Judicially enforced debt collection in Minnesota is almost as old as the state. In 1872, just twelve years after Minnesota entered the union, a creditor sought to collect a debt by using the then-common practice of attaching personal property. The debtor, a man who owned a cigar manufacturing company, possessed a silver watch and chain. He sought to keep it out of the hands of his creditor by asserting that he should be permitted to keep the watch because Minnesota law exempted “all wearing apparel of the debtor and his family.” The debtor also argued that the watch should be kept from the creditor under a provision that exempted “all other household furniture not herein enumerated, not exceeding five hundred dollars in value.” Finally, the debtor claimed that the watch was necessary to his trade as a cigar maker because he used the watch “to keep time of his workmen and regulate his duties.” The Minnesota Supreme Court, however, rejected all the debtor’s arguments and concluded that the watch could not be apparel if it was household furniture, that it could not be household furniture if the debtor wore it, and that the watch was not necessary to the debtor’s trade because:
It is not kept or used for the purpose of carrying on his trade, i.e., to make cigars with, but for his own convenience in keeping the account between himself and those by whom he makes cigars. His workmen could make as many, and as good cigars, if he were to keep their time and “regulate his duties,” whatever that may mean, by the sun.
In the past 150 years, debt collection has evolved from the practice in Rothschild v. Boelter of seizing and selling the personal property of the debtor. Although the remedy of seizing personal property remains in some statutes, the practice has fallen into disfavor—except in cases of repossession, where property is purchased on credit and the property itself secures the debt; and in bankruptcy, where the court apportions the debtor’s assets among creditors in satisfaction of a debt. This shift away from seizing a debtor’s personal property reflects the practical problems associated with seizing, storing, and selling personal property compared to the relative ease of seizing liquid assets in the form of bank accounts and wages.
Moreover, current attitudes regard the practice of entering a person’s home and taking personal property in satisfaction of a debt as a harsh remedy. This practice has been supplanted by the arguably less humiliating, but ultimately more ruinous, practice of seizing wages. Although a late nineteenth-century debtor might regret the loss of a silver pocket watch and chain, an early twenty- first-century debtor may be compelled to surrender as much as a quarter of his or her income for months—or even years—to satisfy a debt.
State wage garnishment statutes date back to the early twentieth century, but it was not until 1968 that Congress first regulated wage garnishment with the passage of the Consumer Credit Protection Act (CCPA). This law exempts a portion of an employee’s wages from garnishment and provides other protections. Since the passage of the CCPA, litigation has resolved some of the uncertainties associated with the law. Additionally, states have enacted legislation that further mitigates some of the harshest effects of wage garnishment. In 2016, the National Conference of Commissioners on Uniform State Laws proposed a uniform wage garnishment act (“Uniform Act”) that would standardize garnishment practices nationally. The Uniform Act has its roots in a 2011 proposal from the American Payroll Association (“Association”), which asserted that jurisdictional variations in garnishment practices created the risk of processing errors and financial liability for employers. The Association requested that the National Conference of Commissioners on Uniform State Laws develop a uniform act governing wage garnishments to “alleviate this complexity and enable employers to more easily fulfill their obligations.” Although the Uniform Act would eliminate some complexity in the administration of wage garnishment, especially for employers who process payrolls in more than one state, many of the changes would also eliminate protections that states provide to their citizens—protections that are consistent with the original purpose of the CCPA. The Uniform Act primarily serves the interests of employers and would eliminate some protections for employees. However, as detailed below, the Uniform Act also makes some useful recommendations for improving the wage garnishment process in ways that would benefit both employers and employees.
Someday, society may regard wage garnishment as intrusive and destabilizing, much as society now considers the once-common practice of seizing household goods. But until such time, states can do much to minimize the harm to low-wage workers. This article does not argue, as others have, for the abolition of wage garnishment, but rather for the amendment of state laws to strike a better balance between protecting consumers and enabling the collection of just debts.
Fifty years after the passage of the CPPA is an opportune time to consider whether the law has fulfilled its original purpose of protecting consumers. Part II of this article defines wage garnishment, offers an overview of the wage garnishment process, and considers some of the implications of wage garnishment for low- wage workers. Part III revisits the CCPA’s original purpose as a consumer protection statute. Part IV explores issues that have emerged in the past fifty years around the implementation of the CCPA and recommends steps that states can take to resolve those issues. These steps include imposing limits on garnish amounts, limiting employer liability, compensating employers for wage garnishment administrative costs, prohibiting firing for garnishment, clarifying the garnishment laws’ application to various wage arrangements, administering the distribution of garnished wages, requiring the renewal and preserving the order of garnishments, and retaining state-level consumer protections.