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Shradha khanal assessment 4.1
- 1. Consumer Credit Protection Act: Wage garnishment
- 2. Introduction to Consumer Credit Protection Act • This is a federal legislation • The aim is to protect the consumers from creditors • Mandates various disclosure requirements for consumer lending and auto- leasing firms
- 3. Main requirements of CCPA • Requires disclosure of the total cost of loan or credit product. • Requires disclosure of interest calculation (Baker, 2019). • Prohibits discrimination regarding the loan applicant. • Bans misleading advertisement.
- 4. Wage garnishment • This is a court judgment which mandates a portion of income be diverted for resolving debt. • This happens when court orders employer to withhold an amount from the employee’s paycheck and send it directly to the creditor.
- 5. Wage garnishment in relation to CCPA • Wage garnishment provisions of the CCPA provides protection to the employees from discharge by the employers as their wage has been garnished for a debt. • A limit is put on the amount which can be garnished in a week.
- 6. Limitation on the amount of earnings which can be garnished • “disposable earnings” include the amount left after legally required deductions are done. • These can include federal, state and local taxes. • Deductions which are not required by law are not are not subtracted from the gross earnings.
- 7. Maximum amount which can be deducted • The weekly amount may not be exceed the lesser of the two following figures: 25% of the disposable earning of employee (Mullen, 2019). Amount by which the earning is 30 times greater than the federal minimum wage which is $7.25 per hour. • This is provided in the Title III
- 8. Exceptions to title III in CCPA • This do not apply to certain court orders pertaining to bankruptcy. • In case the wage garnishment law differs from the Title III, then the law which results in the lower amount being garnished must be observed. • Child support and alimony may be deducted from the total earnings.
- 9. Relevance for the employees • The employees get to know their entitlements regarding the wage garnishment. • The employees also get to understand specific deductions which may not be considered. • The employees also understand the maximum amount which can be garnished.
- 10. References • Baker, C. W. (2019). Abuse Prevention or Consumer Protection: Trends in Consumer Bankruptcy Filings and State-Level Wage Garnishment Exemptions Post-BAPCPA. Bus. & Bankr. LJ, 6, 1. • Mullen, F. (2019). Fifty Years After the Consumer Credit Protection Act: The High Price of Wage Garnishment. Mitchell Hamline Law Review, 45(1), 14.
Editor's Notes
- Hello and welcome to this presentation presented by myself “Shradha Khanal. Today the topic that we will discuss is about Consumer Credit Protection Act.
- Consumer credit protection act of 1968 is essentially a federal legislation which is created for the protection of the consumers from the various credit card companies, banks, and other types of lenders. The act necessitates the lending firms to disclose certain aspects of their business, and these requirements are to be followed by consumer lending and auto-leasing firms.
- Consumer credit protection act necessitates the lending companies to disclose the total cost of loans and credit products in addition to the manner in which interest is calculated. This also prohibits, the discrimination of the applicants of loan. The act also aims to ban misleading advertisements by the financial institutions.
- Wage garnishment in general, arises as a result of court judgment and the portion of the wages are diverted for repayment of debt. Using this provision an employer can rightfully withhold an amount from the paycheck of the employee and pay it directly to the creditor.
- This provision of Consumer credit protection act is very important as it protects the employees from the deductions in their wages of the paycheck indiscriminately, by the employer. This provision sets a limit to which deductions for debt settlement can be done.
- The deductions for the wage garnishing can be done only on the disposable income of the employees. This means that the deduction can be done only after deductions of tax and other statutory deductions are made. However, deductions which are not mandatory by law, such as retirement plan contributions etc. are not subtracted.
- The maximum amount which may be deducted for garnishment is 25% of the disposable earning of the employee. Alternatively, the garnishment should not exceed the amount by which earning exceeds the federal minimum wage of $7.25/hour. The garnishment should be based on the lesser of the two
- Title III may not be applicable in cases of certain court orders associated with bankruptcy. If the law differs from the title III, the law which leads to the lower amount being garnished should be observed. In case child support and alimony needs to be paid by the employee which is deducted from the total earnings, under Title III.
- Through this presentation the employees have been able to understand their entitlements in relation to deductions in wage garnishment. They have also been able to understand the specific cases where the deductions would not be considered, such as non-legal deductions. The employees have also been able to understand the maximum amount which can be garnished in a given period.