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New Mexico pauses consumer debt collection

June 8, 2020. Print article

New Mexico’s Supreme Court temporarily suspended consumer debt collection Friday, following a spate of state actions intended to provide relief for citizens who’ve been financially strapped by the coronavirus pandemic.

The court order says that effective Monday, after a judgment has been reached in a collection case for consumer debt such as medical bills or student loans, clerks may not issue any new writs of garnishment, for money, or execution, for property. Existing writs and domestic support obligations are excluded.

The order is in effect until the court amends or withdraws it. Consumer advocates had hoped such a policy would remain active for at least 120 days after New Mexico's emergency order expires.

Chief Justice Judith K. Nakamura was the lone dissenter in Friday’s action.

At least nine states and the District of Columbia have issued some form of broad protections from garnishment due to COVID-19, according to the National Consumer Law Center. At least three others — Iowa, Missouri and Texas — established similar rules that have since expired.

Robert Greenbaum is an attorney with New Mexico Legal Aid, which along with other consumer advocates in the state, including the New Mexico Center on Law and Poverty, had asked the court to take action. He said advocates looked closely at policies in states including Massachusetts, which among other things put a 90-day moratorium on garnishments and seizures of property; Illinois, which also prohibited citations to discover the assets of debtors or garnishees; and Texas, which further stayed the entry of default judgments when a debtor does not — or cannot — respond. They also examined a Las Vegas order that stayed the consideration of most evictions and foreclosures.

“It’s not everything that we thought should be done, but we definitely think that it’s a valuable and good effort,” he said of the New Mexico court’s order. “It will provide a good degree of relief to, certainly, a large number of New Mexicans who deal with this kind of thing all the time.”

According to the Urban Institute, as of mid-December, 38% of New Mexicans had some amount of debt in collections, with a median value of $1,617. The share of debtors from communities of color — 45% — was almost double the share of white debtors.

In issuing the order, New Mexico’s Supreme Court cited public health directives to stay home, as well as the pandemic’s “significant economic impact on New Mexicans — including loss of income and wages — thereby putting enormous financial strain on New Mexico communities.”

The state is also experiencing its highest unemployment rate in recent history, including “an unprecedented number of unemployment claims,” the judges noted. 

New Mexico’s seasonally adjusted unemployment rate was 11.3% in April, up from 6.3% in March and 5% over the previous year, according to the state

That’s below the national unemployment rate revealed Friday, which unexpectedly recovered somewhat from 14.7% in April to 13.3% in May. The financial sector added 33,000 jobs, rebounding slightly from 264,000 losses the month before.

In addition to garnishing wages or Social Security funds, some states allow collections directly from consumers’ bank accounts — a complicated proposition as millions of Americans, employed and not, are receiving direct stimulus payments from the federal government to help them stay afloat during COVID-19. Bank lobbying groups began pushing for rules halting such collections during the pandemic after many banks suffered negative publicity for automatically removing stimulus funds from customer accounts in accordance with such collections.

Greenbaum is aware that between March 9 and April 17, New Mexico issued more than 1,400 writs of garnishment.

“There’s constantly debt collection cases all across the country,” he said, “and New Mexico is no exception.”

Correction: A previously published version of this article mischaracterized the duration advocates sought for the order. The error has been corrected.