Wage Garnishment And Not Knowing What Things Cost

banana cost

D.C. Council Chairman Phil Mendelson apparently does not know the price of a banana (boldface mine):

On Tuesday, the Council passed a bill that increases the amount of District residents’ paychecks that are protected from debt collection.

D.C.’s current law uses a formula based on the federal minimum wage to calculate how much of a person’s weekly income is exempt from garnishment. That formula is 30 times the federal minimum wage of $7.25, which means at least $217.50 of a District resident’s weekly paycheck cannot be garnished.

The Wage Garnishment Fairness Amendment Act of 2017, introduced by At-Large Councilmember Elissa Silverman, changes that formula to 40 times the District’s minimum wage of $13.25—in effect, the bill protects all wages for a person making the District’s minimum wage of $530 a week (assuming they work 40 hours).

Before the bill passed, Mendelson pitched an amendment that would have lowered the amount of protected wages. Under Mendelson’s version, the formula would have been 35 times the District’s minimum wage, or $463.75 a week.

“Even though it sounds like I’m being horrible to low-income people, depending upon your assumption about disposable income, we could be talking about somebody who is earning $30 to $35,000 a year before this applies,” Mendelson says.

Under the bill, if a person makes more than the minimum wage, debt collectors can garnish up to 25 percent of a person’s “disposable,” income, which is basically what’s left over after legally required withholdings such as federal and local taxes, Medicare, and Social Security. There’s no perfect formula for calculating disposable income. Some say it’s 75 percent of a person’s gross wages, some say it’s 90 percent.

Side note: For a household of one in the DVM metro area, HUD considers an annual income of about $41,000 to be the “very low income limit.” For a four-person household, that figure is $58,600.

As some asshole with a blog recently pointed out, many people have completely unrealistic ideas of what things cost, in no small part due to inflation. This isn’t a matter of ‘optics’, it’s a lack of awareness of how some of your constituents actually live. Of course, some constituents are worth more than others:

Mendelson’s amendment had been shopped around to councilmembers by Wilson Building lobbyist Rod Woodson on behalf of debt collection companies Portfolio Recovery Associates and Encore Capital Group. Woodson tells LL that technically his client was Portfolio Recovery Associates, but Encore also supported the changes to the amendment he was pushing. Woodson argues that the more a government limits creditors’ ability to recoup loaned money, the more difficult it becomes to for people to borrow…

In early December, Racine, along with 42 attorneys general across the country, announced a $6 million settlement with subsidiaries of Encore for engaging in underhanded debt collection practices.

One major issue the AG’s office uncovered was a practice known as “robo-signing,” where Encore employees would sign affidavits en masse, attesting to the accuracy of a debtor’s information without verification.

“We argued that practice is unfair under consumer protection laws,” says an assistant attorney general who worked on the case. “They’re not verifying the information and many times they got the information wrong.”

As part of the settlement, Encore agreed to pay a total of $577,783 to District residents…

Mendelson’s amendment failed, 8-5. Councilmembers Jack Evans, Kenyan McDuffie, Anita Bonds, and Brandon Todd, all of whom make $140,161 a year, voted in favor of the amendment. As chairman, Mendelson makes $190,000, and earlier this year the Council voted unanimously to give him a $30,000 raise.

Another side note: In his early 20s, Todd filed for bankruptcy. He was more than $20,000 in debt, much of which came from credit card charges to luxury clothing stores.

I really wish the Washington Post would spend more resources digging into the D.C. government–and not just when a splashy CRISIS11!!11 occurs. WCP did some good reporting here, but they are a small paper (good reporting though!), but the major newspaper really doesn’t cover this kind of important news too often. That means D.C. residents really don’t know what our government is up to. It’s great that the Post sends reporters out to the ‘heartland’ to talk to yet another fucking Trump supporter, but how about staying home more often? The stories, if done right, will get as many clicks, and it’s a lot cheaper too.

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2 Responses to Wage Garnishment And Not Knowing What Things Cost

  1. Joe Shelby says:

    Something I realized a couple of weeks ago: because inflation has been so slow and so steady, where the only noticeable impact has been spikes caused by either oil price jumps (2001 in particular) or other environmental things where the impact is isolated to only a particular commodity and not the whole economy, people simply…haven’t noticed.

    They just don’t see the inflation. Back in the 70s we saw the price of a candy bar (to give an example) jump from 10c to 25c in the early part, then 25c to 50c during the Reagan inflation-recession of 1982, the one that basically got the Fed to institute the policy of using interest rates to restrain inflation (because inflation is bad for lenders, mind you*) that they’ve held ever since. other examples abound – a Coke can was 25c, then 50c. Today it can be $1.50 to $2.00.

    But that rise, from 50c to $2.00? we never noticed it. It was, as the Fed wanted it, so slow and steady and controlled and stable that NOBODY noticed it happening.

    And that’s created a skewed gap between what pre-millenials think something costs and what it actually does, especially among boomers. They still look at a candy bar and mentally think “50 cents”, the last price it was when it jumped. We notice the jumps. We don’t notice the slow creep.

    So yeah, the Fed protected inflation…but with the side effect that people don’t actually think about what things cost anymore, especially when other subsidies end up keeping certain commodities they might think of (dairy, eggs, corn, gas/oil, frozen concentrated orange juice) down to rates below the inflationary average.

  2. Joe Shelby says:

    * – Inflation is good for the borrower (when the interest rate is fixed) because the amount you owe is lessened over time. If you borrow $50, you owe $50…now if inflation means that $50 is really only *worth* $45 by the time you actually pay it back, you’ve saved $5 by your standards (because as a simple borrower, what do you care), while the bank has lost $4.50 by their’s. The principle of your loan has depreciated for no reason other than what is a dollar these days.

    So rapid inflation is REALLY bad for lenders, and that’s what led to the recessions of the 70s and Reagan’s first term. The Fed acted to try to restrain inflation (through interest rate controls) to reduce that, because with rapid inflation, banks started losing money – the amount you owe is worth less than what the interest you pay would cover.

    Moderating inflation is a response to the fact that inflation is impossible to stop (and *de*flation, while good for lenders, is more devastating to the general economy), and the Fed got VERY good at it, except when a shared universal (gas prices, which impacts shipping prices, and therefore the price of goods on the retail shelf) spikes as it did in 1991, 2001, and several times since.

    That said, and I know it impacts me negatively, i’ve still felt that for much of the 2000s, interest rates were too low. It caused banks to have to make money in different ways (fees that everybody hates, and the risky securities investments that triggered the 2008 crisis), rather than making money through interest.

    Today, the Fed is raising rates (against Trump’s wishes) because they KNOW is going to cause a recession on his own, and they want to have that tool at their disposal to help relieve it. The institution is protecting itself, and hoping Trump has enough other crap to tweet about that everybody will forget it happened. I’m on their side in this.

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