Prop 209 would make changes to Arizona’s debt collection rules
PHOENIX — This November, 10 statewide ballot initiatives will be up for vote by Arizonans. One is Proposition 209, the Predatory Debt Collection Protection Act.
Supporters of Prop 209 tout it as a way to give people in debt some more breathing room. Opponents believe it will actually hurt those it aims to help by making them less likely to be approved for loans.
One of the proposition’s supporters is Rodd McLeod with advocacy group Healthcare Rising Arizona, who says the goal is to keep people from falling deeper into debt.
“[It shields] more of our assets and belongings from debt collectors, and capping the interest rate on medical debt to just 3%,” McLeod explains. “It can be up to 10% right now.”
Besides that cap, Prop 209 also would increase the dollar amount for exemptions on general debt collection.
This includes things like homes (going from $250,000 exempt from debt collection to $400,000) and car equity (rising from $6,000 to $15,000). It would also change the formula used to determine the exemption for disposable earnings.
McLeod doesn’t see Prop 209 as a radical change.
“All of this is Arizona law already,” he says. “We’re just adjusting the amounts to bring them in line with reality, and then annually adjusting those for inflation.”
However, opponents of the proposition think it will have consequences for some Arizonans.
Amber Russo with Protect Our Arizona, the opposition PAC for Prop 209, says they examined the sections of the proposition regarding changes to debt collection on income.
Based on their calculations, an Arizonan making under around $50,000 a year wouldn’t be collectable by a creditor, because their wages would be protected from garnishment.
“The number is based off of the highest minimum wage, extrapolated out,” she explains. “[Factoring in] Medicare and social security withholdings.”
Danny Seiden, president and CEO of the Arizona Chamber of Commerce and Industry, also opposes Prop 209, and says this section of the proposition is the biggest issue.
“If you’re somebody in Arizona who makes under $50,000 a year – which is over half of our population – this would essentially make you untouchable by creditors,” he says. “That might sound great, but what it really means is that nobody will lend to you if there’s no way to ensure they’ll get their money back.”
Seiden says this is why some in the business community takes issue with the proposition.
“It’s a very poorly written bill that will fundamentally change the way Arizonans can access credit,” he says.
Russo agrees. “If I can’t collect against you when you default on your loan, I can’t lend at an affordable rate,” she says. “This is [also] going to impact people outside that earner window, because now we’re going to pay a higher rate to make up for the window where people can’t collect.”
McLeod doesn’t think this argument holds up.
“In Texas you can’t even garnish wages at all, and they’re still lending in Texas,” he says. “People can get a loan or a credit card. This isn’t really about lending, it’s about debt.”
McLeod said the initiative wouldn’t forgive any debt.
“It just puts them in a position where they’ll be able to continue to function, earn a living and pay down those debts,” he said.
Still, Seiden doesn’t think Prop 209 is the right way to tackle debt issue.
“We don’t want to see anyone go into medical debt,” he says, “but this won’t do anything to affect that.”