In response to steady attacks from legislators, rule makers, and others, the ARM industry is getting increasingly vocal about its positive effects on consumers and the economy. Recently, Oregon considered legislation that would have made it more challenging to collect post-judgment. In response, ACA International (ACA) crunched the numbers; it demonstrated to Oregon lawmakers that the data showed the unintended negative economic consequences Oregonians would suffer should the proposed legislation become law.
Oregon law permits garnishment with specific exemptions, including an exemption for disposable earnings. The proposed legislation would have increased Oregon’s weekly disposable earnings exemption from $254.00 to $1,000.00. ACA cautioned that before moving forward with the legislation, Oregon lawmakers should look at the long-term effects of the proposal on Oregon residents.
The ACA noted the following general points:
- The Federal Reserve Bank of New York found that restricting debt collection practices leads to a decline in the overall credit supply since creditors will be less willing to lend.
- The Consumer Financial Protection Bureau’s (CFPB)research suggests a $1.00 change in garnishment exemption causes a $7.69 decrease in available credit for every consumer.
Next, by applying data from the Federal Reserve Board’s Economic Well-Being of U.S. Households in 2022 to the proposed Oregon legislation, the ACA was able to establish the following:
- Should the proposal become law, over 2 million Oregonians would be negatively impacted by having the credit limits reduced by an average of $5,375.00 or eliminated altogether.
- All demographics would see a reduction in available credit. Reductions would total into the billions.
The proposed legislation did not pass through legislative committee and thus did not become law.
Regarding the Oregon legislature’s decision to refrain from increasing the exemption, Scott Purcell, CEO of ACA, said, “As part of ACA’s Advocacy we connected the dots from several sources including the New York Federal Reserve to now provide insights to the magnitude of harm to consumers’ access to credit when returns to the creditors are reduced, and ACA can do this analysis for any state. As part of ACA’s relationships with over 70 Members of Congress, and our national network of state unit lobbyists with significant state house relationships, we can now educate lawmakers on how many people, by race and by credit score band, are impacted in our communities by some of these well-intended but harmful ideas.”
The complete communication from ACA to Oregonian lawmakers can be found here.
Actions have consequences, and it's essential for lawmakers to look at all sides of an issue before creating or modifying existing rules or laws. Despite making excellent headlines, consumers ultimately suffer when lawmakers and regulators fail to consider the effects of their actions.
The process worked correctly and to the benefit of consumers here: by considering all sides of the issue, Oregon lawmakers avoided making a legal modification that would harm the people they were trying to protect. For the legislative process to keep working and to change the narrative surrounding debt collcetion, those in the ARM industry must be active participants. They need to speak loudly of the good the ARM industry does for consumers; they need to keep an eye on their state and local legislatures and bring troubling legislation up to their various industry groups.