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An Overview of the Consumer Credit Protection Act

1168056 at work (1)The Consumer Credit Protection Act (CCPA) aims to protect employees whose earnings are being garnished from discharge by employers. The Wage and Hour Division (WHD) of the U.S. Dept. of Labor (DOL) administers the Act.

All employers are covered by the Act, as well as the employees who receive wages, bonuses, salaries, commissions or periodic payments from retirement or pension plans. Typically, tips income is not included in the Act.

Wage garnishment refers to an employer withholding wages of an employee to repay a debt, as per a court order or other legal procedure. Even if multiple levies are made and proceedings brought for collection, employers cannot discharge employees because of garnishment for a single debt. However, Title III of the CCPA does not prevent employers from discharging workers if their wages are subject to garnishment for two or more debts.

The Act also sets a limit on the amount of money that can be garnished from the earnings of a worker per payday. This equals to the sum by which the wages are greater than 30 times the federal minimum wage per hour, as per the Fair Labor Standards Act, or 25% of disposable wages. (Disposable earnings refers to the amount of wages left after legally mandatory deductions like unemployment insurance, Social Security, state employee pension plans and local, state, and federal taxes. Deductions that are not legally mandatory such as life insurance, health insurance, and union dues are not considered while calculating disposable earnings.)

Regardless of the number of garnishment orders received by an employer, the garnishment limit applies. An amount greater than the above set limit can be garnished from employee wages for the payment of local, state, or federal taxes, bankruptcy, or child support. For more information on the Consumer Credit Protection Act, please refer to the Dept. of Labor (DOL) website.

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