CA Bill Aims To Cut Interest Levied By Courts In Debt Cases


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CALIFORNIA — 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.