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The Consumer Credit Protection Act (CCPA) prevents employers from firing employees for wage garnishment due to a single debt and sets a maximum amount for withholding from paychecks. Wage garnishment only applies when required by law and does not include voluntary agreements. The CCPA applies to personal income in the US and its territories, with exceptions for child support and alimony.
The Consumer Credit Protection Act (CCPA) is another name for the federal wage garnishment law that went into effect in the United States in 1968 and states that employers who must withhold part of an employee’s wages to pay off a single debt cannot fire that employee because of debt. For example, an employer who is required by court order to withhold part of an employee’s paycheck to pay off a debt to the IRS may not decide to fire that employee simply because of the debt. However, if the employee has more than one debt, 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 from job loss, it also sets the maximum amount a company can withhold from a paycheck. This protects an employee from losing an entire salary on debt repayment. Only some debts require the employer to keep the 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 way. The debt is not owed to the employer, but rather the employer takes the money and pays it to the government or appropriate court-appointed person.
Withholding this money is a legal process known as wage garnishment. Wage garnishment is not the same as voluntarily agreeing to withhold money. For example, if an employee has asked an employer to withhold a certain amount from each paycheck to reimburse an individual or a company, this is not based on any court order and does not constitute wage garnishment. Wage garnishment only comes 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 that is treated as personal income is covered by this law. Additional money earned that is considered a tip is not considered part of a person’s earnings under the Consumer Credit Protection Act.
There are exceptions in the case of child support and alimony. In this case, up to 50 percent of the worker’s wages may be withheld and paid as child support. If the person does not have a spouse or current child to support, the court may order that 60 percent of earnings go to child support.
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