7 On Your Side: People's paychecks garnished for debts they don't owe

Michael Finney Image
Thursday, November 19, 2015
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People's paychecks are being garnished for debts that do not belong to them and, here's the kicker, it's perfectly legal.

OAKLAND, Calif. (KGO) -- People's paychecks are being garnished for debts that do not belong to them and here's the kicker -- it's perfectly legal.

A woman from the East Bay is the sole breadwinner in her family; so imagine how hard it was when a collection agency started taking hundreds of dollars out of her paycheck to pay a bill that wasn't even hers.

Kristy Piper lives in Oakland and works for the Alameda County Social Service Agency. She helps people every day, but she needed help herself after getting a shocking call last year.

"'We're calling regarding a debt and there has been a judgment placed on you and we want to resolve the debt,' and I was like, 'What are you talking about?'" Piper said.

It turns out, in 2006 All Cal Collection Services bought a $2,600 credit card debt from Chase that it believed belonged to Piper. All Cal served the lawsuit at Piper's old address and someone there signed the papers.

"I honestly can tell you I never knew about the judgment," Piper said.

Piper believes someone stole her identity and opened the card.

Ted Mermin is an attorney for the Public Law Group. He says companies buy debt for pennies and then hire collection agencies in hopes they'll be able to collect something.

"Right now under existing law, if a debt buyer has gone into court, filed a lawsuit, gotten a judgment against you without your knowing about that case at all, if they wait more than two years, you're out of luck. You can't go into court and tell the judge this isn't my debt," Mermin said.

That happened to Piper nine years ago, but she had no idea. She first got a call from a collection agency this year threatening to garnish her paycheck.

"She said, 'How about if you give us a $100 a paycheck and leave my debit card information on my message,'" Piper said. "What legitimate company would ask you to leave your debit card information on a voicemail? So, I let it go, I was like, 'Oh no, this is a scam.'"

But it wasn't. Soon after, the courts allowed the collection agency to take out $250 from her paycheck. The original $2,600 debt had since grown to $8,000.

"There's fees that get put on it, there's attorney's fees, court costs for all their filing and then that's the total judgment, then that increases by 10 percent per year until the time it gets entered," said Sharon Djemal.

Djemal works for the East Bay Community Law Center and is helping Piper in her fight.

Piper is barely able to make ends meet, but she said, "I've had to cut some things off, let some things go. I'm OK with that, as long as I have a roof over my head. I'm OK."

Just last month, Gov. Jerry Brown signed a bill to help consumers fight judgments and stop wage garnishments for debt that is not theirs. The bill becomes law in January.

"A consumer will have that opportunity to go into court and tell the judge, 'Your honor, this isn't my debt' and to be able to defend themselves," Mermin said.

We were with Kristy when she went to court to file counter lawsuits against the collection agencies. After that and numerous calls from a 7 On Your Side producer, the collection agency now says it will stop garnishing her wages and return all the money.

"I feel very relieved," Piper said. "I feel like I can breathe again."

Experts believe tens of thousands of Californians are in the same boat.

Click here for more information about the new law.