Md.'s Consumer Advocates Push for New Debt Collection Laws



Some of Maryland's debt collection laws haven't been updated since the Reagan administration. Lawmakers and consumer advocates are trying to update the law to protect low-income Marylanders from collection tactics like body attachments. (Photo: Brooks DuBose) Some of Maryland's debt collection laws haven't been updated since the Reagan administration. Lawmakers and consumer advocates are trying to update the law to protect low-income Marylanders from collection tactics like body attachments. (Photo: Brooks DuBose)

ANNAPOLIS (May 17, 2019)—Jailing a person for an unpaid debt has been illegal for almost two centuries in the United States.

But in Maryland, through a roundabout court procedure, hundreds of people every year are jailed for essentially just that: Owing money.

In debt collection cases, a creditor can file a judgment—or a claim that a debt is owed—to compel a debtor to appear in court to answer questions about their assets. Many of these cases result in garnishment—the legal collection of a portion of a debtor's wages, property or bank accounts to pay back a debt.

In 2016, more than 76,000 debt collection cases resulted in garnishment statewide, according to a comprehensive report published in June by the Maryland Consumer Rights Coalition.

About two-thirds of debtors had their wages garnished, the rest had some sort of property garnished, the report found.

Several hundred body attachments—the term for an arrest warrant for an individual who fails to appear in court—are issued each year and about 20 percent of all debt collection cases result in an arrest.

In Baltimore County, more than 10,000 residents had their wages garnished in 2016, the most in the state. The four most populous jurisdictions in the state, Montgomery, Prince George's and Baltimore counties and Baltimore City—about 57 percent of Maryland's 6 million residents—account for more than 70 percent of all garnishment cases.

The other 20 counties averaged just less than 1,200 garnishment cases during the same time period.

The debts owed in these areas averaged to about $4,400, though other costs like interest and attorneys fees can push totals even higher. In Maryland, private debts less than $5,000 are considered small claims settled in Maryland District Courts. A review by the consumer rights coalition found that about three quarters of all debt collection cases between 2015 and 2017 were for judgments less than $5,000.

'A very punitive view of debtors'

In 1988, the average monthly rent for an occupied housing unit in Maryland was less than $500, according to the U.S. Census Bureau. Both the federal and Maryland state minimum wages were $3.35 an hour.

That same year, the Maryland General Assembly passed a law setting the state's wage garnishment practices, which stated that if a person owed a debt, 25 percent of their wages could be garnished. In other words, about $105 of the roughly $134 per week a person working minimum wage in 1988 was protected.

More than three decades later, the same law—and the same percentages—remain in place. The federal minimum wage is now $7.25 per hour; Maryland's is $10.10 hourly and is set to increase to $15 by 2026.

As of 2017, the average monthly rent for an occupied housing unit in Maryland was around $1,300, according to the U.S. Census.

In 1988, that meant the state retained $29 per week.

Today, the maximum sum the state can garnish has nearly tripled, to almost $75 per week, "an immense amount of money" for the working poor, according to Amy Hennen, the managing attorney of Maryland Volunteer Lawyers Service, a Baltimore-based non-profit legal service.

The remaining wages protected by law are less than $11,000 per year—about $850 per month—well below the federal poverty line of $12,490 annually for one individual.

"One of the clients that my office has been assisting with recently has five children living in their home and is earning above minimum wage," Hennen said. "But with the household size, it's really like she's not earning minimum wage and it's incredibly challenging for her."

Over the last quarter century, the debt burden for many Marylanders has increased through a combination of rising housing, healthcare and tuition costs coupled with stagnant wage growth.

Maryland's poverty rate has increased from 8.3 percent in 1990 to about 9.9 percent in 2016, a rise of 19 percent, according to the Maryland Alliance for the Poor.

The state's population has increased by about 25 percent during that same time, and now about one in 10 of Maryland's 6 million residents live in poverty. The state's poverty rate is still below the federal rate of 12.7 percent.

Meanwhile, Maryland's debt collection laws have not kept up with growing income inequality, according to Marceline White, the executive director of the Maryland Consumer Rights Coalition.

"I would declare Maryland's debt collection laws en masse as antiquated," White said in an interview with Capital News Service in January. "I think they have a very punitive view of debtors without a more robust understanding of the strain that working people, especially low-wage workers, face every day in terms of trying to balance needs."

'Completely different language'

The vast majority of debtors in Maryland do not appear in court with a lawyer. The consumer rights coalition report found that 2 percent of debtors statewide have legal representation.

Meanwhile creditors statewide have representation about 98 percent of the time, White found.

Hennen is one of a handful of attorneys in Maryland who instruct consumers on how to meet their debt obligations in a way that doesn't push them further into poverty. She holds a weekly consumer protection clinic at the District Court of Maryland in Baltimore.

"With debt collection, they think of it as a financial issue and they don't think of it as a legal issue," she said. "So that, of course, creates a problem in that people—defendants in these cases—don't know that they should seek legal help."

Another attorney who has done pro-bono legal work with debtors in Baltimore City is Lydie Glynn, one of four or five volunteer lawyers who represent people in Baltimore City District Court for small claims cases—usually involving landlord-tenant disputes, unpaid debts and disputes with bail bondsmen, she said.

"It's a completely different language and a different culture," Glynn said of the court system. She described a client receiving a letter from their landlord notifying them they would be evicted for not paying rent. Instead of seeking professional legal advice, Glynn's clients start preparing to move out.

"These people freak out and start getting storage places and taking time off work to pack up and do all of this stuff because they think … if they don't leave by that date then the sheriff's going to come and evict them," Glynn said. "In order to evict you, the creditor needs to do a lot."

On a typical day in the District Court—dockets are held twice a week—there are about 100 to 150 cases on the docket. Only about 22 percent of defendants in those cases appear in court, according to associate Judge Mark Scurti with the District Court of Baltimore City.

White said many of the clients she works with cannot make time to appear in court because of a job they don't get paid leave from or a childcare issue.

"We're talking about people who have a very thin safety net or there are huge holes in it. There are lots of ways to do this to that would actually support the people that are really living at the economic margins. And we're doing it in the most punitive, Draconian way instead," White said, with wage garnishments and body attachments.

What's more, without an attorney, the defendant will not receive counseling on the consequences of their decision.

"My role is limited to advising the group about services available where they can seek help and get questions answered," Scurti said in an interview with Capital News Service. "We cannot explain to them the consequences of what may happen or may not happen because everybody's situation is different and unique and that's really outside of the court's authority."

The court does offer resources in its law library and provides dozens of videos on its website instructing debtors on topics like how to defend their case and where to seek legal advice.

According to data obtained by Capital News Service from the Maryland Consumer Rights Coalition, more than 7,200 body attachments have been issued in the state of Maryland between 2009 and 2018. An analysis found that the majority—61 percent—were for amounts less than $5,000. The data did not show how many warrants ended in arrests, however, the coalition sampled a six-month period in 2014, which found that about 20 percent of cases—or 40 debtors—resulted in an arrest.

Those numbers have remained consistent—about 800 body attachments and 80 arrests statewide—year-to-year, Hennen said.

"Generally, about a hundred people or less get picked up every year, get actually arrested," she said. "Part of that is … just because of bad addresses or bad information, the person's moved out of state, the person is deceased, something else has happened."

Hennen said part of the problem is that creditors often enter body attachments against people for whom they can't find wage or bank information, which can sometimes mean the person is unbanked or as she put it "existing outside of the normal economy."

"If they are in this situation, they may not be able to engage with a lawyer in order to try to get a resolution to the body attachment," she said. "Body attachments are a pox upon our society and need to be done away with entirely."

Legal and legislative fixes

For years, state Sen. Will Smith, a Democrat from Montgomery County, and consumer protection advocates like White, have sought to update the three-decade-old law, with little success.

Smith has introduced legislation seeking to update the law in each of the last two legislative sessions.

In the 2019 legislative session, Smith sponsored SB772, which sought to increase the wages protected from garnishment per pay period from 30 times the federal hourly minimum wage to 44 times the state's hourly minimum wage.

Under those new guidelines, the wages protected from garnishment would more than double from $217 to about $450 per week.

The bill was meant to "decouple" the state's wage garnishment laws from the federal minimum wage and "tagging it" to the state minimum wage instead, Smith said.

A similar bill passed in Washington, D.C., in December that exempts any wage garnishment for those making less than $27,560 annually, the amount a minimum wage worker would make in a year there.

"In Maryland, we haven't adjusted some of our wage garnishment or debt collection laws in about 30 years," Smith said in an interview with Capital News Service in February. "It's something that definitely needs to change."

At a committee hearing for SB772 on March 15, representatives from credit lenders, debt buyers and housing associations in the state criticized the bill for "drastically" increasing the wages that would be protected. One letter written in opposition said the bill "would render courts' valid judgments unenforceable" and another argued it would hinder citizens' ability to obtain credit because creditors would avoid offering lines of credit in the state.

"It would create a whole class of people that would never have to pay a garnishment," David Schlee, an attorney and the president of the Maryland-DC Creditors Bar, said before the Senate Finance Committee, where the bill died when it did not receive a vote.

A House version of the bill—sponsored by Delegate Erek Barron, D-Prince George's, received an unfavorable report in the House Economic Matters Committee.

Nevertheless, White said, she was encouraged by what she called "a more robust discussion" than in previous sessions as well as support from legislators across the state.

"There are a lot of new members that have been newly elected who care about this," she said. "And you see people caring about it not simply in Baltimore City but you see people in Montgomery County, which has one of the highest cost of living, and in places like Saint Mary's and the Eastern Shore where people are really struggling in more rural areas."

For Smith, the key is to "ensure that yes these people still have access to credit and there's responsible lending but you're not able to garnish people into poverty and keep them in a cycle of poverty," he said.

Court of Appeals rule change

Maryland law states that an individual must be personally served a summons, however, the law includes a caveat, called substituted service, in which someone of "suitable age and discretion" may count if the defendant is not present.

"So that can be a 13-year-old child," Hennen said. "When you're talking about somebody's liberty being taken from them, really, due process requires that person be actually genuinely notified."

Some progress has been made to address the confusion around court summonses and a notice of service.

A judicial committee tasked with addressing and implementing rule changes has recently recommended that a court summons for an unpaid debt include a warning to a debtor that they may be arrested if they do not appear.

Previously, a summons only indicated that a person may be found in contempt of court, not that a body attachment may be issued.

The new rule would require the summons to include language of a potential arrest if an individual does not appear in court as well as be delivered directly to the debtor and not a family member or related party. The court system adopted the changed language on May 15.

"I still see that, especially creditors, believe that people owe these debts and if they can't find a way to get at these people that people need to be held to account, which I just genuinely disagree with," Hennen said. "If you can't find wages to garnish then your judgment isn't worth very much. And locking people up is not a solution to getting people to pay their debts."

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