A recent study provided by ADP sheds light on recent statistics surrounding garnishment in the United States.

It's common for many people who are past due on bills to experience various forms of harassment from creditors. Many creditors will not hesitate to send threatening letters and emails; some even call close friends or loved ones to track down a debtor. But if these tactics don't work, creditors will turn to garnishment.

Garnishment is essentially a legal process that allows creditors to obtain a court judgment to collect on debt. Creditors can collect the debt directly from the debtor or from a third party connected to the debtor, like a bank, credit union, or employer.

In the past, there wasn't really that much public information on wage garnishment in the U.S. However, a recent study offers greater insight into the statistics on garnishment.

Specifics of the study

On behalf of ProPublica, ADP-a company that offers human resource services to a variety of businesses-examined payroll records from 2013 for approximately 13 million U.S. employees. The investigation revealed the following information:

  • Roughly 4 million workers in the U.S. had their wages garnished in 2013.
  • One in 10 employees 35-44 years of age had their wages garnished in 2013 specifically for credit card debt, student loans, medical bills, and child support.
  • About 5 percent of employees that earned between $25,000 and $40,000 in 2013 had their wages garnished for consumer debt alone.

The information is eye-opening, but these statistics reveal something more astonishing-a shift in garnishment practices from previous years.

Shift in garnishment practices

In the past, debt collectors were known to turn to garnishment for specific reasons-likely because of the cost of litigation associated. Past due child support and taxes were the top two types of debt creditors attempted to collect. But today, the data shows that garnishment actions are not just limited to these two situations; creditors are garnishing all types of consumer debt. So, why the shift?

A big reason is attributed to the surge in payday lending institutions. Payday lenders, as they are known, give quick loans to strapped consumers that often carry extremely high interest rates. And many often come with 30 day payment terms; an obligation most debtors find difficult to abide by. As interest rates tack on to the principal amount, the total loan amount adds up to a lot, making it worthwhile for payday lenders to head to the court.

Another reason behind the surge in garnishments is because of so-called "debt buyers." These companies essentially purchase debt from a lender, but for a fraction of the cost. And, in exchange, these debt buyers can attempt to collect on the entire amount of the original loan.

Such a rise in garnishment actions has garnered a lot of public attention. Carolyn Carter with the National Consumer Law Center hopes that "states and the federal government look [at] reforming our wage garnishment laws with some urgency."

However, it remains to be seen whether such action will commence. Given that consumers are still struggling post-recession and wages remain stagnant, it's likely lawmakers will put forth bills to mitigate the problem.

Keywords: garnishment, wages, consumer debt, bankruptcy