WASHINGTON -- Facing heavy government layoffs from budget cuts, the North Carolina State Employees Credit Union says it will no longer seek to garnish the wages of borrowers who fall behind on a debt.
"We simply don't think that's the way to treat people," SECU Senior Vice President of Loan Administration Phil Greer told HuffPost. "Somebody who has lost their job and is struggling to pay utility bills and put gas in the car, who is maybe working a 7-Eleven to make ends meet -- they don't need the additional aggravation of having their wages garnished."
When lenders and debt collecters seek to recover unpaid debts, they routinely attempt to garnish wages -- an act in which the borrower's employer takes an amount out of the borrower's paycheck and sends it to the lender, reducing the borrower's paycheck. The vast majority of lenders make use of wage garnishment, either directly, or by selling unpaid debt to a debt collection agency, which attempts to garnish wages.
"We think it's the right thing to do," Greer said. "People want to pay their debts. There's just a lot who can't right now and kicking them while they're down is just not productive."
With 1.6 million members and $22.5 billion in assets, SECU is the second-largest credit union in the country. Teachers, North Carolina state government employees and their families are eligible for membership. Credit unions are owned by their members, and only members can deposit money with the credit union or receive a loan from it.
Greer told HuffPost that with the state government facing serious layoffs due to budget cuts, it was not a good time for the SECU to be making it harder for its member-owners. Doing so, he said, would only push people into the arms of predatory lenders and check cashing companies.
Teachers are particularly at risk under current budget proposals. The Republican state legislature is pushing $1 billion in cuts to the state's education system, which would force thousands of layoffs. Thousands of protesters descended on the state capitol in Raleigh earlier this month to rally in opposition to the cuts.
Creditors are currently barred from garnishing wages in North Carolina under state law, but the state legislature is considering a repeal of that ban. Many SECU members have moved out of North Carolina, however, and now live in the nearby states of Virginia, Tennessee and Georgia, where wage garnishing is legal. Greer said the SECU has sought to garnish the wages of debtors in those states over the past decade but has done so fewer than a dozen times, indicating that there will be very little serious financial cost to the credit union from abandoning the practice.
If the garnishment ban is repealed in North Carolina, however, the SECU could miss out on an opportunity to profit from that ban. Greer is not concerned.
"We're not in favor of North Carolina having wage garnishment, and we're not in favor of using wage garnishment in adjoining states for our members who maybe have caused us a loss," he says.
Greer said the SECU does not hire debt collectors, but under some circumstances will seek court judgments against people who do not pay their debts to the credit union. Over time, he said, the SECU will work with the borrower to find a way for them to make good on the debt, if they are not able to pay it off right away.
"[We] generally feel that if you work with your members who have run into a tough time ... more times than not they're going to work with you to take care of that obligation, if not next month then in six months when they get back on their feet."