The economic crisis may be a distant memory for many, but for others, the shadows of the downturn still linger in the form of reduced paychecks every month, as more and more lenders utilize wage garnishment as a tool to regain their investments.
Wage garnishment, for the uninitiated, is a legal process in which “an employer is required to withhold the earnings of an individual for the payment of a debt in accordance with a court order or other legal or equitable procedure.” In a recent study conducted by ADP, more than 4 million working Americans, or about 3% of American workers, had their wages garnished to pay off a consumer debt last year. And the penalty, which was once primarily used to insure that child support and alimony payments were made, has become increasingly popular among creditors for more common types of debt, such as consumer debt, or even student loans and hospital bills.
The renewed popularity of wage garnishment as a tactic by creditors has led some to claim that the practice is beginning to get out of hand. Carolyn Carter, a representative for the National Consumer Law Center, who spoke with NPR and ProPublica, called the state of wage garnishment in America “alarming.” She says that “states and federal government should look on reforming our wage garnishment laws with some urgency.”
ADP found that in certain states, “pay seizures appear to be rising fast.” The research institute, which specializes in employment, workforce trends, and human capital management, speculates that “the economic downturn has produced a significant increase in the number of debtors — and creditors seem to be suing at higher levels.” ADP adds that “between 2012 and 2013, there was virtually no change in the garnishment landscape,” which is possibly the result of the “continued economic recovery.”
ADP found that the Midwest has the highest rate of wage garnishment in the country, likely due to the fact that Midwest has “more manufacturing companies than the Northeast and West,” which had the two lowest rates of wage garnishment. The manufacturing industry, ADP found, has the highest rate of wage garnishment, and the Midwest’s high concentration of manufacturing companies, paired with the fact that the region has been slower to recover from the economic crisis than other parts of the country, are two likely factors in the Midwest’s higher rate of pay seizures.