Oregon Allows Debt Collectors to Push Working Families into Poverty
A new report by the National Consumer Law Center gives Oregon a D
Portland, OR - The decision of what bills to pay and what bills to put off is a game of financial roulette tens of thousands of Oregonians are forced to play every month as they struggle to recover from the economic downturn. The priorities are obvious - keep your family housed and fed and pay for transportation plus other items necessary for work - other creditors get what's left.
A new report from the National Consumer Law Center exposes how state exemption laws take these difficult decisions out of workers hands by giving debt collectors the ability to seize a substantial portion of a person's wages and the tools essential for their work. The report, No Fresh Start: How States Let Debt Collectors Push Families into Poverty, finds that Oregon law fails to meet basic standards that would allow debtors to continue to work productively to support themselves and their families.
Exemption laws are designed to protect debtors and their families from poverty, and preserve their ability to be productive members of society. Oregon gets an F when it comes to protecting wages. Current wage garnishment law allows debt collectors to push a family below the poverty level. A minimum wage earner working full time can have their weekly pay reduced to $268.50, less than the federal poverty level for a two-person family. If they work less than full time their wages may be reduced to $217.50, less than half of the federal poverty level for a family of four. Oregon's overall grade is a D. A copy of the NCLC report can be found here.
Oregon's archaic exemption laws fuel the lucrative and fast-growing debt buyer industry. "When a worker's wages are slashed below the poverty level to pay off old credit card debt that was bought for pennies on the dollar by an out-of-state debt buyer everyone loses. The debtor can't pay the landlord or the childcare worker and the family is forced to rely on government services to make ends meet," said Angela Martin, Executive Director of Economic Fairness Oregon, an advocacy group fighting for reform of Oregon's debt collection laws.
"In 2012, the FTC received more than 125,000 consumer complaints about debt collection, representing almost 25% of all consumer complaints it received. Debt collection lawsuits are clogging up civil courts across the nation," said Robert Hobbs, National Consumer Law Center's Deputy Director and author of Fair Debt Collection. "This report serves as a wake-up call for states to update their exempt property laws and stop putting millions of families at risk. Doing so will allow local courts to redirect their focus from the insatiable appetite of a debt machine that churns out millions of undocumented debt collection lawsuits each year."
The NCLC report includes several recommends for reforming state exemption laws, those include:
Preserve the debtor's ability to work, by protecting a working car, work tools and equipment.
Protect the family's housing, necessary household goods, and means of transportation.
Protect a living wage for working debtors that will meet basic needs.
Protect retirees from destitution by restricting creditors' ability to seize retirement funds.
Be automatically updated for inflation.
Economic Fairness Oregon
Oregonian opinion columnist Elizabeth Hovde wrote an execrable column the other day that proposed cutting food stamps for the "not so needy" -- you know, the folks with smartphones and on foodstamps.
Hovde's column shows that if she ever had any understanding of just how damn expensive it is to be poor in America, her perch of privilege has long since helped her forget that crucial fact. So I wrote a letter to the editor in response, which they ran today (below).
If you have no idea what I mean when I say it's really costly to be poor in America, click the image over there, which is to a great book, Shortchanged: Life and Debt in the Fringe Economy, which every politician in America should have to read and pass a test on before being allowed to legislate.
Letter: Cellphones don't always signal prosperity
Another Oregon attorney writes:
Once upon a time, there was a country where the courts could tell the difference between business-to-business disputes and consumer-to-business disputes.
The law for the commercial disputes values efficiency above all other concerns, which makes a lot of sense for disputes involving businesses, which are often fictitious entities anyway (corporations), with no personal stake in the problems.
Further, being fictitious legal persons, entirely created under the law and having no natural rights of their own, the corporations involved in most business litigation could hardly claim to fall under the 7th Amendment right to a jury trial -- the companies only had the rights that the law gave them, and since they essentially all just wanted their disputes resolved in a predictable, roughly fair way, it was no problem that Congress said that they could bind each other to arbitration clauses, which sent their fights out of the court system and into private arbitration, where there are no juries, and there is no open court system that creates precedent with each decision.
The problem is that, as in the Terminator movies, the creatures we created to help us have turned on us and taken over: the corporations have seized control of the courts and have persuaded a majority of the U.S. Supreme Court justices that, not only are they actually entitled to full constitutional liberties, including full First Amendment rights to "speak," they also should be allowed to force real people into arbitration, meaning that when you sue one of these fictitious people, you find yourself in a topsy-turvy world that Joseph Heller, author of Catch-22, could not have imagined on his most cynical day.
We've been heading towards this mess ever since the first decisions in the late 19th Century that perverted the 14th Amendment, turning it from an aid to freed slaves into a weapon for the just-forming multinational corporations. The recent "Citizens United" decision -- a fantastic act of historic judicial activism, with the Supreme Court majority going completely outside the bounds of the case before it to create a new superclass of corporate citizens (all the rights of people but none of the duties) is the best known of the long train of absurd decisions that, one by one, are turning real people into servants of the new superclass.
Which brings us to today's fantastic absurdity, where the federal 2nd Circuit, the appellate court for the Northeast, the second-highest court in all the land (and a leading court for commercial disputes), has held that a New York consumer -- that is, a flesh and blood person like you, one who might be under the vague impression that your Constitutional rights are at least as important as the "rights" of a legal fiction like a corporation -- must go to binding arbitration in Arizona to pursue the scoundrels who ripped off the consumer and essentially reduced the consumer to abject poverty (the company was one of the many (most?) bogus credit repair companies who promise to help you climb OUT of the hole with your credit cards).
There is no way to put it except to say that this is the kind of thing that terrifies people who study history, because this is the kind of thing that survivors study when they try to figure out "What was the spark that caused the explosion? How did what seemed to be a civilized place suddenly erupt in such fury?"
I would love to be wrong about this, but since the DNA of corporations requires that they grab all the power and money that they can, and that they do everything that they can get away with (to compete with all the others), expecting corporations to restrain themselves and not abuse consumers and real people is like expecting Donald Trump to take and keep a vow of silence and poverty. Thus, absent a miracle -- never the thing to bet on -- this isn't likely to get better. And that means we might well be getting close to finding out something awful, like what the 21st Century American equivalent is for 19th Century France's guillotine. Read on:
A student loan expert writes:
Don't. Really. Just don't. Here's just one story of thousands about what can happen if you ignore this advice.
The Washington Supreme Court today announced an important decision, finding --- as the Oregon Court of Appeals just did recently in the Niday case --- that the phony-baloney attempt to dodge recording fees known as MERS can't have it both ways and claim to be just an administrative convenience AND force people out of their homes. Another blow for justice in the Northwest.
The good folks at the National Consumer Law Center have just issued a new report that addresses a lot of the problems with student loan lending (pdf download), particularly the problems caused by for-profit "education" mills that really seem to be about something quite different than education.
The Oregon Court of Appeals has ruled that the hydra known as MERS -- the monstrous placeholding dummy with a million phony vice-presidents, which the mortgage servicing industry created to attempt to evade the requirement (and the fees) that all transfers of interests in mortgages be recorded -- cannot use the streamlined, fast-track nonjudicial foreclosure process in Oregon!
Niday v. GMAC Mortgage, LLC et al,
"[T]he import of our holding is this: A beneficiary that uses MERS to avoid publicly recording assignments of a trust deed cannot avail itself of a nonjudicial foreclosure process that requires that very thing-- publicly recorded assignments."
The nonjudicial foreclosure process was created in the old days when lenders held onto their mortgage loans, which were actually underwritten thoughtfully. Fast forward to the slice-and-dice fast-money 1990s-2000s, when the banksters and money men started financializing everything and you suddenly had a tool that was being used against homeowners in ways never intended, by an entity never imagined by the law, a weird hybrid creature that pretended to be both the beneficiary of the loan (when useful to MERS) and not the beneficiary (again, when useful to MERS).
Hurrah for the Oregon Court of Appeals. BULLSEYE! Seems likely the MERS scammers will appeal but, for now, a true shining example of Oregon flying with her own wings and reaching the right conclusion despite a number of other states having missed the mark widely on this issue.
A frustrated lawyer in Alabama sums it up eloquently:
This whole area of law is completely out of control. We are creating a subclass of educated (and some not-so-educated) poor people. We are basically creating a class of indentured servants who were essentially unknowingly induced into loans that they cannot repay. Many were sold a bill of goods that they could get good jobs upon graduation and repaying their loans would not be a big issue, then the economy tanked.
This is a worse crisis than the mortgage crisis.
At least with a mortgage, once they foreclose, you can walk away - student loans are making American citizens slaves to debt collectors and banks - two of the most unscrupulous entities in our society.
The taking of 80 year olds' social security money to pay on 30 year old student loan debt is beyond inhumane. I am shocked there has been no rioting or occupy movements based on the outrageous laws Bush signed into law making student loans super-liens on par with, or maybe even above, the IRS.
Our founding fathers would not have stood for this type of treatment of their American people. This is a shameful time.