The National Consumer Law Center has published a blistering report on debt collections.

From the Executive Summary:

Every state has a set of exemption laws, intended to prevent creditors from pushing debtors and their families into destitution. Exemption laws preserve basic items of property from seizure by creditors, so that debtors can to continue to work productively and support themselves and their families.

These laws are intended to protect at least subsistence wages and essential property from seizure by creditors.

States have good reason to be concerned about protecting their residents from over-aggressive collection of judgments for consumer debts. The economic downturn has strained families to the breaking point and the growth of the debt buyer industry makes them increasingly vulnerable to seizure of essential wages and property.

This report surveys the exemption laws of the 50 states, the District of Columbia, Puerto Rico and the Virgin Islands. Despite the importance of state exemption laws, this report finds that not one state meets five basic standards:

• Preventing debt collectors from seizing so much of the debtor’s wages that the debtor is pushed below a living wage;
• Allowing the debtor to keep a used car of at least average value;
• Preserving the family’s home—at least a median-value home;
• Preventing seizure and sale of the debtor’s necessary household goods; and
• Preserving at least $1200 in a bank account so that the debtor has minimal funds to pay such essential costs as rent, utilities, and commuting expenses.

In a statement, ACA International, which represents collection agencies and creditors, said the report lacks substance. “Instead of focusing on the experience of the typical American consumer, NCLC is focused solely on aiding the financial position of its primary audience - consumer attorneys - and the enactment of its extreme model state legislation.”

Collections & Credit Risk is interested in hearing what you think about this report. Please share your thoughts in the comments section.

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