The coronavirus pandemic has raised the level of anxiety to new heights for consumers haunted by their debts.
The federal Coronavirus Aid, Relief and Security (CARES) Act, signed into law March 27, was designed to provide a safety net for workers during the pandemic. However, while the law says stimulus payments cannot be seized to offset most debts to federal or state governments, with few exceptions it is silent on the issue of garnishments for debts such as unpaid credit cards, health care bills, defaulted student loans and other money owed to creditors.
That leaves tens of thousands of consumers vulnerable to actions that could threaten their livelihoods, consumer advocates say.
“The economic stimulus was intended to help protect people from catastrophic consequences during a time when our country is suffering from a pandemic,” said Mara Block, an attorney at Legal Aid in Atlanta. “Yet, I know that folks who are in most need of that stimulus are, in some cases, the folks whose stimulus money is being taken for back debt.”
DEBT COLLECTION LAWSUITS ON THE RISE
Debt claims have become the most common type of civil case in many jurisdictions, according to a new report released by The Pew Charitable Trust. In 2013, debt claims made up one in four civil cases, compared to one in nine in 1993, the report found.
• People sued for debts rarely have legal representation, but those who do are more likely to win their case outright or reach a mutually agreed settlement with the plaintiff.
• Debt lawsuits frequently end in default judgment, indicating that many people do not respond when sued for a debt. Unlike most court rulings, these judgments are issued by "default" and without consideration of the facts of the case. The prevalence of these judgments indicates that millions of consumers do not participate in debt claims.
• Default judgments have serious consequences for consumers. Courts routinely order consumers to pay accrued interest as well as court fees, which combined can exceed the original amount owed.
• Georgia is among the states that collect and report little data regarding their civil legal systems. Although it provides public reports of civil cases, there is no detail of how cases have been adjudicated. A total of 12 states are equipped to provide detail on cases, but Texas is the only state that reports on all types of cases, including outcomes, across all courts.
State attorneys in 25 other states have called on the U.S. Treasury to stop garnishments of the relief payments, and some states have prohibited the seizure of stimulus checks and government financial assistance. The supreme courts of several states, as well as a handful of governors, also have proceeded with directives that suspend or prohibit garnishments from bank accounts, liens and setoffs, according to the Boston-based National Consumer Law Center, which is tracking the actions.
So far, in Georgia most jurisdictions have not suspended garnishments. That allows debt collectors to continue to file motions to garnish wages, seize property and make demands for other penalties, consumer advocates said.
However, at least three counties have told consumers that they will not allow creditors and debt collectors to garnish bank accounts and wages at least until the statewide emergency order is set to expire June 12.
"I know that folks who are in most need of that stimulus are, in some cases, the folks whose stimulus money is being taken for back debt." —Mara Block, an attorney at Legal Aid in Atlanta
In Fulton County, Chief Magistrate Cassandra Kirk ordered a halt to hearings and services related to garnishments, while the Gwinnett County Magistrate Court declared it won’t accept any new garnishment filings until after June 12. Macon-Bibb courts haven’t halted hearings, but the sheriff says it won’t carry out eviction orders or new garnishments and has ceased eviction set-outs.
Many of those actions are prompted by a judiciary that understands the financial pressures of consumers who may be losing their jobs and facing other hardships, Fulton County Superior Court Chief Judge Robert McBurney told the Atlanta Journal-Constitution.
“It’s a difficult time,’’ said McBurney, a co-chair of a new justice reforms committee established by Georgia Supreme Court Chief Justice Harold Melton intended to come up with ways to make the civil courts more accessible to consumers. “I think chief judges have been very thoughtful about what things should move forward and what things should not in this complicated time.”
Fulton County Superior Judge Robert McBurney says it’s an important time to consider the financial hardships of consumers.
The debt collection industry says it has weighed in to support suspending those court actions that are threat to financially-pressed consumers. It also says many creditors have implemented their own temporary suspensions for consumers who have been directly impacted by COVID-19, Mark Neeb, chief executive officer of the Association of Credit and Collection Professionals, wrote in a letter late month to U.S. Treasury Secretary Steven Mnuchin that the industry is not targeting stimulus checks during the pandemic.
“They could not and would not be specifically targeting these funds, or even know the specific timing surrounding them,’’ wrote Neeb, whose organization includes more than 2,500 creditors, third-party collection agencies, asset buyers and attorneys.
Falling through the cracks
The Macon woman had a favorable outcome after the debt collector struck an informal agreement with her attorney to return the money to her bank account until the emergency order was lifted and a hearing date could be set on the matter.
“Everybody agreed they were not going to harm this person during this emergency period,’’ Addleton said. “She’s going to have access to her money and an obligation to freeze her pay will not take place until after the emergency is lifted.”
David Addleton, a consumer attorney in Macon, believes courts should be mindful of the financial harm that garnishments can cause to consumers during the pandemic.
However, some consumers attorneys say that in spite of orders by some courts to stop garnishments, it’s likely that some Georgians have fallen through the cracks and couldn’t stop their wages from being frozen or money from their bank accounts seized during the judicial emergency.
“We don’t know what’s happened,’’ Addleton said. “My guess is that (garnishments and bank freezes) are being done on a haphazard basis, depending on the court and depending on the people involved. It is certainly not uniform.”
Consumer advocates in some cases are demanding that courts act immediately to return any garnishments to affected consumers until the crisis ends.
Others say it will be a challenge when emergency orders expire as the courts will likely be even more backlogged by debt cases and most consumers don’t have legal representation in lawsuits by debt collectors.
In metro Atlanta, dockets of multiple magistrate courts are jammed with thousands of debt collection suits, making it more difficult to ensure justice for all, said Quinton Washington, a former Fulton County magistrate who now runs his own law practice in Atlanta.
It would be financially unfeasible to equip each defendant in a debt collection case with a public defender, for example, he said.
“It’s just tough because all of this requires money,” Washington said. “Courts are paid for out of public funds. So, how do we solve these problems when there are limited resources?”