PHOENIX — In November, 10 statewide ballot initiatives will be put to a vote by Arizonans. One is Proposition 209, the Predatory Debt Collection Protection Act.
Proponents of Prop 209 tout it as a way to give people in debt a bit more breathing space. Opponents believe it will actually hurt those it aims to help by making them less likely to be approved for loans.
One of the proponents of the proposal is Rodd McLeod of advocacy group Healthcare Rising Arizona, who says the goal is to keep people from taking on more debt.
“[It shields] more of our assets and property with debt collectors and capping the interest rate on medical debt at just 3%,” says McLeod. “It can go up to 10% right now.”
In addition to this cap, Proposition 209 would also increase the dollar amount of exemptions on general debt collection.
This includes things like homes (going from $250,000 exempt from debt collection to $400,000) and car equity (going from $6,000 to $15,000). It would also change the formula used to determine the available earnings exemption.
McLeod doesn’t see Prop 209 as a drastic change.
“All of this is already Arizona law,” he says. “We just adjust the amounts to bring them in line with reality, and then adjust them each year for inflation.”
However, opponents of the proposal believe it will have consequences for some Arizonans.
Amber Russo of Protect Our Arizona, the opposition PAC for Proposition 209, says she reviewed the sections of the proposal regarding changes to revenue debt collection.
According to their calculations, an Arizonan earning less than $50,000 a year would not be recoverable by a creditor because his wages would be protected from garnishment.
“The number is based on the highest minimum wage, extrapolated,” she explains. “[Factoring in] Medicare and social security deductions.
Danny Seiden, president and CEO of the Arizona Chamber of Commerce and Industry, also opposes Proposition 209 and says this section of the proposal is the biggest problem.
“If you’re someone in Arizona who makes less than $50,000 a year — which is more than half of our population — that would essentially make you untouchable by creditors,” he says. “That may sound great, but what it really means is that no one is going to loan you out if there’s no way to be sure they’ll get their money back.”
Seiden says that’s why some in the business community are challenging the proposal.
“This is a very poorly written bill that will fundamentally change how Arizonans can access credit,” he says.
Russo agrees. “If I can’t collect from you when you fail to repay your loan, I can’t lend at an affordable rate,” she says. “This is [also] going to impact people outside of that revenue window, because now we’re going to pay a higher rate to make up for the window where people can’t collect.
McLeod doesn’t think that argument holds water.
“In Texas, you can’t even garnish wages at all, and they keep lending to Texas,” he says. “People can get a loan or a credit card. It’s not really a loan issue, it’s a debt issue.
McLeod said the initiative would not forgive any debt.
“It just puts them in a position where they can continue to function, earn a living and pay off those debts,” he said.
Still, Seiden doesn’t think Proposition 209 is the right way to tackle the debt problem.
“We don’t want to see anyone go into debt for medical reasons,” he says, “but that won’t change that.”
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