Statute of Limitations and Garnishment Legislation Approved in Washington
Updated wage garnishment requirements, interest rates and collection rules for the statute of limitations take effect on July 28.
6/5/2019 2:00 PM
Members of the Washington Collectors Association (WCA) successfully advocated for the accounts receivable management industry to reform legislation on garnishment exemptions and interest rates as well as the statute of limitations signed by Gov. Jay Inslee.
Inslee recently signed SHB 1602 concerning consumer debt interest and wage garnishment and HB 1730 concerning payments from consumers after the statute of limitations expires.
Changes Under SHB 1602
According to a bill summary for SHB 1602 it:
- Changes the post judgment interest rate for unpaid consumer debt to 9 percentage points above the prime rate, unless the judgment interest rate is specified in the contract.
- Increases the bank account and wage garnishment exemptions for judgments on consumer debt.
- Modifies the writs and forms for garnishment and continuing lien on earnings to specify whether a writ is for consumer debt, and outlines debtor exemption rights for consumer debt.
The bill reduces post judgment interest for consumer debt from 12 % to 9 % said Kelsi Hamilton, CCCO, legislative chair for the Washington Collectors Association and director of compliance and legislative affairs at Dynamic Collectors Inc. in Chehalis, Washington.
The WCA originally opposed the bill, but reversed its position following updates to the interest rate and garnishment levels applied after unit members testified before the Washington state legislature.
“The post judgment interest rate in Washington is now closer to the national average and our surrounding states,” Hamilton said. “The garnishment exemptions were also much higher in the original bill.”
“It initially would have changed garnishment exemptions to 50 times the highest minimum wage in the state (which is $15 in some places) or 85 % of disposable earnings,” Hamilton explained. “We were able to work with stakeholders and lawmakers and agree to 35 times the state minimum wage or 80 % of disposable earnings. It also changes bank exemptions from $500 to $2,000 (they originally wanted $2,500.)”
The bank exemptions refer to bank accounts, savings and loan accounts, stocks, bonds or other securities, according to the bill summary.
Wage garnishment based on a judgment issued for collection on a consumer debt is the greater of 35 times the state minimum wage or 80 percent of disposable earnings, according to the summary.
Overall, the bill is designed to help consumers pay their debts while providing relief from high interest rates and wage garnishment that impacts their livelihood.
Hamilton said agencies licensed in Washington should be prepared to alter their garnishment documents for consumer debt.
“They should also be aware that more consumers may fall under the [wage] exemption amount and to use these avenues accordingly,” she said.
HB 1730: Collection and Statute of Limitations
The Washington state legislature also passed a bill, HB 1730, concerning the effect of payment by a consumer or acknowledgment or promise of payment after the statute of limitations period expires.
According to the bill summary it:
- Provides that any payment on a contract made after the limitation period for commencing a cause of action has expired shall not restart, revive, or extend the limitations period; and
- Provides that an acknowledgement or promise made after the limitation period for commencing a cause of action has expired shall not restart, revive, or extend the limitations period.
The WCA support the bill during the legislative session, Hamilton said.
The statute of limitations for actions on written contracts and accounts receivables in Washington is six years and three years for contracts not in writing, according to the bill summary.
“The general rule in Washington is that running of the statute of limitations does not extinguish the debt,” the bill summary states. “Rather, its running bars the creditor from using the courts to recover the debt.”
Oftentimes, there may be no evidence of a debt’s existence or history of bill payments after the statute of limitations expired.
The legislation is designed to reduce litigation on debts outside of the statute of limitations and prevent bad actors from collecting on accounts lacking a billing and payment history.
“Under current law if a consumer made a payment outside the statute of limitations it would ‘toll’ the account,” Hamilton explained. “Meaning, you could take legal action to collect the debt because of the payment. The new law going into effect would not allow the account to be tolled.”
The WCA found that most members were already in compliance with the bill proposal for HB 1730, Hamilton said. “It seemed reasonable to us to agree not to toll an account or proceed with legal action if the statute period had already commenced.”
The unit members also testified on HB 1066, which requires debt collection complaints to be filed before service of summons and complaint; and HB 1531, concerning medical debt, during the 2019 legislative session.
“We look forward to continuing conversations with consumer advocates and lawmakers and are committed to promoting fair and ethical standards for consumers but also desire to maintain and protect business and accountability,” Hamilton said.
Related Content from ACA International:
Pictured above, from left to right, Washington Collectors Association members Mark Gjurasic, president of public affairs of Washington, Chet Baldwin, Public Affairs Consulting LLC, and Kelsi Hamilton, WCA legislative chair, meet State Sen. Dean Takko, D-Longview.
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