New Law to Protect Against ‘Abusive’ Debt Collection

On Friday Governor Patrick signed Senate Bill 2557 An Act Further Regulating Debt Collection filed by Senator Patricia Jehlen (D) Somerville.

A 2006 Boston Globe Spotlight series revealed that abusive debt collection practices in Massachusetts are a serious problem. The law is intended to protect debtors from losing assets that allow them to continue to earn a living, keep a home, and continue paying off the debt. Current law does protect from seizure personal assets including such things as 2 cows and 12 sheep. But the monetary values for cars and other personal property are completely outdated. Under the new law creditors will be prevented from seizing a debtor’s car up to a value of $7,500 (now it’s $700) and bank accounts will be protected up to $2,500, instead of $125.

“This new law is a great holiday gift to hard-pressed families in the Commonwealth!” said Bob Hobbs Deputy Director of the National Consumer Law Center. “It will protect every struggling citizen’s bank account up to $2500, 85% of their gross wages, and a car worth $7500 ($15,000 for disabled or elderly citizens) while they work to get back on their feet in these difficult economic times.”

The Spotlight series told stories of individuals who had outstanding credit card debt. In some cases, very little was owed, or it had already been discharged in bankruptcy, or they were never notified; yet their cars were seized.

“In cases where debtors are unable or unwilling to pay the debt, plus the high seizure, towing and storage fees, their cars are often auctioned for a fraction of their market value,” reported the Globe. “Or they are junked, leaving the debtors without transportation and still liable for most, or all, of the debt.”

One woman never received notice of the suit, because Goldstone’s company sent the notice to the wrong address. But they were able to find her to seize her car, which cost her her job, and put a lien on her home. She paid off the $543 debt, plus interest, but the towing company had sold her car to recoup the storage fees of $5600.

While these practices are disturbingly widespread they are practiced by a small but active subset of debt collectors. From 2002-2005 The Spotlight found that Dan and Chad Goldstone sued 47,000 Massachusetts residents and towed thousands of cars. The legislation that Senator Jehlen filed received the support of the Mass. Creditors Bar Association (MCBA), a newly formed trade group representing attorneys who practice debt collection. The practices that this new law prohibits are practices that these attorneys do not condone or engage in.

“The Massachusetts Creditors Bar Association is pleased to learn that the legislature acted decisively to increase the personal property exemptions for Massachusetts consumers,” MCBA President Ken Wilson said. “Such action is long overdue. While MCBA did not necessarily agree with every aspect of the bill as enacted, we are happy to have been included in the process and are grateful for the opportunity to voice our concerns and express our opinions to Sen. Jehlen and to work with her staff and the National Consumer Law Center on this important consumer protection legislation.”

“In these difficult economic times more and more people are finding themselves struggling to pay their debts,” Senator Jehlen said. “This legislation will protect people from having their most basic assets seized and their lives turned upside down.”

– Information from State Senator Patricia Jehlen (D-Somerville, Medford)