Voter-approved changes to debt collection aren’t unconstitutionally vague, appeals court rules

The Arizona Court of Appeals on Tuesday rejected a lawsuit filed by debt collectors and homeowners associations that sought to void the debt reforms that voters overwhelmingly approved in 2022 when they passed Proposition 209.

The lenders, debt collectors and HOAs alleged that the guidelines for wage garnishment in Prop. 209 were too vague and posed legal and financial risks for debt collectors who were confused about when the protections of the new law went into effect. That confusion, they said, amounted to unconstitutional vagueness and meant it should be thrown out entirely. 

Dubbed the “Predatory Debt Collection Act,” Prop. 209 dramatically lowered the percentage of wages that can be garnished from indebted individuals from 25% to 10%. Attorneys for the Arizona Creditors Bar Association, the lead plaintiffs in the suit, argued that there is a lack of clarity when it comes to garnishment actions that extend past Dec. 5, when the act became law.

Opponents of the debt reforms said one specific part of the “savings clause” in the act was so confusing that the entire law should be voided. While the clause says that the act’s protections only apply prospectively — meaning after Dec. 5, 2022, when it went into effect —  one section says it doesn’t apply to “rights that have matured” before that same date. 

But a three-judge appellate panel unanimously disagreed. 

“The Saving Clause provides a framework and examples consistent with how Arizona courts have long ensured prospective application of the law. Thus, the Saving Clause is not unconstitutionally vague on its face,” Judge Maria Elena Cruz wrote for the court.

Judges David Weinzweig and Michael Catlett joined Cruz’s opinion.

Supporters of the act have said that the Savings Clause clearly refers to garnishment cases in which a court order allowing collection of an indebted person’s wages was made before Dec. 5, even if the garnishment action itself continued after that date. In those cases, the new reductions in garnishment rates won’t be implemented. 

The lawsuit, however, disagreed and argued that the language isn’t specific enough about which part of the multi-step garnishment process must occur for a debt collector’s right to garnish to “mature,” or be legally allowed. It’s too open to interpretation, they said, and posed issues for debt collectors seeking uniform treatment under the law.

But the appellate judges noted that a law doesn’t meet the standard for being unconstitutionally vague simply because there’s more than one interpretation of it. Courts, Cruz wrote, are adept at applying statutes prospectively only — in fact, all laws in Arizona are only applied prospectively unless they explicitly state otherwise.

“There will undoubtedly be difficult questions about prospective application of the Act, including those involving wage garnishment proceedings. In answering those questions, courts will apply the framework set forth in the Saving Clause—a framework not materially different from what courts apply to any new statute,” the court ruled. 

Rather than strike down the law as vague, based solely on a hypothetical situation that may never occur, Cruz wrote that “the prudent course is to allow courts to work through the meaning and application of the Saving Clause in the context of as-applied disputes involving concrete factual scenarios.”