Emergency Protections: Debt Collection in the COVID-19 Crisis

Given the profound economic impacts of the COVID-19 crisis, it is hard to overstate the financial instability and hardship Coloradans are facing. As lost wages continue to mount and federal benefits expire, late fees and missed payment penalties are adding to Coloradans’ growing debt burdens. 

In response, Colorado passed emergency protections in June to ensure debt collections do not take priority over essential needs. Sponsored by Senators Faith Winter and Julie Gonzales and Representative Leslie Herod, Senate Bill 20-211

  • Prohibits any new extraordinary collection of debts from now until November 1, with a possible extension until February 1, 2021. This means people cannot have their accounts garnished or be forced to sell their assets to pay a debt during this time. 
  • SB20-211 also protects a minimum of $4,000 in people’s bank accounts from garnishment. That would make it so any additional stimulus checks authorized by the federal government would be protected from being garnished for debt collection.  
  • Debt collectors must notify their debtors that they are eligible for these protections if they have been directly or indirectly impacted by the  COVID-19 crisis. 
  • All Coloradans need to do is tell the creditor, in writing or over the phone, that they have been impacted financially by the crisis. They do not need to provide documentation of their financial hardship. 

These protections are critical to helping Coloradans keep their heads above water in this crisis. If you think your rights are being violated, file a complaint with the Colorado attorney general here.

For people who were already living paycheck to paycheck, even a few hundred dollars garnished each month can send consumers into a financial tailspin that reverberates for months and years, preventing people from financial recovery. 

Colorado was recently given a “D” by the National Consumer Law Center for the weaknesses of current debt collection protections. 

The emergency protections in SB20-211 are important in this crisis and are a step toward ensuring debt collection never interferes with someone’s ability to work, keep a roof over their heads, have transportation, or earn a living wage.  

Some of the ways Colorado can strengthen protections and keep debt collection from having any of those impacts would be to: 

  • Raise the amount of someone’s home value exempt from execution (forced sale) to at least the median home value of the area. Right now only $75,000 is protected ($105,000 for those aged over 65). 
  • Make the protection of assets in one’s bank account permanent. 
  • Increase the exempt amount for a reliable used car from $7,500 to at least $10,000 or possibly $15,000
  • Protect all necessary household goods from exemption, instead of just $3,000 worth of goods. For example, two computers needed for work could leave you without a washing machine or refrigerator. 
  • Protect retirement funds from garnishment or execution. 

Passing these protections will help Colorado weather this emergency and support Coloradans economic mobility by helping keep existing savings for essential needs and stopping debt collection from creating long-term financial instability.