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Wage Assignments and Garnishments: What Finance Leaders Need to Know

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Wage assignments and garnishments practices: Here are three things finance leaders must internally audit.

Wage assignments and wage garnishments are not the same. Each reflects a different process subject to different applicable laws. While there is always potential for a DOL Wage and Hour Division audit, financial leaders should internally audit their own processes to ensure compliance and efficiency while minimizing stress and anxiety for the employer and the employee. Here are three things to consider when conducting those audits.

1. Compliance

Wage assignments and wage garnishments differ in many ways. In fact, a wage assignment is not a garnishment. A wage assignment is a voluntary agreement between the employee and creditor where an amount is withheld from the employee's paycheck to satisfy a debt owed to a third-party recipient, whereas under a wage garnishment, the amount withheld from the employee's check is typically obtained through a court order initiated by the creditor.

Adding to the compliance challenge, there are several different types of wage garnishments, often with differing rules for each. For example, child support, bankruptcy and student loans are all types of wage garnishments. Wage garnishments for child support obligations are substantially governed by state law, which varies state to state, whereas garnishments for a bankruptcy plan are governed by federal law and garnishments for student loan debts are governed by either state or federal law, depending on the financing.

2. Efficiency

Businesses must be able to confirm when wage garnishments are initiated, when they cease and when more than one applies and in what order. This is what can make these withholdings complex — and messy. By having trackable systems in place, efficiency can be achievable.

3. Minimizing Stress and Anxiety

According to Workforce , wage garnishments can affect employee morale. Having wages withheld from paychecks may be a negative employee experience, especially when the employer has to get involved. For employers that are preparing audit-ready workplaces, these organizations face their own stress by potentially facing liability for noncompliance with respect to wage garnishment withholdings.

Having prudent processes in place may not only help with compliance and efficiency for the employer, but can also help alleviate stress for both the employee and the employer.

Learn about the ADP SmartCompliance® Wage Garnishment Module .

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Wage Assignments in Consumer and Other Contracts

Most of the time an employee knows when his wages are about to be garnished: He is sued, the court enters a judgment against him for the amount owed, and thereafter a wage garnishment order ensues. The employee has plenty of time to plan for it, forewarn his employer, and make the process as palatable as possible, should a repayment arrangement not be possible.

Not so for many of the so-called “voluntary” wage assignments that are being included in consumer credit and loan agreements with greater regularity than ever before. These provisions allow the creditor to skip the formality, delay, and expense of the legal process altogether, and go straight to the employer with a demand for garnishment.

An employee typically does not learn about this kind of garnishment until after the garnishment has taken place and he notices his pay check is short.

Difference between Wage Assignments and Wage Garnishment Orders

Technically speaking, a wage assignment is a provision in a private agreement — often a consumer credit agreement like the ones used in buying a refrigerator.

The “wage assignment” provision assigns the borrower’s future wages to the creditor in the event of default by non-payment. If a default occurs, the creditor in effect forecloses on the security (the wages) by sending a garnishment demand to the employer. Usually, the letter is written by the creditor’s attorney or billing department.

To enforce a wage assignment, no court process is involved. That’s the nature of the provision. It says no court process need be involved and authorizes the creditor to skip the time and expense of court and go straight to the employer. It also, of necessity, eliminates the debtor’s opportunity to challenge the debt in court or seek limitations on the garnishment.

Most garnishments are based on a judgment or court order and constitute official orders of the court. The request for garnishment is made to the court and the court grants the request by issuing a garnishment order. This is the case for most wage garnishments for child support.

Types of Voluntary Wage Assignments

Voluntary wage assignments, often simply called “wage assignments,” are those that the indebted employee enters into by agreement. He may agree to it by signing a consumer credit or loan agreement, or he may agree to repay a debt by entering into a repayment agreement with a wage assignment provision.

The typical wage assignment provision allows the employer to take the employee’s future wages as security for the debt involved. In the event of default or nonpayment, it authorizes the creditor to go straight to the employer with a demand for wage garnishment, no court filing or judgment required.

Considering these wage assignments as “voluntarily” is a stretch. Most borrowers don’t read the fine print in consumer contracts and loan papers, have no bargaining strength to oppose these provisions even if they want to, and don’t learn about the wage assignment until it is too late to do anything about it.

Nonetheless, unlike a court order, they do have a voluntary component in that the borrower chose to obtain the credit and afterwards to use it to buy goods or services or receive cash.

Federal Garnishment Law Does Not Protect Wage Assignments

In 1970, Congress passed Title III of the Consumer Credit Protection Act. Under that Act, the federal government took control over wage garnishment proceedings for the first time.

Generally speaking, this law limits the extent to which earnings can be garnished to 25% of “disposable earnings” or to amounts above 30 times minimum wage, whichever is less. It also prohibits the employer from terminating an employee for any wage garnishment based on a single debt.

The definition of “disposable earnings” is key to the determination of the maximum allowed garnishment. “Disposable earnings” means earnings after reduction for legally-required deductions like federal, state and local taxes, the employee’s share of State Unemployment Insurance and Social Security, and Worker’s Compensation.

Importantly, the permitted deductions DO NOT include sums withheld as part of a voluntary wage assignment; as such deductions are not legally required. What this means is that wage garnishment protections do not take into account the effect of voluntary wage assignments. Also, they do not apply to real estate purchases (which have specific contracts).

Furthermore, because wage assignments are not technically considered garnishment under federal law, an employer can lawfully terminate an employee for a single garnishment based on a voluntary wage assignment. Put another way, the anti-termination protections of federal law do not apply to wage assignments.

State Law Limitations on Wage Assignments

Many states have passed laws making wage assignments invalid, due to their intrusive and potentially devastating effect on borrowers. Some states bar any form of wage assignment, while others limit wage assignments to only child or spousal support.

Still others require the written consent of both spouses, or the execution of an entirely separate document addressing the assignment (so as to prohibit it from being buried in the fine print). In all cases, the employer need not comply with an illegal wage assignment, and often would be legally liable for doing so.

Needless to say, the field of voluntary wage assignments is a complicated one. Consulting with an experienced labor and employment, debtor-creditor, and/or consumer counsel is an important part of properly navigating this area of employment.

Citations/references

Federal statute: title iii, consumer credit protection act (ccpa), 15 usc, §§1671 et seq., code of federal regulations: 29 cfr part 870, u.s. wage and hour division: fact sheet #30 – the federal wage garnishment law, consumer credit protection act’s title iii (ccpa), field operations handbook – 02/09/2001, rev. 644, chapter 16, title iii – consumer credit protection act (wage garnishment), summary of state laws on garnishment: http://www.nolo.com/legal-encyclopedia/free-books/employee-rights-book/chapter2-9.html.

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What Is Wage Assignment?

Definition and example of wage assignment, how wage assignment works, wage assignment vs. wage garnishment.

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A wage assignment is when creditors can take money directly from an employee’s paycheck to repay a debt.

Key Takeaways

• A wage assignment happens when money is taken from your paycheck by a creditor to repay a debt.
• Unlike a wage garnishment, a wage assignment can take place without a court order, and you have the right to cancel it at any time.
• Creditors can only take a portion of your earnings. The laws in your state will dictate how much of your take-home pay your lender can take.

A wage assignment is a voluntary agreement to let a lender take a portion of your paycheck each month to repay a debt. This process allows lenders to take a portion of your wages without taking you to court first.

Borrowers may agree to allow a lender to use wage assignments, for example, when they take out payday loans . The wage assignment can begin without a court order, although the laws about how much they can take from your paycheck vary by state.

For example, in West Virginia, wage assignments are only valid for one year and must be renewed annually. Creditors can only deduct up to 25% of an employee’s take-home pay, and the remaining 75% is exempt, including for an employee’s final paycheck.

If you agree to a wage assignment, that means you voluntarily agree to have money taken out of your paycheck each month to repay a debt.

State laws govern how soon a wage assignment can take place and how much of your paycheck a lender can take. For example, in Illinois, you must be at least 40 days behind on your loan payments before your lender can start a wage assignment. Under Illinois law, your creditor can only take up to 15% of your paycheck. The wage assignment is valid for up to three years after you signed the agreement.

Your creditor typically will send a Notice of Intent to Assign Wages by certified mail to you and your employer. From there, the creditor will send a demand letter to your employer with the total amount that’s in default.

You have the right to stop a wage assignment at any time, and you aren’t required to provide a reason why. If you don’t want the deduction, you can send your employer and creditor a written notice that you want to stop the wage assignment. You will still owe the money, but your lender must use other methods to collect the funds.

Research the laws in your state to see what percentage of your income your lender can take and for how long the agreement is valid.

Wage assignment and wage garnishment are often used interchangeably, but they aren’t the same thing. The main difference between the two is that wage assignments are voluntary while wage garnishments are involuntary. Here are some key differences:

Once you agree to a wage assignment, your lender can automatically take money from your paycheck. No court order is required first, but since the wage assignment is voluntary, you have the right to cancel it at any point.

Wage garnishments are the results of court orders, no matter whether you agree to them or not. If you want to reverse a wage garnishment, you typically have to go through a legal process to reverse the court judgment.

You can also stop many wage garnishments by filing for bankruptcy. And creditors aren’t usually allowed to garnish income from Social Security, disability, child support , or alimony. Ultimately, the laws in your state will dictate how much of your income you’re able to keep under a wage garnishment.

Creditors can’t garnish all of the money in your paycheck. Federal law limits the amount that can be garnished to 25% of the debtor’s disposable income. State laws may further limit how much of your income lenders can seize.

Illinois Legal Aid Online. “ Understanding Wage Assignment .” Accessed Feb. 8, 2022.

West Virginia Division of Labor. “ Wage Assignments / Authorized Payroll Deductions .” Accessed Feb. 8, 2022.

U.S. Department of Labor. “ Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III (CCPA) .” Accessed Feb. 8, 2022.

Sacramento County Public Law Library. “ Exemptions from Enforcement of Judgments in California .” Accessed Feb. 8, 2022.

District Court of Maryland. “ Wage Garnishment .” Accessed Feb. 8, 2022.

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2019 Ohio Revised Code Title [13] XIII COMMERCIAL TRANSACTIONS - OHIO UNIFORM COMMERCIAL CODE Chapter 1321 - SMALL LOANS Section 1321.33 - Wage assignments for support of spouse or children.

The limitations and regulations of sections 1321.01 to 1321.19 and 1321.31 of the Revised Code do not apply to assignments of, or orders for, wages for the support of a spouse or children when such assignments or orders are made to comply with an order of a court of record. The employee may assign whatever portion of his earnings that may be required to comply with the court order for support. Effective Date: 01-01-1979 .

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Involuntary and Voluntary Pay Deductions: Ohio

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert , The Payroll Advisor

• An employer must begin withholding to satisfy a child support order no later than in the first pay period that occurs after 14 business days following the date the order was mailed or transmitted to the employer. An employer must remit the amount withheld within seven business days after the employee is paid. If an employee is terminated, the employer must file a Termination Notice within 10 business days of the termination. Employers are permitted to withhold an administrative fee. The limits of the federal Consumer Credit Protection Act apply to child support withholding in Ohio. Employers that have 50 or more employees and remit child support payments for at least one employee must remit the payments by electronic funds transfer. See Child Support Withholding .
• The maximum amount that can be deducted from an employee's wages to satisfy a creditor garnishment is 25% of disposable earnings, or the amount that exceeds 30 times the current federal minimum wage. Employers also may deduct a small processing fee from the amount withheld for each pay period in which withholding occurred. See Creditor Garnishment Withholding .
• Wage assignments must be made in writing. Certain conditions determine whether a wage assignment is valid, and priority rules apply when there are multiple wage assignments. There are limits on the amount of wages that an employee may assign and on how many assignments the employee may enter into. See Voluntary Wage Assignments .
• An employer may be required to withhold from an employee's wages to satisfy a tax levy for unpaid state income tax. State tax levies generally must be paid in full within 60 days of the date they are issued. No amount is exempt from levy. See Tax Levies .

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Employment Law: Ohio and Federal: Wage Garnishment

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Introduction

Debtors need to Request a Hearing on the garnishment because Oh. Rev. Code Sec. 2329.66 provides many exemptions, both partial and total, from garnishment. Know your rights and bring your proof to the hearing.

Steps to Minimize Wage Garnishment

1. If you are sued on a debt, make sure you answer the complaint and come to all hearings in the case. 

2. If the creditor does get a judgment against you, within 15 days of receiving the “Notice of Court Proceedings to Collect Debt" have your employer complete the "Payment to Avoid Garnishment" form and return it to your creditor with the  monthly payment due. You might get this form in the mail from the creditor, or there is a sample in the Forms box on this page.

3. If you have a lot of debts, you can file a "Request for Appointment of Trustee", which will essentially make the Clerk of Courts your trustee. You will pay a certain amount into the court every month and the court will pay your creditors. You can find the "Request for Appointment of Trustee" form in the Forms box on this page.

4. You have the right to a court hearing if you disagree with the amount of money proposed to be taken from your check. Complete the “Request for Hearing” form and file it with the Clerk of Courts. You should get a copy of the Request for Hearing form with the Notice to Judgment Debtor letter sent to you by the Court. If this form was not sent to you, a copy of the form is in the Forms box on this page. Fill in the blanks and file the form with the Clerk of Courts. On the Request for Hearing Form, you can explain why you disagree with the amount you are supposed to pay your creditor. However, you don’t have to give any reasons until the court hearing. You must return this Request for a Hearing form to the Court within 5 days of receiving the “Notice to Judgment Debtor” letter. 

5. What can I argue at the hearing? You can only argue that the wrong amount is being taken from your paycheck. Only 25% of each paycheck can be taken by your creditors and the following cash payments cannot be taken by creditors: worker’s compensation, unemployment compensation, disability payments, OWF payments, or child support or spousal support received. If you pay child support, the amount that can be taken will be even less than 25%. You cannot argue that you do not owe the money. The court has already determined that you owe the money.

6. Your wages will be garnished (money will be taken from your paycheck) until: 1. The amount you owe is paid off. 2. You get a trustee appointed to you. 3. A bankruptcy court issues an order that stops the payment. 4. A court decides that you owe money to someone else, and that debt is more important. The new debt will be paid from your paycheck instead. (No matter what, no more than 25% of each paycheck can be taken by creditors.) 

7. It is against the law for your employer to fire you from your job solely because your wages are being garnished unless there has been more than one garnishment in any 12-month period.

• Payments to Avoid Garnishment
• Request for Appointment of Trustee To avoid garnishment, apply to your local municipal court for the appointment of a trustee. This must be done within 15 days of receiving the “Notice of Court Proceedings to Collect Debt,” A trustee is a person who will collect the portion of your wages that will be garnished and divide it between your creditors until your debts are paid off.
• Request for Hearing
• Approved Credit Counseling Services in Ohio In order to prevent future garnishments, you may want to sign up with a consumer credit counseling service.
• Debt Collection from Ohio Legal Help
• Debt Scavengers and Zombie Debt Learn how to avoid the horror story of debt collection harassment over old "zombie" debt. Nolo Press
• Debtor's Rights From Pro Seniors
• Exemptions from Execution, Garnishment, Attachment, or Sale Ohio Revised Code Section 2329.66 Calculations from the Ohio Judicial Conference of exempted amounts for April 1, 2019 - March 31, 2022.
• How to Write a Cease and Desist Letter for Debt Collectors Debt.com
• National Legal Center National law firm (based out of state with a local Columbus representative) specializing in consumer and bankruptcy law. Call (800) 728-5285.
• NCLC surveys the exemption laws of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands. Sadly, not one jurisdiction’s laws meet basic standards so that debtors can continue to work productively to support themselves and their families. National Consumer Law Center
• U.S. Dept. of Labor - Wage and Hour Division The federal minimum wage is $7.25 per hour effective July 24, 2009.
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Cheryl Orr and Heather Sager discuss wage deductions in a BLR webinar entitled ‘Wage Payments: What You Can and Can’t Legally Deduct from Employees’ Pay’. They provide the following information about wage deductions and wage assignments.

• Wage deductions can be voluntary or involuntary
• There is also a distinction between a wage assignment and a wage garnishment
• An wage assignment is typically something that is voluntary. It does not occur frequently
• A wage garnishment implies that a portion of the employee’s wages is going to someone else. Usually, wage garnishments are not voluntary.
• A garnishment is a court order. However, an assignment is usually something that an employee proactively seeks out or proactively negotiates with their employer. In the case of a garnishment, the employee really has no choice but the comply with the court order or the employee can choose to see an exemption
• An assignment can be treated similarly to a garnishment, but is more voluntary rather than the creditor needing to obtain a court document forces the garnishment of wages
• The employer should obtain proper documentation that shows that the employee agrees to the assignment of wages

Cheryl D. Orr, Esq. is a partner and co-chair of the national Labor and Employment Practice Group at Drinker Biddle & Reath LLP ( www.drinkerbiddle.com ). She concentrates her practice on defending employers against FLSA collective actions and state and federal wage and hour class actions, and she regularly litigates discrimination, harassment, and unfair competition claims, conducts high-level workplace investigations, develops plans for reductions in force, and offers employer advice and counseling. Orr frequently lectures on employment law topics.

Heather M. Sager, Esq. is also a partner in the Labor and Employment Practice Group at Drinker Biddle & Reath LLP. Sager focuses her practice on management-side representation in collective and class actions, with particular experience in wage and hour litigation under state and federal law, including representative claims brought under California Business & Professions Code Section 17200. She also regularly handles single and multi-plaintiff employment litigation in the areas of unfair competition, wrongful discharge, harassment and discrimination before state and federal courts and administrative agencies. In addition, Sager regularly provides management training seminars and advice and counsel on reductions in force, employee relations, and workplace policies and procedures for the firm’s clients.

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Wage Garnishment & Assignment: 4 must knows for employers

By Julie Farraj

Feb. 15, 2017

Proper management of wage garnishment can be especially crucial to growing businesses because as their hiring increases, they may also be inadvertently increasing their garnishment liability. That’s why it’s important for an employer to remember four things can help appropriately and accurately process wage garnishments while remaining compliant.

1. All garnishments are not the same.

Here’s a basic wage withholding definition: When an employee fails to repay a debt, a wage withholding court order can be issued against the employee’s earnings to satisfy that debt. This court order — also called a wage garnishment — requires the employer to withhold a portion of the employee’s wages and forward them to a third party. Wage garnishment orders also can be issued by government agencies such as the IRS, state tax agencies and the U.S. Department of Education.

Simple, right? A business receives an order about one of its employees and refers it to its payroll department to process by withholding the appropriate wages and forwarding it to the proper recipient.

There are six common types of wage garnishment. They are:

Child support garnishment comprises by far the highest volume of orders employers process, and, while some of the laws are very standardized, the law can vary by state.

Creditor garnishments are debts that occur when a person is delinquent on consumer payments (e.g. credit card debt). The creditor may take the debtor to court and seek a wage withholding order for the outstanding debt.

Bankruptcy orders . Based on research from the American Bankruptcy Institute , 97 percent of all bankruptcies are personal filings rather than business filings.

Student loans may be collected by the U.S. Department of Education, which may contract with collection agencies to enforce and collect the defaulted loans.

Tax levy garnishments can be issued at the federal, state or local level. Each state differs in its requirements and those laws may differ from federal levies.

Wage assignment occurs when an employee voluntarily agrees to have money withheld from his or her wages. Wage assignments are governed by state law and do not involve a court order. Since they are voluntary and the employee specifies the amount to withhold, they do not fall under the requirements of the Federal Consumer Credit Protection Act.

It’s important that employers keep in mind the type of debt owed, the party collecting it, and the laws applicable to that debt. Knowing which laws, rules, and regulations apply and keeping current on them when processing wage garnishments can be challenging for employers, and, if done incorrectly, may expose employers to various liabilities and penalties.

In addition, the six types of wage garnishments noted above are the most common wage garnishments; employers may receive other less common types of wage garnishments. It’s the employer’s responsibility to comply with and make sure all orders are processed in a timely manner and correctly whether or not they are familiar.

2. Wage garnishment can affect employee productivity and morale.

Most employers recognize that wage garnishment has a direct impact on employees. However, this impact can extend beyond their paychecks. Processing garnishments is not as straightforward as simply withholding wages from an employee’s paycheck and sending a payment. The process is far from simple and can be complicated by myriad emotions.

Employees often find it humiliating because the courts have intervened and employers have become involved in their private struggles.

Employees in this position may feel that they’re now working for the institutions to which they’re indebted rather than for themselves and their futures. Stress and anxiety are often natural extensions of the garnishment process.

An affected employee’s anxiety could show itself through decreased productivity or a lack of motivation. Employers can help affected employees and potentially decrease future garnishments by providing financial wellness training and counseling, as well as tax education, to help employees manage debt.

3. Wage garnishment can affect an employer’s finances and business efficiency.

Employees aren’t the only ones affected by wage garnishment. Employers expose themselves to financial and legal risk when they incorrectly garnish an employee’s wages, fail to file in a timely way, file a defective response, fail to follow specific requirements when sending payments, or make other missteps with a garnishment. Mishandling a garnishment can lead to a judgment against the employer for the entire amount of the employee’s debt, a lawsuit from the creditor or the employee, or other costs or penalties that the employer didn’t anticipate or budget for.

In the instance of garnishments for child support, employers could potentially feel the impact of laws designed to restrict travel. For instance, the Social Security Act was amended in 1997 with a sub-section that established the denial, revocation, or restriction of U.S. passports if the non-custodial parent has child support arrears of $2,500 or more. Additionally, some state agencies have the authority to deny or revoke drivers’ and professional licenses for past-due child support obligations .

If your business requires employees to travel internationally or employs drivers, these laws could impact an employee’s ability to do his or her job effectively and, by extension, impact the efficiency of your business.

Another current area of focus that could impact employers is in the creditor garnishment arena. Currently, the American Payroll Association is working with the Uniform Law Commission to establish a standardized processing for creditor garnishments through the Uniform Wage Garnishment Act, which proposes to standardize the wage-garnishment process for employers, employees and creditors. Currently, state laws differ significantly in their requirements regarding wage garnishment, from the beginning to the end of the garnishment, and are often outdated. This means businesses that operate in multiple states must identify and abide by these different legal requirements, which can potentially lead to processing errors, confusion, inefficiency and noncompliance.

Companies can help manage these challenges if they become familiar with garnishment laws and guidance from agencies such as the Federal Office of Child Support Enforcement, develop reliable and timely procedures for garnishment processing and ensure that policies are administered fairly for all employees facing a wage garnishment.

It may be useful to develop tools, resources and strong contacts with agencies, courts and garnishors. Staying close to these agencies may help your business remain aware of major changes to wage garnishment laws.

Consider participating in state and federally initiated pilot projects. These programs are valuable opportunities to positively build relationships, influence initiatives and provide needed feedback. Make sure you have established a way to monitor legislation that could affect garnishment processing.

Other steps an employer can take include participating with committees, attending conferences regarding wage withholding, and leveraging other contacts you’ve developed with the agencies, those imposing wage garnishments, or other employers.

4. Paper processing is the not the only option.

A study by the ADP Research Institute revealed that 7.2 percent of employees had wages garnished in 2013. Keeping pace with the proper and timely processing of wage garnishments is challenging for many businesses.

As wage garnishment volumes and laws intensify, garnishment processors have the option to use electronic funds transfer, or EFT, to save time, increase efficiency, streamline processes and potentially reduce costs.

Currently, virtually every child support state agency has the ability to accept child support payments via EFT, and some have even mandated employers to send payments electronically. Some tax levy agencies, trustees and student loan agencies also are implementing electronic payment capabilities. In addition to business efficiencies, EFT enables greater security of personally identifiable information, such as Social Security numbers.

Minnesota has passed legislation requiring employers to electronically file their response to a state tax garnishment summons with the state tax agency, and Wayne County Court in Michigan is piloting the option of electronic responses.

Electronic income withholding orders are already very popular. These enable states to electronically distribute income withholding orders and employers to electronically accept or reject them.

Clearly, wage garnishment can have a profound effect on the employee who is being garnished, as well as the employer who must implement the garnishment. It’s important for businesses of all sizes to understand the different types of wage garnishment, familiarize themselves with the laws governing them, and learn ways to accurately and efficiently process them.

Using best practices can help streamline an employer’s responsibilities and ease the potential anxiety an employee may feel with this sometimes-necessary workforce issue.

Julie Farraj is vice president of Garnishment Services for ADP Added Value Services. Comment below or email [email protected].

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Home > Definitions > Divorce & Family Law > Child Custody > Wage Assignment

Wage Assignment

What is Wage Assignment?

Wage assignments allow creditors to take money directly from an employee’s paycheck to pay off a debt. They are voluntary agreements between the employee and the creditor. Due to the fact that employees must sign documents authorizing a creditor to take money from their paycheck, wage assignments do not require court approval. These arrangements differ from wage garnishments, in which a creditor must go to court to obtain permission to collect part of a debtor’s wages. Moreover, the employee typically has the right to terminate the wage assignments, while one must go through a legal process to stop a wage garnishment. 

The United States often uses wage assignments to collect child support payments. Wage assignments may also be utilized to pay off other debts such as unpaid taxes or loans. 

Key Takeaways

• A wage assignment is a voluntary agreement that allows creditors to collect money directly from an employee’s paycheck to repay a debt.
• Wage garnishments are used to repay various debt obligations such as taxes, child support, or loans. 
• State laws regulate the conditions and limitations for wage assignments. 

Wages Assignment Limitations

Wage assignments are not regulated by federal law and therefore are not required to follow the Federal Consumer Credit Protection Act. The laws concerning wage assignment vary from state to state. Following are a few examples of restrictions in various states:

• Illinois does not allow wage assignments unless the debt has gone unpaid for at least 40 days.
• In West Virginia, wage assignments are limited to 25% of an employee’s take-home earnings. 
• Employers in Texas have no statutory obligation to honor voluntary wage assignments, but they may be required to do so under a contractual obligation.
• New York does not allow wage assignments to exceed 10% of one’s gross income.
• A spouse or domestic partner must also sign the wage assignment contract if the employee is married or has a domestic partner in Washington or Wisconsin.
• Some states may require that the agreements be renewed annually and prohibit the assignments from lasting longer than three years. Additionally, various states allow wage assignments only when it is used to pay child support .

Bottom Line

W age assignments are undoubtedly a complicated subject. As a matter of fact, plenty of people are not aware of the differences between wage assignments and wage garnishments . Also, although wage assignments are voluntary, employees are not always aware that they agreed to them. Wage assignment provisions may be hidden among the fine print in consumer contracts and loan documents, and employees may not learn about these clauses until it is too late. This is why it is essential to hire proper legal representation to review important contracts before signing them. A seasoned attorney will be able to help you handle these complex arrangements.

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Voluntary Wage Assignments and Why You Should Avoid Them At All Costs

You would never hand over your paycheck to a creditor, would you?  Of course if you were under threat or order by a court you may hand over your paycheck; but never voluntarily. Right? Well, surprisingly many debtors do just that when they agree to “voluntary wage assignments.” A voluntary wage assignment is an agreement between a creditor and debtor that says the lender can deduct a certain amount of money from the debtor’s paycheck to repay a loan.

Voluntary wage assignments are commonly used by payday lenders. Surprised? You shouldn’t be.  Payday lenders understand that the reason debtors use their “services” is because they are financially strapped and desperate for cash.  But because their interest rates and fees are astronomically high, most debtors experience “payment shock” and may try to avoid paying them when the bill is due. So to protect their interests in the loan, payday lenders are now using voluntary wage assignments to increase their chances of getting paid.

How Voluntary Wage Assignment  Works

A voluntary wage assignment works just like a wage garnishment , except that the debtor has agreed to it. If a debtor defaults on the payday loan, the lender can then garnish the debtor’s wages without going to court. Once a debtor defaults on their payday loan, the lender will send the debtor a notice informing them that they plan to implement the voluntary wage assignment (i.e. wage garnishment).  This usually happens 20 days before the wage assignment notice is sent to the employer.   A wage assignment is valid for up to 3 years . In other words, the payday lender could technically garnish your wages for 3 years or until the loan is repaid.

For obvious reasons, agreeing to a wage assignment isn’t smart. You give the payday lender access to your wages and make it easier for them when you are not legally required to do so.  Signing a voluntary wage assignment can place you and your family in dire straits, if the lender garnishes wages that you need for your mortgage/rent, food and medical care. If you have signed a voluntary wage garnishment, you can revoke the agreement by sending the lender a letter.  Remember, Payday Loans are Dischargeable in Bankruptcy

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Polling shows voters want candidate support for child care in Ohio, other ‘battleground’ states

By: susan tebben - may 29, 2024 4:50 am.

Children at day care.(Getty Images)

New polling shows voters in Ohio and other states spotlighted in the presidential election as “battleground states” want to hear plans to improve child care as part of candidate campaigns.

The child care advocacy group First Five Years Fund commissioned the polling through two research teams to survey registered voters in Ohio, Pennsylvania, Maryland, Montana, Arizona and Nevada.

The researchers found “voters make a strong connection between expanding access to quality child care and a strong economy.”

“And across all demographics, voters expressed strong support for solutions including increasing funding going to states to expand child care options and modernizing the tax system to support child care and early learning,” First Five Years Fund stated in announcing the polling.

The research found that 85% of voters “in states that will be critical to the makeup of the United States Senate,” which includes Ohio, “say they’d be more likely to vote for candidate who supports increased federal funding to the states to expand child care.”

Overall, 89% of voters in the states polled “want candidates to have a plan or policies ready to help working parents afford high-quality child care,” researchers found, with all political affiliations surveyed giving at least 80% support.

The study found that 82% of Trump voters support affordable child care policies, and 96% of voters committed to voting for Biden standing in support of further improvement to the child care system.

Affordable child care is “essential/very important” for a strengthened economy, according to 68% of all voters surveyed.

“Top messages in support of increasing federal funding for child care and early education include giving children a strong foundation, financial strain on families paying for child care, low wages for child care workers and the limits placed on parents in the workplace when they cannot find quality, affordable care,” the study stated.

Asked about specific programs, 85% of survey participants want increases to federal funding to expand programs like the Child Care Development Block Grant. That includes 96% of Democrats, 86% of registered independents and 74% of Republican participants.

Federally, the U.S. House voted to expand a child tax credit early this year, but the measure was left stuck in the U.S. Senate as Republicans criticized a provision that allowed those who earned no annual income to still qualify for the tax credit.

This argument came as reports found child care costs surpassing wages in the country, with the U.S. Bureau of Labor Statistics showing a 214% increase since 1990.

Ohio has seen its own rising child care costs and decreased staffing in child care facilities, creating a challenging situation in need of urgent attention, according to advocates.

Both Republicans and Democrats have introduced measures to attempt to solve the child care challenges in Ohio, with a state tax credit proposed by Democrats in October that would credit a family $1,000 per year for each child aged 0 to 5, and $500 annually per child aged 6 to 17.

Those with a maximum annual income of $65,000 per household would qualify for full benefits, and the benefits would phase out up to the cap of $85,000 per year if the bill were to pass.

Republicans recently introduced their own attempt to address child care struggles, with a bill to create cost-sharing between employers, employees and the state.

Under the companion bills in the Ohio House and Senate, $10 million would be appropriated to start a voluntary program, meant to incentivize businesses to invest in child care and attract employers who have left under the weight of child care costs back to the workforce.

Employers would chose the employees would would benefit from the program, and those employees must be ineligible for publicly funded child care to qualify.

The bill has the support of the Ohio Chamber of Commerce and child advocacy group Groundwork Ohio, both of whom praised the bill in a press conference announcing the proposed measure.

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Susan Tebben

Susan Tebben is an award-winning journalist with a decade of experience covering Ohio news, including courts and crime, Appalachian social issues, government, education, diversity and culture. She has worked for The Newark Advocate, The Glasgow (KY) Daily Times, The Athens Messenger, and WOUB Public Media. She has also had work featured on National Public Radio.

Ohio Capital Journal is part of States Newsroom , the nation’s largest state-focused nonprofit news organization.

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