’t have to file complicated papers or attend court hearings (see report for the full list of recommendations). Model language for California to achieve these goals is provided in the National Consumer Law Center’s Model Family Financial Protection Act. The model law also includes steps the state can take to reduce the pervasive abuse of the court system by debt buyers.

California can prevent over-aggressive debt collectors from plunging families into poverty. Such protections also benefit the state by keeping workers in the workforce, helping families stay together, and reducing the demand on funds for unemployment compensation and social services. Overall, everyone benefits when consumers have the financial resources to improve their earning power and pay off debt in a way that honors their humanity.

For more information on NCLC’s body of work related to fair debt collection, visit: www.nclc.org/issues/debt-collection.html. For a PDF of this release, click here.

Contacts:

Jessica Bartholow, Western Center on Law & Poverty – jbartholow[at]wclp.org

Stephen Rouzer, National Consumer Law Center – srouzer[at]nclc.org

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About Western Center on Law & Poverty: Through the lens of economic and racial justice, Western Center on Law & Poverty fights in courts, cities, counties, and in the Capitol to secure housing, health care and a strong safety net for low-income Californians.

The nonprofit National Consumer Law Center® (NCLC®) works for economic justice for low-income and other disadvantaged people in the U.S. through policy analysis and advocacy, publications, litigation, and training.

 

 

 

 

 

 

 

 

California Senate Passes Bill To License Debt Collectors

“SB 908 is also supported by California Low-Income Consumer Coalition, Consumer Reports, Center for Responsible Lending, Consumer Federation of California, Bay Area Legal Aid, East Bay Community Law Center, Bez Tzedek, Courage California, Western Center on Law and Poverty, and Consumers for Auto Reliability and Safety, among other groups.”

Read More

 

Western Center Reaction to Governor Newsom’s Proposed 2020-2021 Budget

First and foremost, Western Center is pleased that Governor Newsom’s proposed budget includes significant and innovative proposals to address the homelessness crisis in California, which will not only help the thousands of people currently experiencing homelessness, but will also prevent more people from losing their housing. We are also pleased to see the Governor take another major step toward providing health care for all by expanding Medi-Cal coverage to undocumented adults over age 65, and to see the extension of the tax ban on period products and diapers, which makes our tax code more equitable for women, girls and young families.

We were hoping to see additional investments for CalWORKs and SSI grants in this proposal, since they are both crucial for lifting Californians out of poverty. We will continue to advocate for those increases in the final budget agreement.

Below are our initial reactions to the proposed budget by issue area. We will release an in-depth analysis next week.

Housing

The proposed budget appropriately treats the state’s homelessness crisis as an emergency. The proposal devotes additional resources to help people at risk of homelessness remain stably housed and to increase both temporary shelter capacity and permanent housing options for people already experiencing homelessness. We are pleased to see the Governor’s sustained commitment to addressing homelessness and look forward to working in partnership with his administration and legislative leaders to further develop effective, sustainable solutions to the crisis that prioritize residents living in poverty.

We agree with the Governor that the state must ramp up efforts to address the state’s shortage of housing, which is primarily a shortage at lower income levels. We are eager to work with the Governor to ensure that policies and programs to speed housing production prioritize the creation of units for households with the lowest incomes who are priced out of the rental market in every county in the state, protect low-income communities and communities of color from displacement, and increase access to high opportunity areas for our clients.

Financial Security

The budget includes funding to increase the CalWORKs child support pass through (read about it here). Currently, the first $50 of child support paid by a non-custodial parent goes to the CalWORKs family, but any amount over that is kept by state and federal governments. In the Governor’s newly proposed budget, CalWORKs families with one child will keep the first $100 of child support, and families with two or more children will keep the first $200 of child support, beginning January 2022. It also includes funding to provide debt relief for child support owed to the government that is deemed uncollectable. We are grateful that the Governor has heard from parents and families in their call for a child support program that works for children, and we are eager to see proposed associated trailer bill law changes for details. We look forward to working with the Governor and legislature to achieve the goals of conforming with federal law and regulation, and ensuring the program works to benefit the children it purports to help.

The budget also includes the extension of the tax ban on period products and diapers, which will make our tax code more equitable, since taxes on period products and diapers are regressive to poor families and young people. We look forward to continuing work in the legislature to end unmet diaper need and period poverty in California.

Additionally, the budget makes a $92 million investment in reducing criminal justice fees and their harmful, recidivistic impact on people with low-incomes and people of color, their families, and their communities. We are grateful to Budget Chair Mitchell for her leadership on this issue and look forward to working on details with her, the Governor, and other budget leaders. We’re also happy to see that Californians with low incomes will soon be able to reduce the cost of their traffic fines and the overall impact of expensive traffic tickets, with this budget proposing to expand the traffic court ability-to-pay pilot program (currently operational in four counties) statewide over several years. The pilot has yet to be evaluated, so we look forward to details from the Judicial Council to see if the program’s reductions in fines and fees are adequate or need to reduced further.

Finally, to further enhance financial security for Californians, the Governor’s budget creates a new state version of the Consumer Financial Protection Bureau (CFPB). The proposed financial watchdog will hold banks and other financial firms accountable when they engage in unfair and abusive debt collection and banking practices. Medical, student loan, school lunch, and other forms of debt disproportionally burden people experiencing poverty; we expect this new agency to offer important protections for our clients.

Health Care

We applaud the Governor for continuing to move toward universal coverage by making California the first in the nation to expand full-scope Medi-Cal to all income-eligible seniors regardless of immigration status, taking a whole person approach to Medi-Cal, and cost containment with an eye toward quality and equity. We look forward to working with the administration and legislature to advance a budget that ensures equitable access to affordable, comprehensive, quality health care for poor Californians.

The Governor’s proposal also delays suspension of benefits and eligibility, by extending certain Medi-Cal benefits (optical, audiology, podiatry, speech therapy, and incontinence creams and washes), extending Medi-Cal eligibility from 60 days to one year for post-partum women diagnosed with a mental health disorder, and expanding Medi-Cal screening for the overuse of opioids and illicit drugs, all until July 2023.

 

PRESS RELEASE: Governor Signs Bill Stopping Debt Collectors From Draining Bank Accounts

FOR IMMEDIATE RELEASE

New law will protect low-income consumers from losing vital basic income to debt collectors

On Monday, Governor Gavin Newsom signed state senator Bob Wieckowski’s Senate Bill 616, capping a three-year effort by the anti-poverty groups, local governments and labor unions across the state to provide basic protections for the bank accounts of low-income consumers. The bill’s co-sponsors – the East Bay Community Law Center (EBCLC), the Western Center on Law & Poverty, and the California Low-Income Consumer Coalition – cheered the Governor’s signing of a measure that will automatically set aside $1,724 when a debt collector seizes a consumer’s bank account.

Sharon Djemal, director of EBCLC’s Consumer Justice Clinic, saw the need to elevate the issue of bank reform to the California legislature after fielding calls from hundreds of clients who lost the ability to cover food, rent, and basic expenses in one fell swoop. “We’ve fought for this reform for so many years because for too long, our clients were completely vulnerable to the whims of debt collectors. When their bank accounts are emptied, our clients are thrown into a financial tailspin – and sometimes even into homelessness.” Djemal added, “This bill is a significant step toward providing some basic financial stability to low-income Californians.”

“Legal services organizations around the state have long testified about the great harm of the debt-collector-take-all status quo,” said Jessica Bartholow of the Western Center on Law & Poverty, a co-sponsor of the bill. “Our clients miss rent payments, suffer bounced check and overdraft fees and, eventually, walk away from traditional banking altogether as a result of these levies. The governor’s signature on SB 616 will change that.”

The $1724 set aside by the bill is the amount the California Department of Social Services (DSS) has determined is the monthly minimum necessary for a family to survive. The DSS updates the amount every year.

“Other types of assets are protected under California law, from wages to jewelry to art. The one that isn’t – or wasn’t until today – is bank accounts,” noted Ted Mermin, director of the California Low-Income Consumer Coalition. “This bill will encourage low-income Californians to keep their money in the financial system rather than enduring the dangers of becoming ‘unbanked.”

The bill also gives consumers the chance to go to court to get back any seized money beyond the cap that they need in order to survive. Debt collectors currently time account seizures to occur when consumers have just been paid, or have just received their federal earned income tax credit. SB 616 will help to limit the damage that occurs when debt collectors game the system.

The bill offers crucial protections to workers like farmworkers and substitute teachers, who rely on their savings during the off-season. One EBCLC client, Grace A., a substitute teacher, had her account cleaned out at the beginning of the summer. With EBCLC’s help she convinced a judge that the money should not have been taken from her account. However, even though she “won” in court, her money was not returned for five months. In that time she had to borrow from her retired farmworker parents in order to pay her rent – all because of a bank levy that never should have happened, but was legal under existing law. SB 616 ends this practice and resolves the issue by exempting a minimum basic amount.

The bill’s sponsors express their enormous gratitude to Senator Wieckowski and his team, to co-authors Senator Bob Hertzberg and Assemblymember Luz Rivas, to floor supporters Assemblymembers Buffy Wicks, Shirley Weber, and Rob Bonta, and above all to their clients, whose bravery in speaking up and fighting back inspired the multi-year effort that led to the passage of this long-awaited, much-needed bill.

 

Contact: Jessica Bartholow; [email protected]