Taxi drivers and Gig workers-Debt collectors are still coming for millions of Americans
Whether you are a taxi cab driver or a gig worker working as Uber or Lyft driver, possibility is that you are one of millions of Americans experiencing hardship due to COVID 19 pandemic. State governments had created protections for renters and credit card companies also gave time for consumers to get through the economic downturn created during this pandemic. As COVID-19 pandemic hit, Americans got protection from evictions, foreclosures and student debt. But debt collectors have continued to siphon off their share of paychecks from those who still have jobs.
Since 2018, Capital One has been a looming presence in Julio Lugo’s life, ever since the company sued him, as it did 29,000 other New Yorkers that year, over an unpaid credit card. But when the coronavirus hit the city this March, it wasn’t on his mind.
At Mount Sinai in Manhattan, where he works, he’d been drafted into the hospital’s frenzied effort against the virus. He normally gathered patient information at the front desk of a radiology clinic in orderly shifts, 9 to 5. Now he was working 16-hour days, often overnight. At one moment he might be enlisted to help a team of doctors or nurses put on their full-body protective equipment and then he would rush to disinfect another team. He lost track of the days, only orienting himself by the need to juggle care with his ex-wife of their two young children who were now out of school.
But despite a global pandemic, Capital One didn’t forget about him. The company began in late March to seize a portion of his wages to collect on that debt — one that he says wasn’t even his.
Federal, state and local officials have all taken some steps to protect Americans from the ravages of the economic crash due to COVID-19. Congress halted a substantial portion of evictions, foreclosures and collection on student loans. And when it sent $300 billion in stimulus checks out to families, many states took steps to make sure that debt collectors didn’t grab the money. But one of the most aggressive and common forms of debt collection has generally been allowed to continue: seizure of wages for old consumer debts.
The main protection Americans have gotten from debt collectors has been inadvertent, a byproduct of state courts being closed to most hearings, including those pushed by debt collectors. But this didn’t help people like Lugo who were the target of actions that began before the closures. Wage garnishments can run indefinitely once begun. As a result, essential workers and others who were lucky enough to keep their jobs have still been at risk of forfeiting a portion of their paychecks.
While new collection activity has dropped off, some major debt collectors have been laying the groundwork for a return to normal by filing suits by the thousands, according to a ProPublica review of online court records from county and state court websites. For example, in Maryland, two major debt collectors alone filed over 2,000 suits in April.
When the courts fully reopen, as they already have in some states, these companies will be first in line to win new court judgments. Those debtors who still have jobs will be forced to either make payments or risk their wages being seized. With 48% of American households having experienced a loss of employment income in the past few months, many will have no wages to take. But debt collectors can be patient and wait until they do.
Even more worrying to consumer advocates is what lies ahead. Households often rely on credit cards during moments of financial stress. In recent months, more have been paying rent with their cards. Eventually the bill will come due, which could lead to a wave of collection suits as the nation attempts to recover.
“There’s going to be a whole swath of people who never thought they’d be in a position to default,” said Pamela Foohey, a law professor at Indiana University who argues in a recent paper with two colleagues that Congress should impose a debt collection moratorium to allow for recovery. “It’s not productive to be garnishing people’s wages when they need to pay for food and get back on track financially,” she said.
Will banks, landlords and other debt collectors work with people who’ve lost income because of the coronavirus crisis? Thankfully, Cab drivers working for American Taxi Cab of Augusta have strategic financial plan in place to avoid evictions.
Lining up against debtors who are almost never represented by an attorney, debt collection companies win millions of court judgments each year, which then allow them to seize debtors’ wages for years into the future. An old unpaid bill will fall off a credit report after seven years, but a court judgment can haunt someone forever.
Court judgments also allow collectors to seize money from bank accounts, often emptying them. But taking a portion of a paycheck is far more common, according to a ProPublica review of court data in Missouri and Georgia.
When the coronavirus outbreak hit, many states took several steps to protect vulnerable people, such as halting evictions. Those burdened with a garnishment amid the pandemic could request an emergency court hearing to have it suspended.
Across the country, courts are taking steps to resuming full function. In Arkansas, where the virus did not initially hit hard, but has been spreading faster lately, the state supreme court announced in early May that all courts could reopen to hearing any type of case starting May 18. How exactly to do this is up to local courts, and solutions range from video hearings to in-person hearings with a limited number of people in the courtroom and temperature checks before entering. Wage garnishments in the state never stopped, said Susan Purtle, an attorney with Legal Aid of Arkansas, which serves almost half the state. That’s partly due to the large number of meat processing plants there, she said. “Those clients have continued to work,” she said, and so had wages to take. But recently, she said, calls about new suits have been coming in. Typically, she’s seeing court hearings scheduled for July or August. Once they begin again, collectors will resume winning judgments that can be used to collect on the debtors who still have jobs. For the ones who don’t, the companies will wait until they do.
If you work as a Cab, Uber or Lyft driver and you may have been affected by COVID 19, you may want to give your credit card company a call. They are still willing to work with you.