Debt can affect anyone, and families fall into debt for reasons that are often uncontrollable – illness, job loss, accidents. For people living on low incomes, debt is a significant barrier to escaping poverty. In our conversations with people throughout the state, we often hear that many Washingtonians living on low incomes simply do not feel that they have any viable way to manage their debt.
Due to longstanding policies and practices that provide unfair advantages to white people at the expense of people of color, white families accumulate wealth at significantly higher rates than families of color. For instance, for every $100 of wealth and assets in white families, Black families hold just $5.04. As a result, households of color are much less likely to have cash on hand to handle unexpected expense or a loss in income. With regards to medical debt, 8.5% of the residents of Washington State have medical debt, and there is more than $700M of medical debt on the credit reports of those residents. African Americans and Latinos are more than twice as likely to have medical debt than their white counterparts.
Debt Collection in Washington State
Debt collection companies (aka “debt buyers” or “third party debt collectors”) buy outstanding debt for pennies on the dollar and then attempt to collect on it. These companies often engage in exploitative, predatory, and unfair practices that take advantage of people’s financial situations, depriving people of their hard-earned income.
Across the country, debt buyers buy up outstanding debts, then use state court systems to sue people who owe those debts. Often, however, these court suits come as a complete surprise to the consumers involved. The map to the right shows the percentage of debt buyer court cases in Washington by county, as a percentage of all civil cases in Superior Court. In the majority of Washington counties, over 60% of civil Superior Court cases are debt buyer cases.
Many people who receive court summons may not have the money or experience to know how to proceed. In other cases, the person receiving the court summons notice may not recognize the name of the debt buying company, often believing the notice is a scam and throwing it away–therefore never showing up in court. This results in a default judgement on the side of the debt buyer, which then allows debt buying companies to garnish a person’s bank accounts or wages. Often this spiral of debt can lead to job loss (as it is legal to dismiss an employee for garnishments of two or more debts) and even homelessness. This map shows the amount of debt buyer court cases throughout Washington that end in a default judgement favoring the debt buyer. Over 50% of debt buyer court cases in Washington end this way.
What We’re Doing About It
We believe that everyone should have fair and reasonable consumer protections when they borrow money or fall into debt. In 2020 we will continue to advocate for both maintaining consumer protections already in place and enacting stronger protections that will help Washington families avoid debt and lower their amount owed.
- Require debt buyers to legitimately prove that a debt is owed before they can file a claim and obtain a default judgment against a person. We support policies that regulate debt buyers’ abilities to file and win baseless lawsuits against Washingtonians.
- In 2019, we helped pass a bill that prevents home foreclosures due to inability to pay property taxes. This bill makes it easier for homeowners to set up payment plans and ensures that counties provide homeowners with information about services to help them manage outstanding property taxes. In the 2020 session, we will be advocating for funding investments in these foreclosure prevention programs.