Waldemar Majcher fell behind on his credit card bills around 2005. The Chicago resident had recently lost his job working at a catering company and was paying his father’s medical bills.
In 2008, a collection agency took him to court and obtained a court order known as a “judgment” allowing it to be more aggressive in pursuing him. That meant his debt began to be subject to the state-set annual interest rate of 9 percent.
Today, Majcher owes $21,821 — more than ten times what he originally spent.
“The feeling is like suicide,” Majcher said. “You end up in the situation in which comes suicidal thoughts. No exit.” (Majcher is not currently having suicidal thoughts.)
A group of Illinois lawmakers are now working on a package of legislation designed to increase state protections for debtors like Majcher. Advocates say, if passed, these bills would lift the economic fortunes of thousands of Illinoisans struggling with debt. But opponents argue that the legislation would be harmful to the low-income people it is meant to help.
What happens if you can’t pay your bills?
At 9 percent, Illinois’ “post-judgment interest rate” is one of the highest in the Midwest for small claims — at least twice as high as in neighboring Michigan, Minnesota, and Iowa.
Cook County Associate Judge Thomas Moore Donnelly enforced judgments from 2003 to 2008. Donnelly recently told a group of legislatures that during his tenure, the county typically saw “six hundred to one thousand cases a day.“
When a creditor obtains a judgment against someone, they can go after the proceeds of the sale of their house or car, or attempt to take a percentage of that person’s wages.
“In most cases, people who are being garnished in their wages — and these are people earning $18- to $25,000 a year — would never in their lifetime see a paycheck that wouldn’t be garnished,” Donnelly said.
What lawmakers want to do
Democratic Illinois state representatives Barbara Flynn Currie, Juliana Stratton, Will Guzzardi, and Christian Mitchell are sponsoring a package of legislation that would increase protections for debtors. Notably, HB 5487 would cut Illinois’ post-judgment interest rate for small claims from 9 percent to 2 percent. Another bill, HB 5483, would reduce the amount of time a judgment can be pursued from 27 years to five years. Other bills in the package would make it harder for creditors to take people’s wages or money from the sale of their home or vehicle, and establish a “debtor’s bill of rights.”
“These are not people who are happy to be considered deadbeats,” Currie said. “But the problem is the system makes it very difficult for them if they are in strained financial circumstances.”
Currently, all of the bills are stalled out in committee. But Currie said she remains hopeful that “some or all of these good ideas” will move through the General Assembly by the time the session concludes at the end of May.
Worse for low-income people?
Some opponents of these bills argue that they would have unintended consequences for the people they are meant to help.
“The outcome of these restrictions would be for lenders to reduce lending to individuals with riskier credit backgrounds,” said Michael Starzec, an attorney at the firm Blitt and Gaines who speaks on behalf of the Creditor’s Bar Coalition of Illinois.
Starzec points to a 2017 New York Federal Reserve report that examined how restricting collection agencies impacted consumer’s financial health and the credit market across the United States. The report found that restricting collection makes it harder for low-income people to obtain things like credit cards or auto loans.
Almost a decade after a creditor first took him to court, Waldemar Majcher is in worse financial shape than ever and said he wishes he had been warned years ago about how interest can drive up debt.
“You call for information —’whatever problem you have, we are here to help you,’” Majcher said. “Nobody says, ’We are here to drown you.’”
Miles Bryan is a reporter for WBEZ. You can follow him @miles__bryan.