Millions Of Americans' Wages Seized Over Credit Card And Medical Debt One in 10 working Americans between the ages of 35 and 44 is getting his or her pay docked for not paying debts. And in most states, the law allows a quarter of wages to be withheld.

Millions Of Americans' Wages Seized Over Credit Card And Medical Debt

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STEVE INSKEEP, HOST:

Millions of Americans are still paying off debts from the Great Recession, whether they want to or not. Maybe you've had that experience of deciding which bill needs to be paid first; some people have that decision taken out of their hands. One out of 10 working Americans between the ages of 35 and 44 are getting their wages garnished. That means their pay is being docked, often over an old credit card debt or medical bill or student loan. That striking figure comes out of a collaboration between NPR News and ProPublica. The reporting offers the first available national numbers on wage garnishment, and we're going to talk about that this morning with NPR's Chris Arnold. Welcome to the program, Chris.

CHRIS ARNOLD, BYLINE: Thanks, Steve.

INSKEEP: And also with us, Paul Kiel. He is a reporter for ProPublica. Welcome to you.

PAUL KIEL: Thanks.

INSKEEP: So what's happening?

ARNOLD: Well, Steve, for decades, wage garnishment has been out there as a way that if people get divorced and you want to make sure the father's going to pay the child support, the court will insist that the wages be garnished. So that has to happen. That still goes on. It's a big chunk of what goes on, but what's new here is that nobody understood how much this now is being used for just regular, old consumer debt, like you said - credit cards, medical debt. And even national experts, people who track this stuff, who study consumer finance, we took this to them, and they were pretty taken aback by the numbers that we turned up here.

INSKEEP: So, Paul, you're saying that instead of calling you and trying to negotiate with you or urging you to pay your debt, the company gets the power to simply grab assets of yours and take them as its own?

KIEL: Right. And what happens first, though, is they have to go to court - they see you in court - and during the years of the recession particularly, there was just explosion of these types of suits filed in court. And what happens most of the time is people don't show up for a variety of reasons, but once they have that judgment then, they can go and get the wages at any time.

INSKEEP: Are there limits on what a company could take from you? Could they just empty your bank account, for example, or take all of your paycheck?

KIEL: There are. About half the states in the country rely on a federal law - which some would say is outdated; it goes back to 1968 - it caps garnishments at 25 percent of your after-tax income.

Now, for half of America who might have trouble paying to get their car fixed, 25 percent of your paycheck week after week, month after month, sometimes this goes on for years, arguably that is very tough to afford, but the ability to afford this is not something that's taking into consideration.

INSKEEP: And let's make sure we're clear here - we are talking about people who have debts. There's been a court judgment in fact that it seems to be a legitimate debt, but you're saying that people may have their financial future taken away from them and not even quite realize what's happening?

KIEL: Right. A lot of the people we talk to, and Paul can talk about this, too, they want to pay. It's just they're being asked to pay too much.

INSKEEP: So, Paul, how did you measure exactly how many Americans are in this situation? How did you find this 1 out of 10 figure for people in their 30s and 40s?

ARNOLD: Right, so there's a company called ADP, which is the largest payroll services provider in the country and also handle garnishment issues for companies. And so we approached them since they have this massive database to ask them to do an analysis. And this, you know, is particularly important because there's just no numbers on this on a national level at all. And so what they did is they looked at payroll data for 13 million employees. It was their database. It was a very large sample. And today they are releasing the report with these new numbers.

KIEL: And we actually have some tape here from Ahu Yildirmaz, and she heads up the ADP Research Institute. They did the study, and here we asked her to sort of extrapolate, OK, what does this mean for all of America?

AHU YILDIRMAZ: We would estimate 9 to 10 million people, employees, are being garnished today, and these employees are primarily blue-collar workers. Garnishment rates were highest among those earning between 25,000 to 40,000 per year.

INSKEEP: Oh, so we're talking about people for the most part who are below the median income in this country already struggling. And, Paul, is this more people having their wages garnished than would've been true a few years ago?

KIEL: Yes. It's definitely the case. We've spoken to people who've have dealt with payroll for decades, and they said there's really been a sea change in the last 10 years or so.

INSKEEP: Well, Chris, I understand you've been talking to some of the people who've been in this situation. Can you tell us a story?

ARNOLD: Sure. What we're going to hear today and tomorrow from some of those people - and first we're going to hear from Kevin Evans who was making about $75,000 a year as a sales manager. This was back before the recession. He lives in Missouri, and he'd been in that line of work selling office furniture for 25 years. He owned a nice three-bedroom house outside of Kansas City, Missouri.

KEVIN EVANS: Not fancy or anything, but nice and middle-class and all that. And you just figure, you know, you're going to be there forever.

ARNOLD: The house cost $112,000 - so affordable for Evans, but then the recession hit. And, Steve, as you might imagine nobody buys office furniture in the middle of a recession, and Evans' income dropped by half.

EVANS: And at the same time, my daughter was going away to college, and so my expenses were increasing.

ARNOLD: Then Evans lost his job completely.

EVANS: Frankly, I never assumed much debt.

ARNOLD: And he didn't want to, so he sold his house. And he showed us around his tiny apartment that he's renting these days in Springfield, Missouri.

EVANS: I now live in a one-bedroom, efficiency apartment that the living room and kitchen is one. I literally have my kayak on one end in the kitchen.

ARNOLD: The kayak's kind of leaning up against the stove.

EVANS: In front of the stove.

ARNOLD: And so, Steve, during Evans' fall from happy, middle-class life, he worked a series of low-wage jobs - at a lumber yard, at a 24-hour fitness - he never collected unemployment. But along the way, he ended up with about $7,000 on a Capital One credit card. By the end of 2009, he'd fallen behind on those payments and Capital One closed his account in 2010.

EVANS: I'm not blaming my situation on anybody else. It was my debt. I want to pay it. I always did want to pay it. I thought, you know, no problem.

ARNOLD: Now, as the economy's recovered, starting about a year ago, Kevin's actually getting better paying jobs again - some sales jobs. It's not what he was making, but he's sort of on his way back. And so that's when Capital One's debt collectors started garnishing 25 percent of his paycheck for that old debt, and that old debt had been ballooning in size. And credit cards tend to do this. So the $7,000 he owed in 2010, that grew to $15,000 late last year because of the interests. And the lawyers' fees, and Evans was running around, doing all kinds of stuff, trying to manage his life when he saw that he was shocked.

EVANS: It's still racking up almost 30 percent interest rate, and I need to somehow come up with large quantities of money to pay this down as fast as possible so that I don't just keep getting pummeled, just beaten.

ARNOLD: Capital One said in a statement to NPR and ProPublica that legal action is always a last resort and that it tried to work with Evans, but he didn't complete a payment plan that they'd agreed to. Also court records show that Kevin Evans was served with a summons to appear in court when Capital One sued him. Kevin says if it was a summons, he didn't understand that. In any case, when defendants don't show up in court, things don't tend to go their way.

(SOUNDBITE OF COURT HEARING)

UNIDENTIFIED MAN #1: Capital One Bank versus a fellow parolee.

ARNOLD: So ProPublica's Paul Kiel and I were just in Missouri. We sat in on one of these hearings. This one was at the Clay County District Court House outside Kansas City and Associate Circuit Judge Lewis Angliss (ph) presided over a long docket of credit card companies and hospitals and other outfits suing people over debts. Most people who were getting sued didn't show up in court, but the lawyers for the plaintiffs of course did show up in court.

(SOUNDBITE OF COURT HEARING)

LEWIS ANGLISS: New Liberty Hospital versus Stephen Rorrick (ph) and Michelle Rorrick (ph).

MAN #1: I'd ask for a default judgment.

ARNOLD: It's all very clerical, actually - it's like default judgment after default judgment, papers shuffling around, but in each one of these cases, there's a person who now stands to get their wages garnished or in some cases their entire bank account seized.

KARI FIOTI: You've taken everything I have. You're not just taking a portion of it. You're taking my livelihood.

ARNOLD: That's Kari Fioti (ph) who lives near Omaha, Nebraska. Debt collectors seized everything in her checking account over a medical debt. She broke her wrist and says she couldn't afford the hospital bills. We'll hear from her and other people's stories tomorrow, and we're going to look at the rules governing just how much debt collectors are allowed to take from people after they get a court judgment against them.

INSKEEP: Chris, thanks very much.

ARNOLD: Thanks, Steve.

INSKEEP: That NPR's Chris Arnold. We also heard from Paul Kiel of ProPublica. Thanks to you.

KIEL: Thank you.

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