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What is the Consumer Credit Protection Act?

By Jessica Reed
Updated May 17, 2024
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The Consumer Credit Protection Act (CCPA) is another name for the federal wage garnishment law which went into effect in the United States in 1968 and states that employers who must withhold part of an employee's wages to repay a single debt cannot fire that employee because of the debt. For example, an employer who is required by court order to withhold part of one employee's paycheck to pay off a debt to the IRS cannot decide to fire that employee simply because of the debt. If the employee owes more than one debt, however, then the employer can fire him if he wishes. The Consumer Credit Protection Act is enforced by the Wage and Hour Division (WHD).

Not only does the Consumer Credit Protection Act protect employees against losing their jobs, but it also states the maximum amount a company can withhold from a paycheck. This protects an employee from losing an entire paycheck to debt repayment. Only certain debts require an employer to withhold money for repayment. These debts occur when the employee owes money to the government or when a court rules that an employee must repay a debt in this fashion. The debt is not owed to the employer, but rather the employer takes the money and pays it to the government or the appropriate person as appointed by the court.

Withholding this money is a legal process known as wage garnishment. Wage garnishment is not the same as voluntarily agreeing to withhold money. If, for example, an employee asked an employer to withhold a certain amount from each paycheck to repay a person or company then this is not based on any court order and is not wage garnishment. Wage garnishment only goes into effect when the withholding of money is required by law.

Only those living in the United States and its territories or possessions are covered by the Consumer Credit Protection Act. Any money considered as personal income is covered by this act. Additional money earned that is considered a tip is not considered as part of a person's earnings under the Consumer Credit Protection Act.

Exceptions exist in cases of child support and alimony. In this case, up to 50 percent of the worker's earnings can be withheld and paid as child support. If the person does not have a current spouse or child to support, then the court may order 60 percent of earnings to go toward child support.

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Discussion Comments

By FrameMaker — On Feb 16, 2011

Does the consumer protection act cover fair credit reporting? I was recently forced to pay $180 to have a bill removed from my credit that was originally $5, and I was never notified of. HollyWood video went out of business, and I guess I had a late fine for approximately five dollars. I would have gladly paid the balance, but they had abruptly closed their stores in Phoenix without any notice. The bankruptcy judge deemed late fines as collectible assets so all unpaid accounts went into collections. For some strange reason (government corruption in my opinion), Arizona and one other state do not require that any attempt be made to notify a person of their debt before it is placed on a credit report as a charge-off account.

In the end, I paid the charge in full under the condition that it be removed from my credit report completely. This was the only negative mark on my credit report, and was responsible for dropping my credit score nearly forty points for two months. I wonder how many consumers were scammed by this horrible legal loophole that favors debt collection agencies.

By submariner — On Feb 14, 2011

@ Cougars- Those percentages are the upper limits of the guidelines established for determining child support by the consumer protection credit act. Many different considerations go into determining child support.

I am happily married so I do not pay child support, but my friend ended a messy marriage, and is going through the process of determining custody and will eventually need to pay child support. In his case, I am pretty sure that the judge will consider custody, income, and the needs of his child in determining child support. I also think that his ex-wife’s income will be considered. In these cases, the legal process can be lengthy because there is a lot to consider.

By cougars — On Feb 12, 2011

Fifty to sixty percent of a person's wages to be paid in child support seems like a lot of money. I have never had to pay child support, but I do have a daughter that is well provided for, and I don't think that I spend half of my money supporting her. All of her needs and most of her wants are provided for. I would expect child support to be capped at somewhere around thirty five to forty percent of a person's wages because that seems like a more realistic amount to be spent raising a child. I guess the consumer credit protection act garnishments for child support just underline the importance of making a commitment to family when you have children.

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