Governor Brown signs Wieckowski bills to improve financial stability of working poor

The senator's legislation benefits low-income workers and aids consumers fighting abusive debt collectors

October 11, 2015

Sacramento – Two bills that are part of State Senator Bob Wieckowski’s (D-Fremont) Economic Equity and Financial Stability Initiative to aid the working poor and protect the due process rights of consumers fighting debt collectors were signed into law today by California Governor Jerry Brown.  The bills, SB 501 and SB 641, were supported by a strong coalition of consumer, advocates, labor organizations, and legal aid clinics across the state, as well as Attorney General Kamala D. Harris and State Treasurer John Chiang.

“These two bills will help many Californians break the cycle of debt and in turn break the cycle of poverty that prevents them from fully contributing to our economy,” said Wieckowski, a member of the Senate’s Judiciary Committee.  “They help tip the scale away from those who prey on low-income families toward those who are living paycheck to paycheck and looking to climb the economic ladder.  As a result, people will have a better chance to become financially stable and others will be able to defend themselves in court against debt collectors who use abusive and often illegal tactics.”

“We are thrilled,” said Jessica Bartholow of the Western Center on Law and Poverty, which helped these bills pass out of the Legislature.  “Too many low-income Californians remain buried with debt they incurred paying for basic needs during the recession.  These new protections will prevent overreaching, and in some cases unscrupulous, debt collection practices from undermining their futures.”

SB 501, which takes effect July 1, reforms California’s wage garnishment limits.  Current law allows for 25 percent of a worker’s paycheck to be garnished, the highest amount allowed under federal law.  This causes many of the working poor to fall further into debt to credit card companies or predatory lenders.  It also means workers earning just over the minimum wage – $10, $11 or $12 an hour – only take home the minimum wage of $9 with the rest garnished.  The current garnishment rate also doesn’t take into account local minimum wage ordinances in cities like San Jose, Oakland, and San Francisco.  This undermines the desires of local voters and is a disincentive for minimum wage workers to earn more.

Wieckowski’s bill creates a tiered rate structure so that the more workers earn above the minimum wage, the more they repay from their paycheck.  Allowing the working poor to keep more of their paycheck, improves their ability to make ends meet for rent, meals and other expenses.   

“This law will make a real difference to the many Californians who live on the financial edge,” said Ted Mermin of the East Bay Community Law Center.  “The new law will make sure they get to keep a little bit more of their paycheck every week.”

Governor Brown also signed Wieckowski’s SB 641.  The bill creates a more expedient path to court for consumers by allowing them to file a motion to set aside a wrongful default judgment and ask that a judge examine the case on its merits.  Unscrupulous debt buyers are enforcing flawed judgments through wage garnishments and bank levies against Californians who never received notice of the original lawsuit, who have already paid or settled the debt and, in the most egregious cases, who are entirely the wrong individuals.

The federal Consumer Financial Protection Bureau recently validated this claim when it ordered the two largest debt buyers in the nation, including Encore Capital Group, to refund consumers $61 million and pay $18 million in civil penalties for threatening and deceiving consumers in order to collect on debts they knew or should have known were inaccurate or unsubstantiated.  The CFPB said the companies often made no effort to obtain the documents to back up their claims and relied on consumers not filing a defense and winning the lawsuits on default.

SB 641 helps California consumers fight back against these predatory practices.

“If a consumer doesn’t actually owe a debt, she shouldn’t have to pay it, and no one should be abusing our courts to try to make her pay it,” Mermin said.  “It’s that simple.”

The bills were supported by a large group of consumer and public interest organizations, including the East Bay Community Law Center, the Western Center on Law and Poverty, Consumers Union, the Center for Responsible Lending, the California Labor Federation and several others.

Senator Wieckowski represents the 10th Senate District, which includes southern Alameda County and parts of Santa Clara County.