SB 298 will Protect Consumers’ Accounts from Bank Levies

 

The recent resignation of Richard Cordray, the head of the federal Consumer Financial Protection Bureau (CFPB), gave President Trump another opportunity to weaken oversight of powerful financial institutions. The president wasted little time in appointing an open critic of the CFPB as its acting director.  This is yet another blow for consumers who can expect little or no help from this administration.

But in California the Legislature can take an enormous step to protect people who are on the verge of losing all their savings.  By passing SB 298, which is currently on the Assembly floor, legislators would provide a shield that prevents bank levies from emptying low-income Californians’ bank accounts.  It is a moderate bill similar to what already exists in more than a dozen other states whose leaders span the political spectrum. In a time of worsening inequality, it would add meaningful financial security to the tens of thousands of struggling California consumers facing bank levies.

There are no limits on how much debt collectors can take from a Californian’s account.  They can empty the whole account.  The current process in place to protect some of the debtors’ savings from levies so people can pay for basic necessities of life such as groceries, shelter and medicine is broken. Consumers must go through the courts to get a claim of exemption, but by the time one is granted, the bank account has already been cleared out, and it takes months to get money back.

Compounding the problem is the sheer volume of levies (conservatively estimated at over 60,000 annually in California) and the often poor paper trail proving the debt.  Many people are not properly noticed that they owe money in the first place. For example, victims of domestic violence who leave their batterer for a safe environment are not always notified. Low-income people searching for more affordable housing in high-cost California often are not at the last known address a creditor has on file. Debt collectors are notorious for keeping poor records and attempting to collect debt from people who never accrued it. Many people are not even aware their accounts are being levied until they attempt to withdraw the funds.

This unfair system steers many low-income Californians to higher priced check-cashing services or money orders rather than bank accounts.

SB 298 provides real financial security for consumers by automatically protecting from levy up to $2,250.  It does not eliminate anyone’s debt, but would simply ensure that people have sufficient funds to pay needed expenses. It would also save court expenses by reducing the number of claim of exemption hearings because people would have the $2,250 automatically shielded.

If enacted, California would join 16 other states that provide protection from levies, some – Mississippi, Tennessee and Wisconsin – at more than double the amount proposed in SB 298.  That’s why individuals like University of California, Berkeley Law School Dean Erwin Chemerinsky, Labor, nonprofit legal organizations and consumer groups all support SB 298.

The bill passed the state Senate earlier this year and is currently on the Assembly floor. Call your state Assembly member and urge them to join Labor in support. For more information on SB 298, go to www.casb298.com.

At a time when consumer protections are under attack at the federal level, California must provide meaningful reform to this broken system to enable the working poor to break out of debt traps and avoid falling deeper into poverty.

 

State Senator Bob Wieckowski (D-Fremont) represents the 10th District, which includes southern Alameda County and parts of Santa Clara County. 

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