Interest levied by California courts on unpaid consumer and personal debt would be cut by more than half if a bill introduced by state Sen. Nancy Skinner, D-Oakland, becomes law.
Skinner announced the introduction of SB 1200 Wednesday. The bill also seeks to keep residents from being burdened by debt for long periods.
SB 1200 would limit annual interest to 3 percent, down from 10 percent and restrict the renewal of legal judgments on unpaid debt after 10 years.
“For years, state law has required courts to charge exorbitant interest rates on legal judgments, exacerbating the debt owed by California families,” Skinner said in a statement. “SB 1200 will help relieve financially struggling families by slashing high interest rates on legal judgments and limiting the amount of time families are forced to struggle under mounting debt.”
While California courts have been requiring 10 percent interest on unpaid debt, that is on top of the interest creditors charge.
Also, research shows more than other groups, communities of color are burdened by debt collections and related wage garnishments and asset seizures.
Top debt collectors seized more than $700 million from California residents in the years 2012 to 2017, according to Skinner’s office.
In addition to high interest, debt collectors, who frequently buy and sell debt, are allowed to renew judgments on unpaid debt after a legal judgement is supposed to retire. That allows interest to accrue, resulting in debt that may be insurmountable.
“We should not require our courts to add to the burden of financially strapped families; it’s time to rein it in,” Skinner added. “There’s no reason for Californians to be subjected to unreasonably high interest rates that can more than double or triple what they originally owed.”
The interest rate limits would also apply to legal judgments on unpaid debt owed to government agencies.
For years, the statutory 10% rate made no sense whatsoever insomuch as it was untethered to economic reality during the last two decades of disinflation.
With inflation above 7%, however, this proposal to cap the statutory interest rate at 3% is just as nonsensical.
Indeed, it would allow deadbeat scofflaws to just wait out creditors as the real value of judgments erodes over time.
But Nancy, this could be a teaching moment.
It can go two ways: either debtors learn that it’s cheaper to pay debts promptly and avoid the penalty, or they learn to become repeat offenders and wait the creditor out until they charge off the debt.
Next she’ll introduce legislation that borrowers with bad credit should be given loans they have no ability to repay (its discrimination to consider credit history!). Then you guessed it, the responsible citizens finance it.
She is shortsighted.
Some ones debt is another ones profit.
Nah… the government wouldn’t economically assault anyone.
High interest rates is supposed to be a motivating factor for fines and penalties to be paid.
I’m surprised this bill isn’t only applicable to people of color. You know, “white privilege”… a so-called movement to address alleged racism.
Watch out for so-called “social justice” supporters because it is just institutionalized discrimination like BLM.
Here’s a novel idea – don’t commit a crime if ya dont want to interact with the police!
….. Actually sounds reasonable to me. Because interest rates are low. But isn’t this the same woman that proposed the law that would allow muggers to mug people for up to $950 and not be punished at all? “As long as no ‘great” harm was done to the victim”.
+1
Let’s just take it a step further, rando. If you can’t pay your credit card bills, home mortgage, and student loans, you should be locked up in jail for life. Pay your debt to society!!! Build debtor prisons!!!
(Sarcasm for the uninitiated)
I don’t know any credit card that charges interest as low as 10% so it seems that the existing rate is a break from credit card debt. But this bill also applies to medical debt and traffic fines, etc.
I have no sympathy for debt collectors. In my opinion, once the debt is sold to them, the amount should be frozen. The original creditor has already given up their interest in the debt other than the pennies on the dollar paid by the debt collector. The latter stand to make good money when paid and deserve no further interest to make their profit even larger.
If it is regular consumer debt, perhaps the debtor could be required to attend debt school in exchange for the reduction in interest, if any.
Some get in debt through no fault of their own. Illness, accident, being let off and able to find a job right away. My guess is for most it is a combination of things. So if someone is trying to get back on their feet a high interest rate makes that difficult. Off course credit cards don’t lower the very high interest rate. When the debt gets too old it often gets sold to “bottom feeders”, Dave Ramsey’s term, not mine. Listen to Dave Ramsey for sound financial advice, how to get out of debt, or better yet not get into debt in the first place.
Sometimes people get in debt and can’t pay it off. Most were in debt prior to any unforeseen event. Why, is it someone or some businesses duty to take the fall when it was definitely wasn’t their fault the person was in debt?
So if you have debt you can just wait it out. That seems fair actually no it doesn’t. The companies will make it harder to borrow money, because of the risk, but that is considered racist and/or a “tax” on the poor by some fools.
If the interest rate are lower it will be easier for the person to pay it off, if they are experiencing financial hardship. Frankly, 10 percent vs 3 percent isn’t that big of a deal. It’s the credit card companies that charges 25 to 29 percent, that is criminal almost. Which is why l always pay my credit cards of every month the few times l use them. Except for my Macy’s card, which l use almost every month.