Debt collection proposition met with skepticism, would limit access to credit

Arizona voters in November will vote on Proposition 209, the Predatory Debt Collection Protection Act, a measure that claims to address supposedly unfair debt collection practices, but that opponents say will impede Arizonans’ access to credit and increase the cost of borrowing.

A “yes” vote on the proposition would lower the maximum annual interest rate on medical debt from 10% to 3%. It would also make homes, household items, motor vehicles, and bank accounts exempt from debt collection, while “decreasing the amount of disposable earnings subject to garnishment to no more than ten percent.” Even then, a court order could further reduce the amount subject to garnishment “to five percent based on extreme economic hardship.”

In arguments against the proposition, members of Arizona’s business community and supporters of a market-based economy expressed concern that the initiative would greatly limit financing options for Arizona residents.

In a statement by the Arizona Chamber of Commerce & Industry, CEO Danny Seiden argued that “when lenders can’t collect outstanding debts, they’ll pass their losses onto their other customers, which means higher interest rates for everyday Arizonans.” 

Seiden warns that “without the ability to collect on their loans, lenders will simply stop doing business with hardworking Arizonans who need access to funds the most, leaving these potential customers unable to get credit to buy a car, rent an apartment or buy a house.”

The Arizona Bankers Association emphasized the importance of stable credit systems, saying that “access to credit fuels economic growth by allowing consumers and businesses to invest and spend beyond their cash reserves.” 

The association’s CEO, Paul Hickman, argued that “by imposing a series of draconian requirements on Arizona financial services firms, Prop. 209 would severely restrict the ability of Arizona consumers and businesses to access critically important lines of credit.”

Scot Mussi, president of the Arizona Free Enterprise Club also raised economic concerns and questioned the proposition’s supporters, claiming that the initiative was “funded almost entirely by California unions that would, if passed, California our Arizona.”

The initiative is backed by Healthcare Rising Arizona, and by Workers United, which is an affiliate of Service Employees International Union, based in California.

Other supporters include the Arizona Public Health Association, the Arizona Education Association, and the Arizona Democratic Party, whose arguments for the proposition were published by the Secretary of State’s Office.

Other opponents of the initiative include the Goldwater Institute, the Tucson Metro Chamber, and the Greater Phoenix Chamber.  

Election Day is November 8.

Craig Ruiz

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