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Legislative proposal aims to protect Oregonians struggling with debt

Elise Amendola

In Oregon, 16% or nearly 700,000 people have debt that’s been turned over to collections

Bonnie Walls fell into a spiral of unpaid debt after her husband died in 2022 and she lost his income.

Bills for cancer treatment and dental implants piled up as she struggled to get by on her reduced retirement income. Walls lives in Scappoose and worked for 35 years in a paintbrush factory in Portland. She’s had two knee replacements and cannot work.

At 75, she’s hounded daily by calls from debt collectors. She cannot file for bankruptcy because then she would have to sell her manufactured home to pay off debts.

“I didn’t have any options,” Walls said in an interview with the Capital Chronicle. “All I have is Social Security, and they can’t take that. It’s very stressful.”

Walls is among the 16% of Oregonians who have debt in collections, a group of 680,000 people who could benefit if Oregon lawmakers pass House Bill 2008. The bill, discussed Thursday in the House Rules Committee, would offer more protections to people who are paying off debt, shielding more of their property, wages and assets from garnishments and court-ordered seizures.

The bill would:

  • Raise the amount of take-home pay workers can keep after wage garnishments from $254 to at least $590, the Portland-area minimum wage for a 40-hour work week, or 75% of the check, whichever is more.
  • Provide more protection for people’s housing, including for seniors. Currently, only $40,000 of a home’s value is protected from seizure to pay off debts. That would increase to 33% of the real market value, with all of the home’s real market value protected for seniors 65 years and older.
  • Protect bank accounts with a balance of up to $2,500 from garnishment. The bill would also protect vehicles worth up to $10,000 from court seizure to pay off debts, an increase from $3,000.
  • Target unlawful debt collection practices. It would raise the minimum award for people who successfully sue in court from $200 to $1,000. If damages are more, a person could receive more. 

Five Democratic lawmakers signed on as chief sponsors: Senate President Rob Wagner of Lake Oswego; House Speaker Dan Rayfield of Corvallis; Sens. Kathleen Taylor of Portland and James Manning of Eugene; and Rep. Nathan Sosa of Hillsboro.

Oregon receives ‘D’ grade

Consumer advocates say Oregon needs to update its debt collection system and put more protections in place to help people avoid a lifetime of debt.

“The bill’s approach ensures lower-income families aren’t pushed into crisis or even homelessness by debt collection, while recognizing that higher earners may be able to afford to have more wages seized,” Sybil Hebb, director of legislative advocacy for the Oregon Law Center, wrote in submitted testimony.

The National Consumer Law Center, an advocacy group for low-income and vulnerable people, gave Oregon a “D” grade for its lack of consumer protections in a 2022 report that looked at whether states have laws to help people continue to have a liveable income while facing debt collectors and garnishments.

“It’s unacceptable that Oregon received a ‘D’ grade from the National Consumer Law Center on our ability to protect family finances from debt collectors,” said Rayfield. “We need to pass HB 2008 to ensure debts are paid while protecting the financial well-being of Oregon families.”

Cost of loans

Representatives in the banking and credit industry warned lawmakers that the bill could have unintended consequences, including making it harder for people to obtain credit if it’s harder to collect on unpaid debts.

“For banks, House Bill 2008 will impact the cost of credit and its availability in Oregon,” the Oregon Bankers Association said in submitted testimony. “As the potential risk of not being able to collect on an unpaid loan increases, so will the cost of the loan. Banks will have to factor collection risk into the cost of a loan, making lending more expensive.”

The Oregon Financial Services Association, a trade group for the consumer credit industry, raised similar concerns. The group’s lenders often work with credit-challenged borrowers

“If we do not have solutions available in the unlikely event of a default, we may no longer be able to, or may at least be hindered in providing credit to a very large portion of our existing customer base in Oregon,” Maureen McGee, the group’s lobbyist, said in testimony submitted to lawmakers. “Again, because our customers are often people who already do not have access to other traditional lenders, these circumstances could result in consumers having even more limited options for obtaining safe credit in this state.”

The House business committee passed the bill in March, on an 8-3 vote and sent it to the Rules Committee where it faces another vote which isn’t scheduled yet.

The Oregon Capital Chronicle is a professional, nonprofit news organization. We are an affiliate of States Newsroom, a national 501(c)(3) nonprofit supported by grants and a coalition of donors and readers. The Capital Chronicle retains full editorial independence, meaning decisions about news and coverage are made by Oregonians for Oregonians.

Ben Botkin covers justice, health and social services issues for the Oregon Capital Chronicle. Ben Botkin has been a reporter since 2003, when he drove from his Midwest locale to Idaho for his first journalism job. He has written extensively about politics and state agencies in Idaho, Nevada and Oregon.