Measure limiting debt collections likely to be voted on in Arizona

A move that could prevent the sale of more of Arizonans’ assets to pay off medical and other debt will likely be passed in November.

The Predatory Debt Collection Act would add protections against wage garnishment and increase the amount of money in homes, vehicles, bank accounts and household assets protected from sale to reimburse debt collectors.

The ballot initiative would limit the interest rate on medical debt to 3%, but the rest of its provisions would apply to all consumer debt, the initiative’s organizers said.

The law would increase the amount of equity in a home protected from being taken by creditors to $400,000 from $250,000. This would increase vehicle coverage from $6,000 to $15,000 ($25,000 for physically disabled drivers).

Proponents say the current debt protection figures are outdated and the updates they offer reflect inflation.

The law would also increase the amount of money protected in a bank account from $300 to $5,000 and increase the value of household assets protected from creditors from $6,000 to $15,000.

These amounts would be adjusted annually for inflation, and aside from the interest rate cap, the protections would apply to all debts, not just medical debts.

The law was introduced last year by Healthcare Rising Arizona, a political action committee and health advocacy organization with 1,200 members in Arizona. It receives support from SEIU-United Healthcare Workers West, a union for healthcare workers headquartered in Oakland, California.

For the law to pass in November, Healthcare Rising Arizona needed to collect 237,645 valid signatures on its petitions – 10% of the votes cast for governor in the previous election.

The group expects to collect just under half a million signatures, organizers said.

The deadline for filing signatures at the Secretary of State’s office is Friday.

In the United States, two-thirds of personal bankruptcies are caused by medical bills. “We’re trying to avoid this cycle of poverty that people get pulled into,” said Rodd McLeod, spokesperson for Healthcare Rising Arizona.

Medical debt is a big concern

Bill Ford, a 77-year-old Navy veteran, lived in rural Arizona for 35 years before moving to Buckeye 12 years ago. He became a member of Healthcare Rising Arizona in 2020 and collected signatures for the Predatory Debt Collection Act.

“I have seen firsthand the challenges people face in obtaining affordable, accessible, and quality health care in our state,” Ford said. “Especially in our rural communities.”

“My mother-in-law was a breast cancer survivor,” he said. “She thought she had relapsed, but postponed the medical diagnosis because the family could not afford medical coverage. She postponed treatment until she got older in Medicare. By then it was too late and she died of cancer.

For Ford’s family, medical debt left a lasting legacy.

“My wife’s first husband was diagnosed with cancer in his mid-thirties. The family did not have access to affordable health coverage,” he said. “He died nine months later, leaving a widow with three young children with a mountain of medical debt that took years to pay off. When you die, your medical debt does not disappear.

“Credit card debt collection practices can trap families in a vicious cycle of debt and make them impossible to free,” Ford said. “If someone gets sick or injured and can’t pay their medical bills, they can lose their car. If they lose their car, they can’t go to work. If they can’t work, they lose their house.

Urban Institute Credit Bureau Data of 2022 shows that 27% of Arizonans have collection debt: 20% of white Arizonans and 39% of Arizonans of color (defined by the study as any race other than white, or multiracial). Twelve percent of Arizonans have medical debt in collection: 10% of white Arizonans and 16% of Arizonans of color.

According to the Kaiser Family Foundation 2022 Health Care Debt Survey, four in 10 adults in the United States have some form of health care debt. And uninsured adults, women, black and Hispanic adults, and low-income people are especially likely to have health care debt. At least half of black and Hispanic adults report having debt due to medical or dental bills, compared to 37% of white adults. And 62% of uninsured adults report having health care debt, compared to 44% of insured adults.

Just under 14% of Arizonans under age 65 do not have health insurance, according to census data.

Gene Godwin, an election worker, holds a roll of stickers for people who vote by dropping off their ballots at the Maricopa County Elections Office at 510 S. Third Ave.  in Phoenix on October 16, 2020.

Critics expected to fight the initiative

The measure has its detractors.

“The most troubling misconception of this initiative and the reason we believe the initiative is so misleading to the community is because it would eliminate debt collection for more than the title suggests: medical expenses,” said Michael Guymon, President. and CEO of the Tucson Metro Chamber of Commerce.

Guymon acknowledged that the intent of the ballot initiative is to help those who are down on their luck and being pursued by predatory debt collectors, but said it would ultimately hurt those people more.

He pointed to the part of the ballot initiative that adds protections against wage garnishment, a legal procedure in which a person’s earnings are withheld by an employer for payment of a debt.

The law states that a judgment debtor will only be subject to a maximum withholding of 10% from wages, with a potential reduction to 5%. Earnings available for garnishment will be based on the state minimum wage and will increase from thirty times the minimum hourly wage to sixty times the minimum hourly wage.

Calculations made by the Tucson Metro Chamber of Commerce using the state’s minimum wage as of January 2023 found that this means someone earning a W-2 income of less than $50,000 would be exempt from seizure. – salary stoppage.

“If a lender can’t collect the outstanding debts of someone earning $50,000 a year or less, why would he lend to them?” said Guymon.

Due to added protection against wage garnishment and increased protections on homes and bank accounts, Guymon said analysts estimate a “more than 70% decline in current and future wage garnishments that are in place to collect judgments that have been granted to creditors in Arizona.”

“People who owe money to these creditors, but earn less than $50,000 a year, will not have to pay their debts,” he said.

“This will negatively impact business owners, lenders and the overall financial ecosystem in Arizona,” Guymon said. “If neighbor A fails to repay his debts, the ‘cost of money’ to neighbor B will increase in the form of restricted money lending and higher interest rates.”

On Thursday morning, Healthcare Rising Arizona will deliver its signatures to the office of the Arizona Secretary of State.

“We expect there to be a trial and a real fight over this, but we think we’ll overcome the challenge,” McLeod said.

Madeleine Parrish covers equity issues for the Arizona Republic. Join her at [email protected]

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John A. Bogar