Financial Services Committee Reports Out Senator Eldridge’s Bill Protecting Consumers from Debt Collectors

Boston, MA – The Joint Committee on Financial Services favorably reported out Senator Jamie Eldridge’s bill, S578 An Act relative to fairness in debt collection. S578, if passed, will implement incremental reforms designed to relieve some of the financial burden exacerbated by COVID-19 while ensuring equity for debt collectors.

“I applaud Chairman Welch, Chairman Murphy, and the members of the Joint Committee on Financial Services for advancing a version of my debt collection fairness bill that strongly protects consumers from the abusive practices of debt collectors,” said Senator Eldridge. “This bill comes at a time where it is most needed. As household incomes decrease due to the economic effects of COVID-19, there will be an inevitable accumulation of debt. This bill will ensure fair debt collection practices, when the time comes for repayment.”

 Current law allows debt collectors to garnish (take from a salary) up to 15% of wages, receive 12% interest on money determined to be owed by a court, and collect on that court judgment for an astonishing 20 years, as well as use civil arrest warrants in the debt collection process.

These laws were not fair to consumers before the massive unemployment surge caused by the COVID-19 crisis.  In light of the crisis and the inevitable wave of debt default it will cause, it is even clearer that the state needs to ensure that consumers have sufficient income to support their families and pay their bills.

The Debt Collection Fairness Act (DCFA) will balance the interests of debt collectors and consumers with incremental reforms by, among other things:

• Protecting More Wages from Garnishment: Current MA law protects debtors from the garnishment of a portion of their wages equal to 50 times the minimum wage per week, or 85 percent of the debtor's gross wages--whichever is greater.

  • The DCFA will protect 70 times the minimum wage per week, and only allow the garnishment of 10% of wages over that amount.  

• Reducing the Interest Rate on Debts a Court Has Determined a Consumer Owes: The interest rate on judgments – the interest a debt collector can charge upon winning their civil suit - in Massachusetts is the highest in the country at 12%, an anachronistic rate that belongs in the 1980s and that only two other states have.

  •  The DCFA will reduce that rate to 6%, putting it in line with most other states.

• Reducing the Window of Time to Collect on Debts a Court Has Determined a Consumer Owes: Under current law, a collector can collect on a court judgment for 20 years, and the statute of limitations is 6 years--an astonishingly long time to have a debt hanging over someone’s head.

  • The DCFA will reduce that window to a more reasonable 10 years, and reduce the statute of limitations to 4 years.

• Making Clear that no one in the Commonwealth Shall be Imprisoned for Failure to Pay a Consumer Debt: Current law provides for the issuance of “warrants for arrest and other processes to secure the attendance of debtors or creditors to answer for any contempt.” This statute can be abused by creditors who use these civil arrest warrants and the threat of arrest to frighten consumers into making payments.  

  • The DCFA will reform the use of civil arrest warrants and make clear that no one in the Commonwealth shall be imprisoned for failure to pay a consumer debt.

Michael Best of the National Consumer Law Center praised the bill, calling it “essential” in light of the COVID-19 crisis.

 “The severe loss of income many families are experiencing will inevitably result in default on debts through no fault of their own.  This bill will help ensure that debts are collected fairly and that when folks can go back to work, they can keep enough of their wages to support their families and their local businesses,” said Michael Best.

Nadine Cohen, Managing attorney, Consumer Rights Unit at Greater Boston Legal Services (GBLS), said, “Greater Boston Legal Services is extremely pleased that the Debt Collection Fairness Act (DCFA) has been reported out favorably out of committee. This will increase consumer protections for many of our low-income clients who are significantly impacted by our current debt collection practices. Our thanks to the Committee Co-chairs and to the sponsors, Sen. Eldridge and Rep. Nguyen, for their steadfast leadership on this important issue, especially in these difficult times.”

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