On April 4, 2024, the Oregon Governor signed Senate Bill 1595—the Family Financial Protection Act (SB 1595)—into law. SB 1595 increases the amounts exempt from execution by creditors, imposes new account review procedures for banks in responding to garnishments, and increases protections for debtors from unlawful debt collection practices. This article discusses some of the important changes implemented in SB 1595.
Changes to Debtors’ Exemptions
SB 1595 modifies amounts exempt from execution by creditors after entry of judgment. Among other things, SB 1595:
- Increases the vehicle exemption from $3,000, to $10,000.
- Increases the wage exemption from the lower of $254/week or 75 percent of a judgment debtor’s disposable income to $305/week effective January 1, 2025, $338/week effective July 1, 2025, $400/week effective July 1, 2026, and thereafter equal to minimum wage then in effect multiplied by 30. These amounts will be adjusted annually for inflation.
- Increases the amount of homestead exemption from $40,000, for single persons, or $50,000 for two or more with interest in homestead, to $150,000 or $300,000, respectively, which is adjusted annually for inflation.
- Provides a new $2,500 exemption for bank accounts, which is adjusted annually to account for inflation.
The increases in the exemption amounts do not apply to debts for child support, spousal support, or criminal restitution.
The changes to the exemptions will become effective on January 1, 2025. Thus, beginning on January 1, 2025, creditors will need to update their garnishment forms and will need to keep updating their garnishment forms periodically to reflect the exemption amounts adjusted for inflation.
Changes to Bank Garnishment Procedures
In addition to increasing exemption amounts, SB 1595 also clarifies account review procedures banks are required to undertake upon receipt of a writ of garnishment. Specifically, if a garnishment includes a Notice of Right to Garnish Federal Benefits, a bank may process the garnishment without undertaking the account review. And, if the garnishment includes an attestation that the debt arises from a child support, spousal support, or criminal restitution judgment, a bank must conduct a modified account review to determine whether the funds in the account are exempt under other law (e.g., retirement funds, federal benefit payments (including social security), unemployment payments, and workers compensation payments (“Exempt Benefit Payments”)).
If the garnishment does not include a Notice of Right to Garnish Federal Benefits or an attestation that the debt arises from a child support, spousal support, or criminal restitution judgment, a bank is immediately required to make available to the account holder $2,500 of the funds on deposit across all accounts at the bank. The bank is then required to conduct a review of the accounts to determine whether the balances of funds on deposit are exempt under other law as Exempt Benefit Payments. Upon completion of the account review, the bank must make available to the account holder (i) the standard $2,500 account exemption plus (ii) any amounts in excess of $2,500 that are traceable to Exempt Benefit Payments.
Consistent with prior law, the lookback period for the account review is two months. Within three business days of completing the account review, the garnishee bank is required to notify the account holder of any actions taken by the bank in connection with the review. To the extent the funds in the account are not subject to the $2,500 base exemption or otherwise Exempt Benefit Payments, the bank is required to remit the funds to the garnishor.
Changes to Oregon’s Unlawful Debt Collection Practices Act and Implications to Creditors
SB 1595 also modifies Oregon’s Unlawful Debt Collection Practices Act (“UDCPA”), coded at ORS 646.639 and 641, in several important ways:
- First, SB 1595 repeals ORS 646.643, which stated that a debt collector1 in compliance with the FDCPA would also be considered in compliance with the requirements of the Oregon UDCPA. Debt collectors should review both statutes and ensure that their debt collection practices comply with both the UDCPA and the FDCPA.
- Second, SB 1595 amends ORS 646.639(2)(s) to provide debt collectors an affirmative defense against an alleged unlawful practice action. Specifically, under SB 1595, the fact that a debt collector obtained a judgment in an amount less than what was collected does not, in itself, prove a violation of the UDCPA. Rather, if a debt collector over-collects, the debt collector may show that the procedures they relied upon, either followed by the original creditor or the debt collector, were reasonably put in place to avoid the error. Previously, overcollection could result in a per se violation of the UDCPA.
- Third, attorney fees and costs are now awardable to a prevailing debt collector or creditor in a UDCPA action only if the debtor had no objectively reasonable basis for bringing the debt collection action. The prevailing debt collector or creditor has the burden to prove that the debtor had no basis to bring the action in order to recover its attorney fees and costs in defense of the action.
- Finally, SB 1595 extends the amount of time debtors have to file a complaint for unlawful debt collection practices to three years from the date of injury.
The changes to the UDCPA became effective on April 4, 2024.
Observations
- The increase in the exemption amounts—most especially the homestead exemption—significantly decreases the likelihood of unsecured creditor recoveries in Oregon. Lenders concerned with repayment risks are well-advised to take a security interest in collateral, which would not be subject to the new and increased exemptions.
- The separate exemption amounts as between ordinary debts and child support/spousal support/restitution judgments may have unforeseen results in bankruptcy cases, where debtors look to state exemptions to determine how much is required to be paid to creditors. Specifically, the separate exemption amounts could have the effect of requiring payment in full of some debt amounts that may not otherwise be entitled to priority payment in bankruptcy.
- The bank account review procedures for most judgments require a bank to automatically exempt garnishment $2,500 in funds on deposit in the bank. SB 1595 specifically exempts the combined total of $2,500 from all the debtor’s accounts in one financial institution. Therefore, if a judgment debtor has funds on deposit in multiple banks, this exemption potentially allows a judgment debtor to protect amounts in excess of $2,500 from garnishment so long as they are deposited in more than one bank.
- The revised attorney fee provision in the UDCPA is likely to spur more litigation against debt collectors, including attorneys and law firms representing financial institutions. With the new safe harbors, however, debt collectors are well-advised to document and implement debt verification procedures to avoid future liability.
1 The amendments to the UDCPA do not apply to banks that are attempting to collect on their own loans.
