Saturday, May 2, 2020

THE PARASITE ECONOMY - PARASITES SEIZE WAGES, BANK ACCOUNTS SO THE POOR ONLY GET POORER

One Thing the Pandemic Hasn’t Stopped: Aggressive Medical-Debt Collection

U.S. hospitals are in the spotlight for being on the frontline of fighting the pandemic. But in the shadows, debt collection operations continue, often by the same institutions treating coronavirus patients, all while unemployment and uncertainty soar.

by Alec MacGillis

 April 28, 2:05 p.m. EDT

Is the United States Prepared for COVID-19?

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Darcel Richardson knows she’s fortunate in one sense: She still has her job as a vocational counselor in Baltimore. But despite that, she won’t be able to make her rent payment this month because she’s not getting her full salary for a while. More than $400 per biweekly paycheck — about a quarter of her after-tax income — has been siphoned off by Johns Hopkins University for unpaid medical bills at one of its hospitals.

Richardson, 60, got word of the garnishment from her employer just as the coronavirus pandemic was arriving in full force last month. “My job was going to take the money out. They don’t want to get in trouble,” she said. “I spoke with our payroll accountant, and the bottom line was, even though the crisis had begun, they still had to pay my money to them.”

In a moment when hospitals nationwide are being heralded for their role at the front lines of fighting the pandemic, some Americans continue to experience a less favorable side of hospital operations: aggressive collection for unpaid medical bills, even at a time when many of the debtors are seeing their income plunge. Debt collection is occurring on other fronts as well, over unpaid college and bank loans among others, prompting debates over protecting people’s economic stimulus checks from collection agencies or suspending garnishments outright. But collection by the very hospitals that are treating coronavirus patients brings the health and economic exigencies of the moment into especially stark relief.

In a few cases, hospitals have brought new cases against former patients in recent weeks, such as in Wisconsin, where Froedtert Hospital in Milwaukee filed 46 small-claims lawsuits even after the governor declared a state of emergency on March 12, and other hospital systems in the state filed dozens more, according to a report by Wisconsin Public Radio and Wisconsin Watch. Steve Schoof, Froedtert’s director of external communications, told ProPublica in a statement that the hospital stopped filing small claims suits on March 18. “Moving forward,” the statement continued, “Froedtert Health will no longer be filing small claims suits for medical debt collection. Unfortunately, there was a miscommunication that resulted in small claims filings after March 18. We immediately rectified this miscommunication and dismissed these small claims cases that were filed after March 18.”

Will banks, landlords and other debt collectors work with people who’ve lost income because of the coronavirus crisis? Help us find out.

More often, though, the collection stems from cases filed months before the pandemic arrived, as the legal process grinds its way forward. “Where debt collection is underway for pre-COVID medical debt, they will continue to do that,” said Jenifer Bosco, a staff attorney for the National Consumer Law Center.

In Richardson’s case, the debt stemmed from a two-day 2018 visit to Johns Hopkins Bayview Medical Center in southeast Baltimore, one of a string of medical visits she has had to make over the years to deal with a knee injury from a fall, a hip injury from a car accident, hernia repairs and back trouble. She had insurance coverage through her job, which at the time was with the state Division of Correction, but it left a balance of almost $1,000 for her to pay. Richardson, who lives by herself in a modest apartment complex just east of the city, started hearing from a collections lawyer for Hopkins last fall and tried to work out a payment schedule with him, but she couldn’t make it work.

“I just didn’t have the money,” she said. “I said to the lawyer, I might be able to pay an amount monthly, but when it came time, I just didn’t have it. What can you do when you’re caught between a rock and a hard place? I prioritize. I’m going to try to pay my rent first, pay for gas and electric, cellphone costs. And I’ve got to eat.”

The court judgment was finally entered against Richardson in Baltimore City District Court in January: $923.21, plus $34 in court costs and $138.49 in attorney’s fees. The notice of wage garnishment went out on March 6 — the day after Maryland Gov. Larry Hogan announced the state’s first three coronavirus cases. The garnishment was confirmed by Richardson’s new employer, the nonprofit drug treatment organization Gaudenzia, on March 16, the day that Hogan decreed the closure of all bars, restaurants, gyms and movie theaters, and three days after Richardson and her colleagues were barred by safety precautions from providing counseling inside prisons. She now works at a small treatment center that houses seven women, where social distancing is easier.

Johns Hopkins, by far the largest private-sector employer in the state and the largest beneficiary of billionaire Michael Bloomberg’s charitable giving, has long faced scrutiny for its aggressive collection of medical debt, including from the many low-income Baltimore residents it serves, who in theory should be able to qualify for the hospital’s charity care programs. In 2008, The Baltimore Sun reported that Hopkins and other Maryland nonprofit hospitals had filed more than 32,000 debt-collection suits over the past five years, winning at least $100 million in judgments. Last May, a coalition that includes the AFL-CIO and National Nurses United, which has been trying to organize Hopkins nurses, released a report finding that Hopkins had launched 2,400 lawsuits in Maryland courts since 2009 against patients with unpaid bills, increasing from 20 in 2009 to a peak of 535 in 2016.

In response to the 2019 report, Hopkins officials said they offered considerable free and discounted services, and that “for patients who choose not to pursue those options or who have a demonstrated ability to pay, we will make every effort to reach out to them and to accommodate their schedule and needs. In those rare occasions when a patient who has the ability to pay chooses not to, we follow our state required policies to pursue reimbursement from these patients.”

The cases have slowed in pace but not stopped altogether since the report. Bayview, one of several hospitals under the Hopkins umbrella, has filed about 60 cases over the past year, according to Maryland court records. Dozens of them, including Richardson’s, remain open.

Kim Hoppe, vice president for communications for Johns Hopkins Medicine, said in a statement that after looking into the matter, the medical system has become aware of nine garnishments that went into effect in February and March, and that it has now placed a “hold” on them. “Johns Hopkins remains committed to providing affordable access to all patients in need of our care, regardless of ability to pay,” Hoppe said. “We also make numerous efforts to communicate with patients who have overdue bills. Typically, patients receive more than a dozen contacts via mail or phone call along with multiple opportunities to file for medical or financial hardship. At all points in that process, patients are encouraged to speak with financial counselors; their bills will be forgiven if they can show financial hardship or inability to pay.”

Politicians have touted debt relief, but the various proposals are patchwork. Many homeowners and renters won’t get much help; those struggling with credit card, car and other loan payments will get none.

For Cheri Long, aggressive medical debt collection came with less warning than it did for Richardson. Long, a nurse at an assisted living center in northern West Virginia, had stopped by a Dollar General on March 23 to pick up some groceries for her kids and some requests for residents at the center: prunes, caramel candies and adult diapers. When she went to pay with her debit card, the machine told her she had insufficient funds. She checked the account after leaving the store and found there had been a debit for about $900. She assumed her account had been hacked and the funds would be restored. In fact, the bank told her, her account had a hold on it from the magistrate court.

She told the bank she had not received any notification. But that night, a card was waiting in her mailbox alerting her that there was a certified letter waiting for her at the post office. She picked the letter up the next day and rushed to the magistrate court, and she learned that the account had been garnished by West Virginia University Hospitals, the official name for J.W. Ruby Memorial Hospital, the large nonprofit academic medical center in Morgantown that is the flagship of the WVU Medicine system.

The bills were for care received by her husband, Seth — after a motorcycle accident seven years ago and after a visit for alcohol rehab after he had started drinking heavily upon losing his coal mining job three years ago. He had insurance coverage at the time of both hospital stays, even supplemental motorcycle insurance, but the coverage had left a balance of about $3,500. Seth had gotten work at another mine but lost it again two years ago, leaving the family relying on Cheri’s income, about $3,000 per month in take-home pay. “Times are hard,” she said in an interview. “That [medical bill] was my last priority. I didn’t think they would do anything over $3,500.”

The bank garnishment sent her into a panic. She was in tears at the courthouse, pleading for someone to help her. She eventually filed for an “affidavit for exemption” through the sheriff, seemingly got the garnishment lifted temporarily and changed her direct deposit to another account to be on the safe side. But when she went for groceries again on April 3, her card was declined. Her account had been zeroed out again despite the exemption, apparently due to a bureaucratic oversight.

She borrowed money for groceries and gas from her co-workers, nursing aides who make minimum wage. Her father-in-law offered to cover the house payment. And, on Easter Sunday, she started writing emails — to the governor, to the attorney general. “It was a very depressing time,” she said later. “I’m out working, busting my butt, and they’re going to take my money.”

At last, she got help. The National Consumer Law Center put her in touch with a local legal aid lawyer, Jennifer Wagner with Mountain State Justice. Wagner filed a lawsuit on behalf of Long, arguing that it was unconstitutional to seize her property when the closure of the court system undermined her ability to seek due process.

On April 15, Preston County Judge Steven L. Shaffer issued an emergency order halting seizure of both Long’s bank account and her imminent stimulus funds, thereby restoring the money already taken. “Seizure of personal property during the court closure and stay at home order and related state of emergency ... violates due process of law,” he wrote in the order, first reported by the Times West Virginian newspaper.

In a statement, WVU Medicine spokeswoman Angela Knopf said that the system gave guidance to its third-party collection vendors in March to be mindful of the economic impact of the pandemic crisis in seeking repayment, but it did not order them to hold back entirely. “At WVU Medicine, we need to balance our need to liquidate patient balances with the needs of our community, especially during times of disruption,” read the guidance. “Collection calls and letters can continue. However, please take a soft approach to calls and express the compassion that WVU Medicine has for our community during this difficult time. We do not want to beat our patients up as they are sequestered in their homes, compounding the stress of the current situation. We want to be a partner in helping them through this.” The guidance instructed vendors not to file any new lawsuits for “at least the next 60 days,” but it does not explicitly address the garnishing of accounts from cases launched before the crisis.

Wagner, the legal aid lawyer, said she is getting calls from more than a dozen other people in the area facing collection from the hospital and is considering filing a class-action lawsuit over the garnishments. “We’re contemplating seeking broader relief because of our concerns that they haven’t stopped, notwithstanding the order,” she said. “It’s actually going to dissuade people from seeking medical care during a time when it’s really important to seek medical care, and that is really alarming.”

Governors have issued orders temporarily banning wage and bank garnishments in several states, including in Illinois, Massachusetts and Washington. The Texas Supreme Court has decreed that any new garnishment orders not be served until after May 7. Governors or state attorneys general have taken the more limited step of barring the seizure of stimulus checks during bank account garnishments in some other states, among them California, New York and Ohio. But this leaves several dozen states where medical debt collection can still carry forward, with or without the ability to seize stimulus checks in the process.

In recent years, revelations of aggressive medical debt collection have been especially prevalent in states that chose not to expand Medicaid under the Affordable Care Act, which has left hospitals with more unreimbursed care than in states that did expand Medicaid. Kaiser Health News reported on 36,000 lawsuits filed in recent years by the University of Virginia medical system, most predating the state’s expansion of Medicaid in 2018, and ProPublica last year reported on 8,300 lawsuits over five years by Methodist Le Bonheur Healthcare in Memphis, where Tennessee lawmakers have refused to expand Medicaid. That reporting resulted in a pullback by Methodist, which announced that, while not altogether abandoning collection lawsuits, it would expand its financial assistance policy and stop suing its own employees over medical debts.

Meanwhile, though, another Memphis hospital, Baptist Memorial, has kept up aggressive collection during the economic crisis. The Shelby County court system lists about 20 garnishments for Baptist Memorial debts initiated last month alone, some of them for debts going back more than a decade.

In Memphis, Methodist Le Bonheur Healthcare has brought 8,300 lawsuits for unpaid medical bills in just five years.

One of the Baptist Memorial targets found out that she was about to have her paycheck garnished for a 13-year-old debt when she received a letter in the mail from a lawyer seeking to represent her in the matter. “It’s just been very hard,” said the woman, who asked that her name not be used. “I had offered a settlement, but they wouldn’t work with me. They’re playing hardball.”

A Baptist Memorial spokeswoman said in a written response, “These are not new cases; these judgments were made months ago. You’re looking at renewals that were filed in January — well before the first known COVID case was diagnosed in the U.S. If any of these people lost their jobs, we would stop trying to collect. If they have other financial issues, they can contact us and we’ll work with them. We have modified payment plans for hundreds of patients since the COVID pandemic began.”

Critics of the hospital debt collection say they are aware that hospitals may be more sympathetic creditors at the current moment, when they are strapped by the demands of treating victims of the pandemic, while losing much of their usual business. Johns Hopkins, for one, announced this week that it was running a $100 million deficit, due largely to a dropoff in the elective medical procedures that provide much of its revenue base.

But the National Consumer Law Center notes that hospitals nationwide are receiving $100 billion in the federal relief packages to help recover some of the costs of the crisis. And Cecilia Behgam, an AFL-CIO researcher who helped produce the 2019 report on Hopkins, notes that collection on unpaid bills makes up just a tiny sliver of hospital revenue — for a giant institution like Hopkins, typically less than one-tenth of a percent. “This is not making a significant difference in the budget of these hospitals,” she said.

Behgam also noted that in cities such as Baltimore and Memphis, the lawsuits and garnishments are being brought mostly against exactly the demographic that has been shown to be most vulnerable in the pandemic: lower-income African Americans with underlying health conditions. “These are people who are already disproportionately feeling the impact of the epidemic,” she said.

In Baltimore, Darcel Richardson says she has so far managed to talk the managers of her apartment complex into letting her pay the outstanding balance of her rent once the garnishments stop. They might even be willing to cancel the usual fees for late payment, she said. “I am a firm believer in trusting God,” she said. “He’ll meet my needs. So far, he’s still kept the roof over my head.”

Wendi C. Thomas contributed reporting.

 

Wages Seized. Bank Accounts Frozen. The Poor Are Getting Poorer as Creditors Pursue Debts

 

Alana Semuels

Time•May 1, 2020

Cindy Kimbler knows she’s lucky to have a job right now, especially after being furloughed for a week by her employer, a thrift store in Grove City, Ohio. But in mid-March, she noticed something strange. Although she was working her usual hours, putting her health in danger with every shift, she was making one-third less money.

The reduction amounted to about $200 a week and was significant, especially since Kimbler only makes $11 an hour as a cashier. She checked with her payroll department and learned that in mid-March, a creditor had started garnishing her paychecks. Kimbler, 59, hadn’t even been aware of the court judgment allowing the wage garnishment to begin. The debt, she says, is from four years ago, when her car broke down and she got a payday loan—with an interest rate of around 26%— to fix it.

Even before the coronavirus sent the economy plummeting, Kimbler had been living paycheck to paycheck. Now, suddenly, she was in danger of not being able to make rent and possibly being evicted when the local eviction moratorium lifted. “I thought, ‘I am never ever going to be able to pay any of my bills with them taking $200 out of my check,’” she told me recently.

Though some protections exist for people struggling financially during the COVID-19 pandemic, thanks to the CARES Act stimulus package signed into law on March 27, they largely ignore those who were already on the edge of financial ruin. The CARES Act has paused federal student loan debt payments and payments on federally-backed mortgages, and various cities and states have suspended evictions. But few states have stopped creditors from moving ahead with wage garnishments, repossessions, and attachments (one-time seizures of bank accounts). This means that in many cases, the pandemic will tip people like Kimbler, who was barely getting by, into an economic abyss from which it will be difficult or impossible to recover. Even the one-time $1,200 stimulus payments promised to millions in the U.S. can be garnished by financial institutions in many states.

“This is crippling people right now,” says Melissa Linville, an attorney at the Legal Aid Society of Columbus. “Some courts are carrying on as if there is no pandemic.”

And with parts of the country starting to reopen to business, sending a message that it’s time to rev up the economy, legal advocates see little chance of new restrictions to protect the poorest sector of society. That means a likely rise in consumer bankruptcies as individuals see no way to escape their debts.

“Things were bad before the COVID emergency, they got worse with COVID, and they’re going to get even worse,” says Margot Saunders, senior counsel at the National Consumer Law Center.

***

Garnishments can occur after a creditor obtains a court judgement against someone who owes them money. Some people are not aware of the court hearings, often because they have not been informed by the creditor and don’t show up to argue their cases. Kimbler says that’s what happened to her. But once a court gives the go-ahead, creditors are free to take a portion of a person’s wages from their paycheck. A separate order allows them to seize money from an individual’s bank account. Federal law requires that debtors are left with at least $217.50 a week in take-home pay—for a family of four, that’s less than half the federal poverty level. Some states protect more income from creditors, but creditors aren’t limited to targeting money. They are free to seize cars, even if a debtor needs a vehicle to get to work to earn the money to pay off their debts.

About one-third of Americans have debts in collection, according to the National Consumer Law Center. Total household debt reached an all-time high in the last quarter of 2019, at $14.5 trillion, according to the Federal Reserve Bank of New York.

Unemployment checks are supposed to be protected from creditors, but even they are at risk of seizure once they are deposited into bank accounts. To protect their benefits, debtors must file a court motion, which is challenging in scores of jurisdictions where the coronavirus has closed most courts. People who do succeed in filing motions are being told they must wait weeks and sometimes months for their cases to be heard. In the meantime, the funds remain frozen. “I really worry that these creditors will use this delay to get debtors to pay them money they don’t have the right to,” says Alex Kornya, litigation director of Iowa Legal Aid. Before the pandemic, Iowa judges would hear exemption cases within a week; now, clients’ hearings are being scheduled two or three months from now, he says.

 

Cindy Kimbler outside her place of work, the Volunteers of America store, in Grove City, Ohio on April 25, 2020. Kimbler received help from the Legal Aid Society of Ohio after debt-collectors started garnishing her wages in March. | James D. DeCamp—JamesDeCamp.com

In Wisconsin, people who receive food stamps can file a document arguing they are exempt from wage garnishment, says Karen Bauer, a staff attorney at the Legal Aid Society of Milwaukee. But creditors are trying to make people go to court to prove they get food stamps, and so the garnishments are continuing. “We’re seeing a lot of issues with people just trying to protect the money that was supposed to be there to protect them,” she says.

Garnishments are also coming from the U.S. Department of Education, even though Secretary of Education Betsy DeVos announced on March 25 that the department would halt collection actions and wage garnishments for 60 days beginning March 30. Andrew Orlandini, 52, a military veteran who works at a hazardous waste disposal company in Milwaukee, has had his wages garnished weekly because of a $13,000 student loan debt, despite the DeVos directive. Orlandini says his employer won’t stop garnishing until it receives a letter from the DOE instructing it to do so. (Employers risk violating a state court order if they don’t comply with a garnishment). A spokesman for Ascendium, the company that is garnishing Orlandini’s wages on behalf of the Department of Education, says the action should have stopped. It’s possible the employer or collections agency missed the notice to halt garnishments, he says, and he pledged to look into Orlandini’s case.

In mid-April, U.S. Senator Cory Booker and Congresswoman Ayanna Pressley, along with 30 colleagues, wrote a letter rebuking the Trump administration for allowing garnishments to continue for federal student loans. And on May 1, the National Consumer Law Center, in partnership with other groups, announced a class action lawsuit against DeVos and the Department of Education demanding an immediate halt to garnishments of student borrowers. The lead plaintiff is a home health aide whose hours have been reduced during the pandemic and who has no money in her bank account, but whose paychecks are still being garnished.

 

Volunteers distribute eggs from the Second Harvest Food Bank of Central Florida to needy families at a drive through event on April 17, 2020 in Kissimmee, Florida. | Paul Hennessy—NurPhoto/Getty Images

Many states and local governments are still garnishing wages and collecting outstanding debts from court fees and fines, including traffic tickets, according to Joanna Weiss, the co-director of the Fines and Fees Justice Center in New York. Though some states like Delaware and California have suspended the active collection of payment for criminal, civil, and traffic violations, others are still sending collection notices, revoking driver’s licenses, and in some cases, jailing people who fall behind on fees.

After Reunca Lewis was pulled over on April 17, a Friday, because her car was missing a license plate, she told me she spent the weekend in a cramped jail cell in Alabama with six other women. Like her, all of them were there for unpaid traffic tickets. Lewis, 23, doesn’t deny that she’d fallen behind on paying traffic tickets, something the officer who pulled her over quickly discovered, but Alabama Gov. Kay Ivey on March 13 had directed law enforcement to issue summons or citations when possible in light of the pandemic. “The condition of jails inherently heightens the possibility of COVID-19 transmission,” Ivey’s proclamation read. Nevertheless, Lewis says she was handcuffed as her 6-year-old son watched and taken to jail, where it was too crowded to keep a safe distance from her cellmates.

“It was just mind-blowing that all of us were in there for traffic tickets,” she says.

A few states have acted to protect indebted consumers. Virginia suspended new garnishment orders and has allowed consumers to attend remote hearings to seek exemptions from previous orders. Illinois suspended wage garnishments while the state is under a gubernatorial disaster proclamation. Texas suspended all service of new garnishments until May 7. Washington, D.C. prevented creditors from initiating, threatening, or acting upon a garnishment. But none of these orders suspend old garnishments, and only Virginia provides a way for clients to quickly file for exemptions.

Twenty-five state attorneys general wrote a letter to Treasury Secretary Steven Mnuchin on April 13 asking that the Treasury take action to prevent stimulus payments from garnishment, but the Treasury has not acted. A transcript of a Treasury Department call with financial institutions obtained by The American Prospect indicates that the department told banks that there was no law that prevented them from seizing stimulus payments, which some critics saw as de facto permission to seize the money. The National Consumer Law Center has been advocating for an amendment to the CARES Act that would treat stimulus payments like government benefits such as Social Security, which creditors are not allowed to seize.

***

Even if an amendment were to pass, it would not help the people who’ve resorted to bankruptcy in the face of persistent debt. Stephania Fredericksen, a 36-year-old artist, took that step after she was served with a debt collection lawsuit on March 26 over unpaid student loans. Fredericksen says she had been catching up on payments until the pandemic hit. Art fairs were canceled and tourism slowed in her hometown, Charleston, SC, and her income dried up. “I was just catching up again, just gathering speed, and now this,” Fredericksen says.

She went onto Upsolve, a nonprofit website that allows low-income consumers to file for bankruptcy, and filled out the paperwork. Upsolve CEO Rohan Pavuluri says the majority of people coming to Upsolve now are those whose finances were affected by COVID-19.

Upsolve can’t help everyone–it is only for people who have simple Chapter 7 bankruptcy cases and who satisfy a host of other requirements. People must answer hundreds of questions to figure out if they qualify. Fortunately for Fredericksen, she did, but Saunders, of the National Consumer Law Center, worries that the increased cost of filing for bankruptcy and the excessive paperwork, the result of a massive bankruptcy reform in 2005, will prevent people from exercising that option. There will also be delays in filing because many courts are still closed.

Many consumers may be waiting to file bankruptcy until they hit bottom and realize the depth of their financial hole. They may also be worried about filing too soon, because of the requirement that eight years pass between Chapter 7 filings. If they fall deeper into debt shortly after one Chapter 7, they’ll have to wait a long time before seeking this relief again.

Cindy Kimbler, the Ohio cashier, didn’t want to wait. Once the creditor started garnishing her wages, she started calling bankruptcy attorneys to figure out her options. The private lawyers quoted costs starting at $1,500—money she didn’t have—so she contacted the Legal Aid Society of Columbus, which is now helping her file for bankruptcy. The lawyers there have been able to stop the garnishing of Kimbler’s wages, and the organization only asked that she pay the $350 in court filing fees.

“I’m just looking forward to getting my life back on track,” says Kimbler. For the first time in a long time, Kimbler is optimistic about her financial future, and that makes her a rarity in America today.

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