Michigan Can Improve Its Debt Collection Policies

On May 22, 2024, Erika Rickard, of The Pew Charitable Trusts, testified before the Michigan Senate’s Finance, Insurance, and Consumer Protection Committee in support of Senate Bill 408. The bill would update the state’s laws related to debt collection litigation, which have not changed in 60 years. If enacted, the legislation would improve court processes and help people being sued for a debt more easily repay those debts without being thrust further into financial distress.

Most debt collection cases nationally end in garnishment of a person’s assets, wages, or state income tax refunds. And under current Michigan law, people who are sued for a debt can have their bank accounts drawn down to zero and 25% of their weekly wages seized.

In her testimony, Rickard outlined how S.B. 408 would help address these issues. The bill would protect certain wages, bank accounts, and assets from garnishment to allow working families to meet their daily needs while paying off debts and adjust those protections for inflation.

Rickard also provided an overview of Pew’s research on debt collections litigation—including who is likely to be sued, for how much, and where—and discussed how Michigan’s consumer protections compare to those in Illinois, New Mexico, Oklahoma, Washington, Wisconsin, and other states that have modernized their garnishment laws.

In addition to her testimony at the hearing, which you can listen to online, Rickard also submitted a longer written statement to the committee.