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SB 298

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Date of Hearing: June 27, 2017

ASSEMBLY COMMITTEE ON JUDICIARY


Mark Stone, Chair
SB 298 (Wieckowski) – As Amended May 9, 2017

As Proposed to be Amended

SENATE VOTE: 22-12

SUBJECT: ENFORCEMENT OF MONEY JUDGMENTS: EXEMPTIONS

KEY ISSUE: IN ORDER TO PROTECT LOW-INCOME DEBTORS AND THEIR


FAMILIES FROM THE POTENTIALLY DESTABILIZING EFFECTS OF BANK LEVIES
AND TO INCENTIVIZE MORE SUCH HOUSEHOLDS TO USE TRADITIONAL BANKING
SERVICES, SHOULD THE LEGISLATURE AUTOMATICALLY EXEMPT UP TO $4,800
IN A BANK ACCOUNT FROM LEVY, ON A PER DEBTOR BASIS, WITHOUT THE
DEBTOR NEEDING TO FILE A CLAIM FOR EXEMPTION?

SYNOPSIS

According to the author, while 16 other states provide statutory protection from levy for varying
sums of money in a bank account, current California law allows creditors to seize up to 100% of
a debtor's bank account to pay off a judgment debt—with dire consequences for low-income
debtors. Accordingly, this bill seeks to automatically exempt up to $4800 (i.e. approximately
eight weeks of earnings at a minimum wage rate of $15 per hour) from being levied from a
debtor's bank account to repay a creditor. This reverses the dynamic of the claim of exemption
process in current law, which requires a judgment debtor to file a claim of exemption with the
levying officer within 10 days after service of the notice of bank levy if she wishes to assert any
claim of exemption and preserve the funds for her use.

The Western Center on Law and Poverty (WCLP) and the California Low-Income Consumer
Coalition (CLICC), two of the co-sponsors of this legislation, report client stories gathered by
legal aid providers that suggest the seizure of most or all funds in a low-income debtor's bank
account is, at a minimum, destabilizing for the debtor's family, and in the worst case scenario,
financially devastating. Such a levy can trigger a downward financial spiral that deepens the
cycle of poverty. These harsh and potentially ruinous outcomes are facilitated by the fact that
even debtors who are able to file a timely claim of exemption still regularly find themselves
without access to the frozen funds for months, while their claims and any resulting court orders
are contemplated and decided. Proponents of the bill, including consumer advocates, organized
labor groups, and legal aid providers, among others, strongly believe that the automatic
exemption rule is needed to protect low-income debtors from suffering harms attributable to
difficulties in navigating the current exemption process—usually without legal assistance and
without much time to complete the necessary paperwork with care. In addition to the automatic
exemption, the bill briefly extends the allotted time for a debtor to make a claim of exemption of
other funds under the current process.

The bill is strongly opposed by the California Association of Collectors (CAC), the California
Bankers Association, and the California Credit Union League, among others. They reiterate that
bank levies have long been recognized as a proper post-judgment means of collecting
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legitimately owed debt; and that generally speaking, creditors rely on the bank levy process after
other efforts to collect or negotiate a payment plan have failed. With a proposed $4,800
exemption, they contend this bill will effectively eliminate bank levies as a tool for collecting debt
in California because most successful bank levies are for far less than that amount. Opponents
also contend that this bill is unnecessary because the current claim of exemption process already
provides necessary protections for debtors who truly cannot afford to pay a judgment, and
existing law already provides ample types of exemptions, including necessaries of life, that are
intended to ensure that low-income debtors will have money for food, rent, and other basic living
costs. They prefer the current court-supervised process to determine what funds should be
exempt, rather than an automatic $4,800 exemption of the funds in a debtor's bank account.
Because the debtor no longer has the burden of proof to justify the need for an exemption of the
first $4,800 in the bank account, opponents characterize this bill as discarding the existing due
process rights for creditors. Finally, the only proposed amendments to the bill establish a
delayed implementation date of September 1, 2018, in order to provide Judicial Council more
time to update court forms associated with bank levies and the claim of exemption process.

SUMMARY: Automatically exempts an amount up to $4800 (i.e. approximately eight weeks of


earnings at a minimum wage rate of $15 per hour) from being levied from a debtor's bank
account to satisfy creditors seeking to recover a judgment debt. Specifically, this bill:

1) Exempts from levy from the judgment debtor’s deposit account an amount equal to or less
than the state minimum wage multiplied by 320, or four thousand eight-hundred dollars
($4,800), whichever is greater. Further provides that this amount is exempt without requiring
the judgment debtor to make a claim for exemption.

2) Clarifies that the above exemption applies per debtor, not per account. Provides that if a
judgment debtor holds an interest in multiple accounts, the judgment creditor or judgment
debtor may file an ex parte application in the superior court in which the judgment was
entered for a hearing to establish how and to which account the exemption should be applied.

3) Provides the exemption in 1) does not preclude or reduce a judgment debtor’s right to any
other exemption provided by state or federal law, and furthermore does not apply to a levy to
satisfy a judgment for wages owed, child support, or spousal support.

4) Requires any levy against a judgment debtor’s deposit account to include a written
description of the requirements of this bill, as specified.

5) Clarifies that the debtor may make a claim of exemption by filing a claim of exemption with
the levying officer either in person or by mail.

a) Provides that if the claimant is personally served with the notice of levy, the claim shall
be made within 15 days (rather than 10 days) after the date the notice of levy is served on
the judgment debtor.

b) Provides that if the claimant is served with the notice of levy by mail, then the claim shall
be made within 20 days after the date the notice of levy on the property claimed to be
exempt is served on the judgment debtor. If the claim is filed by mail and assigned a
tracking number by the United States Postal Service or another common carrier, the filing
shall be deemed complete on the date the claim is postmarked; however, if the claim is
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filed by mail and not assigned a tracking number, the filing shall be deemed complete on
the date the claim is received by the levying officer.

EXISTING LAW:

1) Authorizes a judgment creditor to levy upon the property of a judgment debtor to satisfy a
judgment. (Code of Civil Procedure (CCP) Section 695.010. All further references are to
this code unless otherwise noted.)

2) Permits a judgment creditor who wants to use a bank levy as a means to satisfy a judgment to
fill out a writ of execution, file it with the court, and then bring the writ to the sheriff (also
known as "levying officer") for execution. (Section 700.140 (a).)

3) Provides that the execution lien that arises upon service of a writ of execution and notice of
levy reaches only amounts in a deposit account at the time of service on the financial
institution, including the amount of any deposit not yet finally collected unless the deposit is
returned unpaid to the financial institution. (In other words, without any limitation, as much
as 100% of the money in the account can be seized by the sheriff and conveyed to the
creditor to pay the debt.) (Section 700.140 (b).)

4) Permits an account holder to claim that certain property is exempt from levy by filing a claim
of exemption with the levying officer within 10 days after the date the notice of levy is
served on the account holder. (Section 703.520 (a).)

5) Provides for an additional five days to file the claim of exemption, if notice of the levy is
served on the account holder by mail. (Section 684.120 (b).)

6) Provides that, if a claim of exemption is filed, the judgment creditor shall be notified and has
10 days from that time to file an objection. (Sections 703.540 and 703.550.)

7) Provides for a hearing within 30 days in the event that a judgment creditor objects to an
account holder’s claim of exemption. (Section 703.570.)

8) Exempts from wage garnishment, with certain categorical exceptions, the portion of a
judgment debtor's earnings which the judgment debtor proves is necessary for the support of
the judgment debtor or his or her family supported in whole or in part by the judgment debtor
(i.e. "necessaries of life.") (Section 706.051.)

FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.

COMMENTS: According to the Western Center on Law and Poverty (WCLP) and the
California Low-Income Consumer Coalition (CLICC), co-sponsors of this legislation, many low-
income debtors in Californians live one precarious step away from a "catastrophic downward
financial spiral" that may be triggered by having up to 100% of the money in their bank account
seized by creditors as the result of a bank levy. To address this reported problem, this bill would
automatically exempt an amount up to $4800 (i.e. approximately eight weeks of earnings at a
minimum wage rate of $15 per hour) from being levied from a debtor's bank account. Nothing
in this bill acts to discharge any part of the underlying debt.
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Need for the bill. According to the bill’s co-sponsors, WCLP and CLICC, sixteen other states
provide statutory protection from levy for varying amounts of money in a bank account, but
current California law allows creditors to seize up to 100% of the contents of a debtor's bank
account in order to pay off a judgment debt—with dire consequences for many low-income
Californians. Explaining the need for the bill, they state the following:

These bank seizures happen with little or no warning. They leave people with no way to
pay for their rent, food, medicine, transportation, and other life necessities both in the
month when they occur, and for months thereafter. Oftentimes, individuals do not owe
the debts for which their accounts are levied in the first place due to identity theft or
mistaken identity, or else they have a valid reason to contest the amount of debt being
claimed. In other cases, while debtors may owe the debts for which their accounts are
being levied, the destabilizing effects—job loss, unfilled prescriptions, auto repossession,
hunger, and even eviction—of having so much money seized at one time create social
harms that outweigh any benefit to creditors. Debtors’ employers, entities with whom
debtors do business (including landlords, grocery stores, and pharmacies), and other
lenders whom debtors are unable to repay are also indirectly harmed by bank levies.

California law recognizes this problem and tries to address it through the claim of
exemption process, in which a debtor may try to convince the court that levied funds are
“necessary for the support of the judgment debtor and the spouse and dependents of the
judgment debtor” and therefore, ought to be returned. However, the exemption process is
fraught with problems and delays, forcing many households to stave off disaster by
selecting which bill would be least-disastrous to default on, or by incurring more debt at
exorbitant interest rates, or in some cases, declaring bankruptcy. The cycle of poverty is
thereby deepened.

Whatever their debt situation, low-income families need dependable access to bank
accounts in order to maintain stability in their lives, whether to handle regular expenses
like rent, or unexpected expenses stemming from illness or job loss. Debtors are also in
far better position to repay their debts if they are housed, healthy, fed, and employed. If
enacted, SB 298 would bring these goals within reach for many households. [SB 298] is
a precisely-drawn bill, founded on evidence, and addressing a serious public policy issue
keeping many low-income Californians trapped in poverty.

Legal aid organizations often are contacted by low-income clients who have had their bank
accounts levied or their wages garnished, and who seek assistance with what to do next. Public
Counsel provides the following account of one of their clients that they contend illustrates the
strong need for this bill:

As an example of the devastating effects bank levies can have, Public Counsel is
currently working with an unemployed client subject to a levy that cleared out the entire
balance of $9,100 from his bank account. The money was taken three days after the client
suffered an injury so severe that he was unable to work or look for work. The money
levied was all he had to pay for the basic necessities of life. The client did not understand
the exemption process but luckily contacted Public Counsel on the last possible day to
file a claim. After a hearing some weeks later, the court ordered the bulk of the money be
restored to his account; the client is still awaiting the return of these funds. In the period
between the levy and the date of this later, now almost 10 weeks, the client has fallen into
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an increasingly dire financial situation: he is three months behind on this rent, has a
negative balance on his bank account compounded by associated charges, and has had to
borrow what little money he can from friends just so he can eat. SB 298 would prevent
this type of financially crippling situation.

Background about the bank levying process to collect debt. After a creditor goes to court and
obtains a judgment against a debtor for repayment of an unpaid debt, the creditor has a number
of different options for how to collect payment of the debt, including wage garnishment (also
known as "earnings withholding"), placement of a lien on real property, or finally—the focus of
this bill—levy of a bank account.

A creditor who wants to use a bank levy to satisfy a debt fills out a writ of execution, files it with
the court, and then brings the writ to the local sheriff (a.k.a. the "levying officer) for execution.
The writ of execution instructs the bank to freeze the money in the account and notify the
account holder that the money will be removed from the account and conveyed to the creditor to
satisfy part or all of the debt. Under current state law, up to100% of the money in the account
can be seized by the sheriff to pay the debt (although federal regulations may make a certain
amount of money exempt from levy, depending on the source of the funds). In theory, the
account holder has time after receiving the notice of levy to respond to the court and request that
some portion of the money be unfrozen and left in the account, based on certain legal
justifications, for daily living expenses. This request is known as a “claim of exemption,” and
under current law, the debtor whose account is being levied must file a claim of exemption
within ten days of receiving the notice of levy, or risk having no funds exempted, even when it is
clear that some funds would qualify as exempt once they were evaluated by the court.
According to the author, however, service of the notice of levy is often effected after the levy has
occurred, and the money has been released to the creditor. So even if the debtor files a claim of
exemption, the funds are out of the possession of the levying officer and cannot be returned to
the debtor.

East Bay Community Law Center (EBCLC), the third co-sponsor of the bill, conducted research
to estimate how many bank levies are conducted in California each year. EBCLC reports that
earlier this year, they submitted Public Records Act requests to all 58 County Sheriffs’
Departments in California. Their requests sought documents relating to the number of writs of
execution for bank levies served during the period from January 1, 2014 to December 31, 2016.
Sheriff Departments in 45 counties (including the largest, Los Angeles County) responded with
data showing that they collectively served 174,634 bank levies during this three-year period.
Extrapolations of this data statewide (adjusting for the disproportionate number of levies filed in
Los Angeles County) led them to a final estimate of approximately 331,220 levies served in
California during this time period.

This bill establishes a threshold amount of $4800 per debtor to be protected from bank levy.
As described above, current state law allows up to 100% of a debtor's bank account to be levied
to repay a judgment debt. Proponents of the bill argue that this can have devastating effects on
low-income people and threatens to destabilize their lives and compromise their ability to retain
housing and funds for basic life necessities In addition, proponents note that this is inconsistent
with laws in many other states that provide statutory protections from levy for household funds
in bank accounts (ranging in amount from $300 in Arizona and Pennsylvania, to $10,000 in
Mississippi and Tennessee), and is inconsistent with California's own laws on wage garnishment,
which caps at 25% the percentage of a person's wages that may be garnished to collect on a
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judgment. For low-wage workers, the percentage that may be taken through wage garnishment
is even lower.

Accordingly, this bill would automatically exempt up to $4800 from being levied from a debtor's
bank account to satisfy a judgment debt. To be more specific, the bill provides an exemption for
an amount equal to or less than the state minimum wage multiplied by 320, or four thousand
eight-hundred dollars ($4,800), whichever is greater. Assuming a worker earns the state
minimum hourly wage of $15/hour and works 40 hours per week ($15/hour times 40 hours/week
= $600/week), then $4800 is equivalent to roughly two months (8 weeks) of earnings for a
minimum-wage worker. Putting this into context, WCLP states:

Financial advisors typically recommend that households save at least three months’ of
their earnings for unexpected emergencies such as job loss and illness. SB 298 would
stop short of this goal, but still allow Californians to safeguard two months’ earnings at
the forthcoming state minimum wage of $15/hour from levy. This level of protection is
essential because California has one of the highest costs of living in the United States,
and when taking into account housing costs, the nation’s highest poverty rate overall.

The bill is strongly opposed by the California Association of Collectors (CAC), the California
Bankers Association, and the California Credit Union League, among others. They reiterate that
bank levies have long been recognized as a proper means, after a judgment has been issued, to
legitimately collect debt; and that generally speaking, creditors rely on the bank levy process
after other efforts to collect or negotiate a payment plan have failed. With a proposed $4,800
exemption, they contend this bill will effectively eliminate bank levies as a tool for collecting
debt in California. CAC states:

Currently, 75% of a consumer’s paid earnings are exempt and additional exemptions are
available for “necessaries of life.” This already greatly reduces the funds available for
bank levies. This bill adds an exemption for the first $4,800 in cash in every deposit
account owned by a consumer. The vast majority of successful bank levies are for far less
than $4,800. This new cash exemption, when coupled with the exemption for 75% of a
consumer’s paid earnings and the numerous other available exemptions, will render bank
levies unavailable.

Encore Capital Group, a prominent debt collection firm based in San Diego, also opposes this
bill on the basis that restricting bank levies is actually bad for consumers because bank levies are
the most consumer-friendly option of the available post-judgment tools for collection. Encore
explains:

With a bank levy, the consumer doesn’t incur any fees or interest – they pay the judgment
amount, and no more. Our average bank levy amount is typically under $1,500 (often as
low as $500). Unfortunately, with its astronomical $4,800 exemption, SB 298 is in effect
eliminating the ability of judgment creditors to use bank levies to collect a judgment.
Without bank levies as an option, wage garnishments will be the next option for creditors,
but unfortunately, will cost the consumer hundreds of dollars each year in fees and
interest. Unlike the fee-free and interest-free bank levy, wage garnishments tack on
hundreds per year in additional costs to consumers. Specifically, wage garnishments cost
consumers an additional $24/month in sheriff’s fees, and 10% statutory interest under CA
state law. And while Encore does not charge any interest, we are the exception. For a
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consumer, wage garnishment is a costly alternative to a bank levy, easily turning a $500
debt into $700 or $800.

Proponents dispute the characterization that bank levies are "consumer-friendly" simply because
interest does not accrue in the same manner as wage garnishment. While it is indisputable that a
consumer will pay more in the long run through interest and fees when wage garnishment is
drawn out over a longer period of time, current law protecting at least 75% of a person's
paycheck from being garnished to satisfy a debt benefits protects consumers from sudden
financial catastrophe. As proponents note, this bill is needed precisely because nothing in
current law automatically protects the same worker from having his entire paycheck seized by
levy from the person's bank account—a prospect that does not seem particularly "consumer-
friendly", nor preferable to being able to maintain some savings for emergencies and daily
necessities. Proponents further contend that when workers are not undermined by high wage
garnishments or losing their entire account balance to a bank levy, they are less likely to file for
bankruptcy or to rely on high-cost and predatory payday lending entities. In the long run,
preventing financial hardship for workers actually increases the likelihood of them being able to
pay off debt quicker and eventually exit the debt trap.

Proponents also refute the contention that consumers face no added fees associated with bank
levies. While a debt collector like Encore Capital may not charge any additional fee for a levy,
evidence received by the Committee indicates that some major banks charge the consumer a
significant "processing fee" when a levy is executed on the consumer's account. Legal aid
organizations have passed along several examples of their clients’ redacted bank statements that
itemize levy processing fees of $75, $100, and $125 for remitting funds to a levying officer. (The
one example of a levy processing fee imposed by a credit union, by contrast, was for $25). This
processing fee is apparently paid to the bank and deducted from the balance before funds are
remitted to the levying officer.

Enforcing the $4800 exemption on a per-debtor basis and the "wealthy debtor" argument.
Recent amendments to the bill clarify that the exemption applies per debtor, not per account, and
permit either the judgment creditor or judgment debtor to file an ex parte application in court for
a hearing to establish how and to which account the exemption should be applied, if a judgment
debtor holds an interest in multiple accounts. These provisions are intended to ensure that so-
called "wealthy debtors" are not able to shelter more than $4,800 total by harboring multiple
bank accounts and claiming the exemption for each account. Nevertheless, opponents of the bill
contend that the bill enables exactly that kind of loophole. Encore Capital explains:

By expanding the current exemptions to allow for a blanket protection of the first $4,800
in an account, this bill would allow wealthy debtors to shelter their money from judgment
creditors by maintaining a balance below $4,800 in multiple bank accounts. Senator
Wieckowski amended the bill to limit the $4,800 exemption to be per debtor, not per
account, but this is an empty promise because enforcement of such a limitation is an
impossibility. Wealthy debtors can still spread their assets to other bank accounts as
creditors are simply unaware of how many bank accounts a consumer may have, and
banks do not disclose the account balance during a bank levy -- they are only told what
portion of the levy was accepted. As a result, this bill would only serve to protect
wealthy consumers who want to avoid paying back their valid debt obligations.
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With respect to "wealthy debtors," proponents point out that owners of real estate, automobiles,
life insurance policies, and even artwork currently benefit from exemptions from enforcement of
judgment under current California law. They note that a so-called wealthy debtor could take
advantage of laws that allow him to deposit up to $18,000 per year in 401k and 403b retirement
accounts which are exempt from levy even as they grow in value. These types of property are
more likely to be owned by middle-class or wealthy individuals, and not low-income debtors.
With these other options being available, it becomes less likely that a wealthy debtor would elect
to shield large sums of money from his creditors in sums of $4,800 or less across multiple bank
accounts. Conversely, supporters contend the law should do a better job of protecting the kinds
of property that poorer households are more likely to have—in this case, money saved in a
deposit account—and enact more progressive rather than regressive exemptions.

With respect to the contention that enforcement of an automatic exemption would be impossible
as a practical matter, Committee staff notes that at least two states, Massachusetts and Nevada,
already have laws establishing automatic exemptions on bank levies. National banking
institutions that oppose this bill have branches located or operating in virtually every state, so
presumably those banks have developed practices and policies for how to comply with the
automatic exemption laws in those states.

This bill reverses current practice by making the exemption from levy automatic, without
requiring the debtor to make a claim. As previously described, existing law authorizes a
judgment debtor to file a claim of exemption with the levying officer within 10 days after service
of the notice of bank levy in order to assert any claim of exemption for the funds in the bank
account being levied. Opponents of the bill note that besides the notice of levy, consumers must
also be served with (among other things) the writ of execution, the forms needed to make an
exemption claim and to provide a financial statement, and the list of available state and federal
exemptions. According to CAC, the list of exemptions available to consumers includes 75%
percent of a consumer’s paid earnings, necessaries of life, Social Security benefits, public and
private retirement benefits, unemployment compensation and disability benefits, workers’
compensation benefits, public assistance and welfare, and personal injury damages.

If the consumer claims an exemption, the creditor must timely object to the exemption claim or
the levy will be released. If the creditor objects to the exemption claim, the issue of the
exemption claim is set for a hearing before the Court, which will then determine the merits of the
exemption claim. This bill, however, reverses current practice by making the proposed $4,800
exemption automatic without requiring the debtor to make a claim or subsequently demonstrate
that the funds are, in fact, exempt.

Opponents contend that this bill is unnecessary because the current claim of exemption process
already provides necessary protections for debtors who truly cannot afford to pay a judgment,
and existing law already provides ample types of exemptions, including necessaries of life, that
are intended to ensure that low-income debtors will have money for food, rent, and other basic
living costs. They prefer the current court-supervised process to determine what funds should be
exempt, rather than automatically making $4,800 of a debtor's bank account automatically
exempt without some burden of proof upon the debtor to justify the need for exemption. For
these reasons, they contend that the bill eliminates existing due process rights for creditors.
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Proponents believe that the current claim of exemption process is "fraught with problems" for
low-income debtors facing the prospect of potentially having the entire balance of their bank
account seized through a bank levy and turned over to creditors. They explain:

Debtors able to file timely claims of exemption still regularly find themselves without
access to frozen funds for months while their claims and any resulting court orders are
processed. After a claim of exemption is filed, judgment creditors are mailed notice and
given an additional 10 days to respond. Judgment creditors typically oppose claims of
exemption, and it can take weeks or months for the court to hold a hearing on a contested
claim. Because California does not protect any amount of funds in a bank account from
levy, courts must engage in a fact-intensive review of a judgment debtor’s expenses and
income in order to determine whether levied funds should be returned by the creditor.
Even if the judgment debtor prevails at this hearing and the court issues an order
determining the claim of exemption in the debtor’s favor, the order must be processed by
the levying officer before funds are returned to the debtor. Processing an order can take
weeks or months [and] in the meantime, despite having been judged in need of the funds,
the debtor continues to suffer.

In addition, legal aid organizations supporting this bill contend that the exemption process is
difficult for many low-income people whom they serve, particularly those with disabilities or for
whom English is not their first language. WCLP describes the exemption forms, particularly the
Financial Statement (Judicial Council Form EJ-165), as being "detailed and intricate, requiring
substantial financial documentation as back up in case of a contested court hearing." They
highlight that most judgment debtors face short statutory deadlines to respond and have no legal
counsel to help them fill out the necessary forms to properly file a claim of exemption. For these
reasons, the author and proponents strongly believe that an automatic exemption, one that no
longer requires the debtor to file a claim, is the best solution to address the shortcomings of the
current process.

Committee staff notes that under the current claim of exemption process, it may takes weeks or
months for a court to hear and decide a contested claim of exemption, which creates a lag time
during which either the debtor or the creditor must bear the temporary burden of being deprived
of the funds at issue. Under the current system, the financial burden is borne by the judgment
debtor until the date of the hearing on the merits of the claim. The previous client example
shared by Public Counsel (and other client accounts not recounted here for reasons of space)
highlights the dire consequences that can result when this burden is placed, even temporarily,
upon poor debtors who are at the same time being deprived of perhaps their only safety net.
Even if the court eventually concluded the funds were exempt and must be returned to the
debtor, proponents contend that the burden of being deprived of those funds in the interim may
thrust the debtor deeper towards an inescapable cycle of poverty. This bill reflects the
proponents' strong conviction that the policy shift signaled by an automatic exemption is
warranted because, under the current process, the debtor in financial distress is almost certainly
less likely to be able to bear the burden than the creditor, particularly in cases where the entire
balance of the debtor's account has been seized at once. Furthermore, the automatic exemption
ensures that some amount of money will continue to be available to the debtor even if he does
not successfully make further claims of exemption for other funds under the specified process.

This bill extends the time that a debtor may make a claim of exemption. Existing law, CCP
Section 703.520(a), requires a debtor to make a claim for exemption within 10 days after the date
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the notice of levy is served on the judgment debtor. Under CCP Section 681.040, the claim is
deemed filed when actually received by the levying officer. While 10 days may seem like
adequate time to file the claim of exemption, proponents contend that it is often completely
inadequate when, as is reportedly often the case, the debtor does not receive the notice of levy
until after the levy has occurred. If the levying officer has not received the claim by the 10-day
mark, the levied funds are released to the creditor and can no longer be retrieved through the
claim of exemption process. As the sponsors points out, service of notice on the judgment debtor
by mail (the preferred method of creditors) simply takes time, as does filling out an accurate
claim of exemption and mailing it back to the levying officer in time to be received--all within a
period of 10 days. (They note that personal service of the claim on the levying officer, while
theoretically possible, is too expensive for most low-income debtors located in a different county
from where the levy occurred, or who live in large counties.)

Accordingly, this bill briefly extends the allotted time for a debtor to make a claim of exemption.
Specifically, the bill provides that if the claimant is personally served with the notice of levy, the
claim shall be made within 15 days (rather than 10 days) after the date the notice of levy is
served on the judgment debtor. If the claimant is served with the notice of levy by mail, then the
claim shall be made within 20 days (again, rather than 10 days) after the date the notice is
mailed.

Establishing an automatic exemption from bank levy may remove an obstacle to banking for
some low-income workers. According to the author, there are many workers for whom the
threat of seizure by bank levy is a deterrent to maintaining a bank account. By removing the
prospect of having the entirety of one's bank account seized through a bank levy overnight,
proponents contend this bill would remove that obstacle and may have the benefit of encouraging
more low-income households to use traditional banking services. According to the sponsors:

21.4% of households earning less than $15,000 and 15.1% of households earning
$15,000-$30,000 in California—i.e., the households most vulnerable to financial
shocks—lack bank accounts. [citation omitted.] One reason: many have been the victims
of bank levies, in which all or most of the money in their accounts is seized by creditors.
As a consequence, they fall short in paying for monthly necessities, and out of fear of
repeating the experience, often abandon the banking system altogether.

In response to a request from the Legislature for comment on this issue, California Rural Legal
Assistance, Inc. provided this assessment of the impact the bill may have upon banking practices
in the farmworker community:

Many tens of thousands of seasonal farmworkers, who regularly go without work for
months at a time, must save whatever money they can from their earnings in order to
survive the offseason (in employment.) It is critical that these workers be able to deposit
the earnings in a bank. Unfortunately, every year, California sheriffs serve tens of
thousands of levy orders on financial institutions to satisfy creditors. People whose assets
are frozen or seized as a result of these orders are unable to pay for rent, food, and
medicine, and so are at high risk of homelessness, hunger and illness. This drives them
into the arms of high-interest lenders, further reinforcing the cycle of debt and poverty
among agricultural workers. Further, after experiencing the harm of a single bank levy,
many workers choose not to use conventional banking services anymore. They instead
rely on check-cashing services and money orders, and more dangerously, resort to hiding
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cash in their homes and on their persons. This fact is well-known in farmworker
communities; as a result, farmworker families are often the victims of home invasions.

By safeguarding a minimum dollar amount per individual, SB 298 should lead more
farmworkers to use conventional banking services, reducing both the risk that they will
be unable to make ends meet, and the danger that they will become crime victims. In our
view, the bill will promote both financial stability and safety for farmworker families, our
most vulnerable population.

Proposed amendment to delay implementation until September 1, 2018. After consultation


with the Judicial Council, the author proposes to amend the bill to delay operation of these
provisions until September 1, 2018. The delayed implementation date is intended to give the
Council more time to update relevant forms used by debtors, creditors, and levying officers in
the levying process and the claim of exemption process.

Related pending legislation: SB 16 (Wieckowski) seeks to reduce the maximum amount that a
creditor may garnish from the wages of a debtor for a judgment based on private student loan
debt. Under the revised formula, the maximum amount that could be garnished is lowered from
25 percent of the debtor's disposable income to just 15 percent, unless the debtor is a low-wage
worker in which case the amount may be calculated to be lower. The bill is currently on
Assembly Third Reading, awaiting a vote on the Floor.

Prior related legislation: SB 501 (Wieckowski), Ch. 800, Stats. 2015, established the current
wage garnishment formula in California for consumer and student debt. The bill, as of July 1,
2016, reduces the maximum amount of disposable earnings subject to wage garnishment to the
lesser of either 25 percent of the individual's disposable earnings for that week, or 50 percent of
the amount by which the individual's disposable earnings for that week exceed 40 times the state
minimum hourly wage.

AB 1775 (Wieckowski), Ch. 474, Stats. 2012, codified the definition of “disposable earnings”
under the federal Consumer Credit Protection Act and the maximum amount of weekly wage
garnishment of 25 percent of the individual’s disposable earnings. AB 1775 also capped the
weekly wage garnishment amount at 40 times the state minimum hourly wage.

AB 1388 (Wieckowski), Ch.694, Stats. 2011, allows a court to grant a judgment debtor's claim
of exemption from wage garnishment in cases where the underlying debt was incurred for
medical care or hospital services rendered to the judgment debtor or his or her family.

AB 1321 (Wieckowski) of 2011 would have allowed a debtor to obtain a temporary stay on wage
garnishment for the period between the filing of a claim of exemption and the hearing date for
the court to enter judgment on the claim. That bill died in Assembly Appropriations.

REGISTERED SUPPORT / OPPOSITION:

Support

California Low Income Consumer Coalition (co-sponsor)


East Bay Community Law Center (co-sponsor)
Western Center of Law & Poverty (co-sponsor)
Asian Law Alliance
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Bet Tzedek
California Reinvestment Coalition
California School Employees Association
Central California Legal Services
Consumers Union
Courage Campaign
Dr. Prasad Krishnamurthy, J.D. Ph.D.
EARN
Health Access
Housing and Economic Rights Advocates
Law Foundation of Silicon Valley
Legal Aid Association of California
Legal Aid Society of San Bernardino
Maternal and Child Health Access
Mission Access Fund
Mission Economic Development Agency
Project Inform
Public Counsel
Public Law Center
Riverside Legal Aid
San Francisco Office of Financial Empowerment
SEIU
UDW/AFSCME Local 3930
United Farm Workers
United Way
United Way of Kern County
Watsonville Law Center
Worksafe

Opposition

California Association of Collectors


California Bankers Association
California Community Banking Network
California Credit Union League
California Financial Services Association
Encore Capital Group
Receivables Management Association
USCB, Inc.

Analysis Prepared by: Anthony Lew / JUD. / (916) 319-2334