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Lawmakers Address Debts of WA Families on Financial Brink

Four in 10 Americans say they couldn't cover an unexpected expense of $400. (TatianaMara/Twenty20)
Four in 10 Americans say they couldn't cover an unexpected expense of $400. (TatianaMara/Twenty20)
March 29, 2019

OLYMPIA, Wash. – Debt is a major challenge for some Washington families, and measures moving through the Legislature could give them a bit of relief.

House Bill 1602 would cap the interest rate companies can charge on consumer debt collection after winning a court judgment at 9 percent. The current rate is 12 percent – the highest in the nation.

The bill would also increase consumer protections when wages are garnished.

Jay Doran, policy and field campaign manager with the Statewide Poverty Action Network, says current law allows debt collectors to take everything except $500 in a person's bank account. The bill would raise that limit to $2,000, which Doran says is critical.

"If you look at almost any part of the state, even just one month's rent for a person or a family is going to be significantly more than $500,” says Doran. “And so, ideally this would give someone enough cushion in their account that they wouldn't be rendered homeless because of an outstanding debt."

Court can prove to be a big hurdle for paying off debt, according to the Center for Responsible Lending. In more than 20,000 Washington state cases between 2012 and 2016, the group found more than 80 percent were ruled in favor of debt collectors, and just over 1 percent of defendants had a lawyer.

The collection industry says it only uses court as a last resort.

HB 1602 has passed the House and is now in the Senate.

To illustrate the potentially damaging effects of debt, Doran cites a Federal Reserve report from 2018, which found 40 percent of Americans couldn't cover a $400 unexpected expense.

"Families living on low incomes and even middle-income families are just struggling to stay afloat,” says Doran. “The cost of living across Washington, and really just across the country, is outpacing income, and people simply don't have extra money on hand to cover unexpected expenses, to say the least."

Other bills in the state Legislature would regulate interest on medical debt and address so-called "zombie debt," or debt after the legal collection period has expired. Both are House bills that have made their way to the Senate.

Eric Tegethoff, Public News Service - WA