Maryland Receives “D” Rating in Report, Fails to Protect Residents from Debt Collectors

January 24, 2023

BALTIMORE – With millions of families struggling to find financial stability as soaring inflation drives up the costs of basic necessities, our state legislature plays a vital role in protecting Maryland households from seizure of essential wages and property to pay old debts. But according to a new report from the National Consumer Law Center (NCLC), Maryland has some of the worst protections in the nation.  

“At a time when thousands of families across our state are still suffering from the health and wealth ravages of the pandemic, Maryland is failing our families with our poor protections for those struggling with debt,” said Marceline White, executive director at Economic Action Maryland (formerly Maryland Consumer Rights Coalition). “Economic Action Maryland worked with the General Assembly to move our wage garnishment wage from an “F” to a “C” but our working families deserve much more.” 

The No Fresh Start report grades each state on its exemption laws, which protect income and property from seizure by creditors, debt buyers, and the debt collectors they hire. Maryland’s weak exemption laws allow creditors and debt collectors to seize nearly everything a resident owns, even the minimal items necessary for the debtor to continue working and providing for their family.

“Maryland needs to modernize, strengthen, and expand its debt exemptions,” White added. “We’re working on legislation to improve bank protections this session and will be moving forward to strengthen other protections in future sessions.”

 The state failed to receive higher than a “C” rating in any of the five basic standards analyzed in the report: 

• Preventing creditors from seizing so much of the debtor’s wages that the debtor is pushed below a living wage – C
• Allowing the debtor to keep a used car of at least average value – C
• Preserving the family’s home—at least a median-value home – F
• Preserving a basic amount in a bank account so that the debtor’s funds to pay essential costs such as rent, utilities, and commuting expenses and to weather income and expense shocks are not cleaned out – C
• Preventing seizure and sale of the debtor’s necessary household goods – F 

“In states with weak exemption laws, working families are at risk of falling deeper into financial peril if their wages and bank accounts can be seized as they struggle to pay for heat, food, and other necessities,” said Michael Best, staff attorney at the National Consumer Law Center. “Weak protections for the income and assets that families need imperil their health and safety, push them deeper into poverty, and can widen the racial wealth gap.”

State exemption laws are a fundamental protection for families. Without these laws, once a creditor obtains a ruling from a court that a consumer owes it a sum of money, the creditor can seize the debtor’s entire paycheck, bank account, car, and household goods, and sell the debtor’s home. Exemption laws place limits on these seizures.

Without continued improvement to exemption laws, seizures by debt collectors drain away the wages and resources that families need—and that the local economy needs them to be spending at Main Street businesses. Reform of exemption laws not only protects families from destitution but can also act as an economic stimulus tool that steers money into state and local communities.

For more information on NCLC’s work related to fair debt collection, visit nclc.org/topic/debt-collection

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ABOUT ECONOMIC ACTION MARYLAND:  Economic Action Maryland (formerly the Maryland Consumer Rights Coalition) champions Economic Rights and Housing Justice through advocacy, research, consumer education, and direct service. They advance local, state, and federal policy, work to reform predatory debt collection practices, decriminalize poverty, and secure older adult resources. Economic Action Maryland provides direct services to ensure every Marylander has access to safe, affordable housing, free from discrimination, harassment, and code violations and remove barriers to economic well-being that disproportionately affect low-income older adults, individuals, and communities of color.

For more information, contact Marceline White, Executive Director, Economic Action Maryland at [email protected] or 410-220-0494. Find Economic Action Maryland on the web at www.econaction.org , on Facebook at facebook.com/EconAction and on Twitter at twitter.com/EconActionMD

Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.