For Consumers

There are more than 1 billion credit cards in our country today, with Americans carrying roughly $8400 of debt on average. This could take 30 years for the average individual to pay off. Dealing with debt and credit issues can be an emotional, and often uncomfortable process. But, it doesn’t need to be.

As an industry, third party debt collection is committed to treating each consumer with dignity and respect, along with offering solutions that benefit both the consumer and the creditor.

As a consumer, you have rights that protect you under state debt collection laws, as well as under the federal Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA). By understanding the facts, you will be empowered to help yourself cope with your collection concerns and solve your debt problems.

Collect the Truth wants to be a resource to you. We’re answering some of the most common consumer questions, and hopefully shedding a little more light on what you might not know about third party collection and consumer rights.

To learn more, you may also visit for more information from the federal Consumer Financial Protection Bureau (CFPB), which offers education, resources, and assistance regarding financial products and services.


Student Loans

What is a Grace Period?

Different loans have different grace periods (how long you can wait after leaving school before you have to make your first payment). For Perkins loans the grace period is nine months; for Stafford and most other federal loans it’s six months. The grace periods for private student loans vary, so consult your paperwork or contact your lender to find out.

Source:  The Project on Student Debt; An Initiative of the Institute for College Access & Success

Wage Garnishment

What is Wage Garnishment?

Wage garnishment is when a debt collector or creditor gets permission from a court to take money directly from a consumer’s earnings or tax refunds. However, consumers have certain legal protections regarding wage garnishment at both the state and federal level. These restrictions include the amount that can be garnished and, in certain states, the length of time the garnishment can take place. Also, you have the right to dispute a wage garnishment with the court that issued the judgment by filing a form with the court.

Most wage garnishments are initiated by court order after a creditor or debt collector obtains a judgment that allows the creditor or collector to take personal earnings to pay the debt. The payments come directly from your employer by deducting the payment amounts from your paychecks.

If you owe non-tax debt to the Internal Revenue Service or other state or federal agencies, your wages may be garnished without a court order.

It is not considered wage garnishment when you voluntarily work with your employer to set aside part of your income to fulfill a debt.

How Does Wage Garnishment Work?

Once a creditor or debt collector has obtained a writ of garnishment, the creditor or debt collector must provide notice to your employer and to you. Generally, this notice informs you that a garnishment has been placed on your earnings by the courts, the amount that will be garnished, and the length of time it will be in effect. The notice also provides you with your rights.

Are There State Restrictions on Wage Garnishment?

While many states follow the federal exemptions described above, if the state wage garnishment law differs from the federal one, the law resulting in the smaller garnishment must be observed. Check with your state’s government Web site for wage garnishment laws specific to your state.

Additionally, many states allow for the continuous garnishment of wages until a consumer pays off a judgment, while some states limit the time for garnishment. Again, consult your state’s laws for exact rules governing the amount that can be garnished and the length of time the garnishment can take place.

Are There Federal Restrictions on Wage Garnishment?

Under federal law, there are restrictions on how much can be garnished from your wages. The amount is based on your disposable income, or in other words, the amount of money you have after legally required deductions, such as federal and state taxes, Social Security and unemployment insurance, are made. Parts of your paycheck that are not exempt from garnishment are union dues, health and life insurance contributions and savings bond purchases, as these are considered part of disposable income.

For ordinary wage garnishment, the weekly amount cannot exceed the lesser of either:

  • 25 percent of your disposable income, or
  • The amount by which your disposable income is greater than 30 times the federal minimum wage. ($7.25 per hour effective July 24, 2009).

For child support and alimony, federal garnishment law allows up to 50 percent of your disposable earnings to be garnished if you are supporting another spouse or child, or up to 60 percent if you are not. Your wages may not be garnished if another creditor is garnishing your wages already, unless:

  • The first garnishment takes less than 25 percent of your disposable income, or
  • The creditor or collector has a judgment for alimony or child support.

You can learn more about wage garnishment at the U.S. Department of Labor’s Web site or by calling the helpline at the Labor Department’s Wage and Hour Division: 1-866-4USWAGE.

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