More Lenders Are ‘Garnishing Wages’ To Get Paid Back [View all]

[Purveyor]

If you’ve fallen behind on credit-card, medical, or other debt, there’s a growing likelihood that the lenders will simply help themselves to the contents of your paycheck — or even your bank account — to get their money back.

You read that right. Wage garnishment — typically thought of as a tool for collecting unpaid child support or back taxes — is increasingly being wielded by lenders and collection agencies, and it’s hitting middle class and blue-collar workers the hardest.

“The impact is often humiliating and stressful for employees. It can result in decreased productivity and motivation that can be detrimental to the affected employee, workplace, and employer,” payroll giant ADP says in a report about garnishment conducted at the request of ProPublica.

According to a joint investigation by NPR and ProPublica based on the ADP data, roughly 4 million working Americans had their wages garnished to pay off a consumer debt last year. For those earning between $25,000 and $40,000, consumer debt was the main reason for garnishment. Employees of manufacturing companies are more likely to be hit by garnishments, as are residents of Midwestern states.

These aren’t small amounts, either. Although some states limit how much can be garnished, a creditor can take up to 25% of your paycheck in more than half the country. What’s even worse is that debtors whose pay is garnished are likely to wind up paying back far more than the original debt owed, because creditors are free to tack on penalty fees, hike the APR on the balance, add their own legal costs onto the balance.

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http://time.com/3422329/wage-garnishment-lenders-going-after-paychecks/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+time%2Fbusiness+%28TIME%3A+Top+Business+Stories%29