BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 501|
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THIRD READING
Bill No: SB 501
Author: Wieckowski (D)
Amended: 4/28/15
Vote: 21
SENATE JUDICIARY COMMITTEE: 5-2, 5/12/15
AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski
NOES: Moorlach, Anderson
SUBJECT: Wage garnishment restrictions
SOURCE: East Bay Community Law Center
Western Center on Law and Poverty
DIGEST: This bill reduces the maximum amount of disposable
earnings subject to wage garnishment from 25 to 10 percent of
the individual's disposable earnings for that week or one-third
of the amount by which the individual's disposable earnings for
that week exceed 40 times the state minimum hourly wage. This
bill provides that if a judgment debtor works in a location
where the local minimum hourly wage is greater than the state
minimum hourly wage, the local minimum hourly wage in effect at
the time the earnings are payable would be the amount upon which
to base the maximum amount of wage garnishment. This bill, for
any pay period other than weekly, bases the maximum amount of
disposable earnings subject to levy on the applicable local
hourly minimum wage rather than the state hourly minimum wage.
ANALYSIS:
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Existing law:
1)Establishes procedures regarding the garnishment of a judgment
debtor's wages.
2)Provides that "disposable earnings" means the portion of an
individual's earnings that remains after deducting all amounts
required to be withheld by law.
3)Provides that "earnings" means compensation payable by an
employer to an employee for personal services performed by
such employee, whether denominated as wages, salary,
commission, bonus, or otherwise.
4)Restricts the amount of garnishment of a judgment debtor's
disposable earnings for any workweek to the lesser of 25
percent of the individual's disposable earnings for that week
or the amount by which the individual's disposable earnings
for that week exceed 40 times the state minimum hourly wage in
effect at the time the earnings are payable.
5)Requires that for any pay period other than weekly, the
following multipliers are to be used to determine the maximum
amount of disposable earnings subject to levy under an
earnings withholding order that is proportional in effect to
the weekly calculation, as specified:
for a daily pay period, the amounts shall be identical
to the weekly garnishment amounts;
for a biweekly pay period, multiply the state hourly
minimum wage by 80 work hours;
for a semimonthly pay period, multiply the state hourly
minimum wage by 862/3 work hours; or
for a monthly pay period, multiply the state hourly
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minimum wage by 1731/3 work hours.
1)Requires, on and after July 1, 2014, the minimum wage for all
industries to be no less than $9.00 per hour, and on and after
January 1, 2016, the minimum wage for all industries to be not
less than $10.00 per hour.
This bill:
1)Reduces the maximum of disposable earnings subject to levy
from 25 to 10 percent of the individual's disposable earnings
for that week or one-third of the amount by which the
individual's disposable earnings for that week exceed 40 times
the state minimum hourly wage.
2)Provides that if a judgment debtor works in a location where
the local minimum hourly wage is greater than the state
minimum hourly wage, the local minimum hourly wage in effect
at the time the earnings are payable shall be used for the
above calculation.
3)For any pay period other than weekly, bases the maximum amount
of disposable earnings subject to levy on the applicable
hourly minimum wage rather than the state hourly minimum wage.
Background
In California, under the Wage Garnishment Law, a judgment
creditor can seek garnishment of a judgment debtor's wages to
satisfy a court judgment. When wages are garnished, the
employer withholds money from the debtor employee's paycheck and
sends the money to the creditor. The Wage Garnishment Law
provides for exemptions from wage garnishment, such as for
necessities for living and child support.
AB 1775 (Wieckowski, Chapter 474, Statutes of 2012) codified the
definition under the federal Consumer Credit Protection Act for
"disposable earnings" and the maximum amount of weekly wage
garnishment of 25 percent of the individual's disposable
earnings. AB 1775 also capped the weekly wage garnishment
amount at 40 times the state minimum hourly wage and provided
certain multipliers to determine a maximum amount subject to
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levy for pay periods other than weekly.
This bill further reduces the maximum amount of disposable
earnings subject to wage garnishment from 25 to 10 percent of
the individual's disposable earnings for that week or one-third
of the amount by which the individual's disposable earnings for
that week exceed 40 times the state minimum hourly wage, as
specified. This bill, for any pay period other than weekly,
bases the maximum amount of disposable earnings subject to levy
on the applicable local hourly minimum wage rather than the
state hourly minimum wage.
Comments
The author writes:
No one should experience poverty, especially people who work.
When they do, it is essential we do what we can to prevent
hardships for workers and their families. SB 501 will improve
the ability of low-wage working families to meet their basic
needs by remedying two problems with current wage garnishment
law: 1) The disincentive for a worker facing a garnishment to
earn more than the local minimum wage, and; 2) The unjustly
high percentage of income taken from a worker's paycheck.
Prior Legislation
AB 1775 (Wieckowski, Chapter 474, Statutes of 2012) - See
Background.
AB 1388 (Wieckowski, Chapter 694, Statutes of 2011) deleted the
exception from the wage garnishment exemption for common
necessaries of life and instead provided an exception for wages
necessary for the support of the judgment debtor and his or her
family. AB 1388 also added the exception for debt incurred
pursuant to an order or award for the payment of attorney's fees
under specified sections of the Family Code.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified5/14/15)
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East Bay Community Law Center (co-source)
Western Center on Law & Poverty (co-source)
Bay Area Legal Aid
California Employment Lawyers Association
California Faculty Association
California Labor Federation, AFL-CIO
California Reinvestment Coalition
California Rural Legal Assistance Foundation
Consumer Federation of California
Consumers Union
Law Foundation of Silicon Valley
Public Law Center
Service Employees International Union California
Unite Here
Western Regional Advocacy Project
OPPOSITION: (Verified5/14/15)
California Association of Collectors
California Bankers Association
California Chamber of Commerce
California Creditors Bar Association
California Retailers Association
DBA International
Encore Capital Group
PRA Group
San Diego Regional Chamber of Commerce
One individual
ARGUMENTS IN SUPPORT: The East Bay Community Law Center,
co-source, states that "[c]urrent wage garnishment laws place
immense pressure on low-income individuals. With recent
increases in the cost of living in California, it is harder than
ever for low-income individuals to get by. Clients who come to
our office, even before garnishment, barely have enough to pay
for housing, food, transportation to work, and basic utilities.
To keep their heads above water, our clients will creatively
juggle bills, making payments on the most necessary items. But
this is a precarious balancing act that falls apart when a
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creditor starts taking out 25 percent of a person's wages. At
that point[,] there simply is not enough money to go around.
Many people are forced to turn to stopgaps, often taking out
more debt from exploitative payday or title lenders."
The Western Center on Law & Poverty (WCLP), co-source, notes
that researchers have found that individuals whose wages are
being garnished are living below the California Poverty Measure.
WCLP argues that "[b]y allowing wage garnishment for a wider
range of debt than other states, California undermines the value
of work, especially considering the high cost of living in the
state. When low-income workers' wages are garnished, they often
face more severe cutbacks, losing their assets and falling into
further debt to credit card companies or predatory lenders. As
a result, workers are more likely to remove themselves from the
job market or to file for bankruptcy if they are unable to meet
their basic needs through working. This undermining of work
also reduces the wages earned by low-income workers that is
spent in the local community and saved for future emergencies;
ironically, increasing the likelihood that they will need to
loan again and reducing their ability to pay back old debt."
The Public Law Center states that "[t]he changes proposed by SB
501 would make a significant difference in the lives of our
low-income clients. Our clients will benefit from the added
protection of capping the garnishment at 10 [percent] of weekly
disposable earnings or one third of the amount the earnings
exceed the relevant minimum wage. Instead of having to make
choices between food, rent and utilities, or clients may be able
to survive by clipping a few extra coupons or creatively
reducing utility bills."
ARGUMENTS IN OPPOSITION:A coalition of creditor stakeholders
contends that this bill drastically reduces the ability of
judgment creditors to recover on valid, court-issued judgments,
and may result in harming the very consumers this bill is trying
to protect. The coalition argues that the amount a creditor can
garnish is severely limited by law and there are robust
exemptions for certain categories of income making this bill
unnecessary since California debtors can already file a claim of
exemption to reduce the amount withheld in a wage garnishment,
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and those claims are commonly granted. The coalition asserts
that this bill will result in higher administrative costs (a $12
assessment is charged to the debtor for each disbursement under
a writ of attachment) the debtors will have to pay, which costs
could total $624 over the course of a year, and this bill will
have little or no impact on the already declining bankruptcy
rate. The coalition also argues that the new layer of
complexity to calculate exemptions from wage garnishment will
unnecessarily burden employers and sheriffs' offices that
process garnishments.
Further, the coalition states that the proposed rate cap in this
bill is substantially more restrictive than the cap in New York
because the New York cap is the lesser of 25 percent of
disposable income or 10 percent of gross income, not 10 percent
of disposable wages as proposed in this bill. The coalition
also notes that, although a few states do not allow wage
garnishment of any kind, those states provide judgment creditors
with other remedies that are less favorable to consumers. The
coalition also asserts that this bill will create an imbalance
that will be detrimental to the vast majority of consumers who
are fiscally responsible by placing more restrictions on the
collection of validly owned debt, which, in turn, causes the
availability of credit to decrease while increasing the cost of
credit. Finally, the coalition notes that the Consumer
Financial Protection Bureau (CFPB) is currently engaged in a
broad rulemaking of debt collection that will likely cover
almost every aspect of the industry, and the coalition requests
that the Legislature wait to make significant changes to
collectors' ability to recover on judgments until the CFPB has
issued its rules.
One attorney, Harvey R. Wolf, argues this bill should be amended
to create a sliding scale (i.e., 10 percent, 15 percent, 20
percent, etc., of disposable incomes) to account for varying
levels of income, as well as account for a debtor having
multiple jobs.
Prepared by:Tara Welch / JUD. / (916) 651-4113
5/15/15 15:24:31
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