FOR IMMEDIATE RELEASE: December 18, 2024
Contacts: Jerome Montes, 609 540-9197, [email protected]
National Consumer Law Center, Stephen Rouzer ([email protected])
New Jersey Exemption Laws Allow Debt Collectors to Push Families Into Poverty
Annual Report Grades the Strength of State Protections for Family Finances; NJ Receives F Grade
WASHINGTON – As working families continue to struggle through a perfect storm of historically high inflation, all-time high credit card interest rates, an ever-growing cascade of junk fees, and record-breaking consumer debt, a new report finds that not one state or jurisdiction sufficiently protects its residents' homes, vehicles, belongings, and family finances – and New Jersey fails miserably, getting an “F” grade.
“No should be left destitute because they have debt,” said Beverly Brown Ruggia, Financial Justice Program Director for New Jersey Citizen Action. “New Jersey families continue to struggle with their household budgets, with credit card, auto loan, student loan, medical and mortgage debt all contributing to financial stress. We can greatly improve New Jersey's debt collection protection laws by passing a strong version of S1746/A3538. A bill version that makes protections automatic would allow New Jerseyans to remain in their homes, keep food on their tables, and hold onto essential personal property while they repay their debt."
“Debt collectors have long made low-income New Jersey consumers’ lives miserable by freezing all of the money in their bank account to collect a medical debt or credit card judgment, even when the money is exempt from seizure,” said David McMillin, Chief Counsel for consumer issues at Legal Services of New Jersey. “This forces many vulnerable consumers to go to court just to get their money released. Other states around the country prevent this by automatically exempting a floor amount of money in every consumer’s bank account. New Jersey should do this, too, and also pass a homestead exemption protecting family homes – as 48 other states already do.”
"Once again, New Jersey gets an “F” on its state exemption laws," said Renee Steinhagen, Executive Director of NJ Appleseed. "It is long past time for us to strengthen those protections for the most economically vulnerable people of this state. We call on the New Jersey Legislature to expeditiously pass S1746/A3538."
The National Consumer Law Center (NCLC) report, No Fresh Start 2024: Will States Protect Families from Debt Collectors Seizing Wages and Bank Balances?, grades each state on its exemption laws–fundamental safeguards that protect family income and property from seizure by creditors, debt buyers, and debt collectors. These laws are designed to protect consumers and their families from poverty and to preserve their ability to rehabilitate their finances and be productive members of society.
These protections are critical as families reel from historically high inflation, but as the report details, New Jersey received an “F” grade, and falls short of adequately protecting families in each of these five areas:
- Preserving a basic amount in a bank account so that the debtor’s funds to pay essential costs such as rent, utilities, and commuting expenses are not cleaned out; and
- Preventing seizure and sale of the family’s necessary household goods.
- Preventing creditors from seizing so much of the debtor’s wages that the debtor is pushed below a living wage for a family of four;
- Allowing the debtor to keep a used car of at least close to average value;
- Preserving at least a median-value home;
This year’s report updated the rating scale to reflect inflation. It also introduced a new rating criterion for protection of a basic amount in a bank account–whether it is self-executing. If a debtor has to file paperwork in court, take time off from work to appear at court hearings, or hire a lawyer to claim the protection, it is unlikely to be of much help to a struggling family.
The report also examines how the historic racial wealth gap creates a more significant debt burden for Black and Latino/Hispanic families. When hit with challenging financial times, Black and Latino/Hispanic households have less of a financial safety net to draw on. Black and Latino households are also more likely to experience unemployment and are disproportionally represented in the poverty population.
“State exemption laws provide critical protections for cars, work tools, gas money, and other basic essentials consumers need to remain in the workforce,” said Michael Best, senior attorney at the National Consumer Law Center and co-author of the report. New Jersey’s exemption laws need to be strong enough to protect families from poverty and allow families to recover financially after the collection of a debt.”
Strong exemption laws not only protect families from destitution but can also act as an economic stimulus tool that steers money into state and local communities. Strong exemption laws in New Jersey can deter predatory lending, protect residents from impoverishment, and save taxpayers money.
Related Resources
- No Fresh Start 2023: Will States Let Debt Collectors Push Families Into Poverty as Economic Uncertainty Looms?
- Model Family Financial Protection Act
- State Debt Collection Fact Sheets
- Fair Debt Collectionand Collection Actions (legal treatises):
- Surviving Debt(consumer book) and Consumer Debt Advice (free articles)
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New Jersey Citizen Action is a statewide coalition and grassroots organization that fights for social, racial, and economic justice for all.
Since 1969, the nonprofit National Consumer Law Center has worked for consumer justice and economic security for low-income and other disadvantaged people in the United States through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.