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Despite new debt law, consumers should be on their guard

BY TORI GANTZ

Cronkite News

Rodd McLeod thinks voter approval of Proposition 209 this fall will go a long way toward keeping people from being “forced out on the street or lose their cars” when they have medical bills they can’t pay.

But he also thinks that consumers still need to be on their guard.

“I think debt collectors are still going to be aggressive and try to get as much money from people as possible,” said McLeod, spokesperson for Arizona Healthcare Rising, one of the main supporters of the proposition.

“That’s just the reality of the way the debt collection industry functions, which is why it’s important to have protections in the law so that ordinary people don’t get hurt,” he said.

Opponents of the law have not given up the fight. They challenged the measure in court, and a Maricopa County Superior Court judge earlier this month temporarily blocked the law from taking effect on any debt incurred before Dec. 5 – the date the 2022 election results were certified. That injunction was lifted this week, however, and the judge allowed the entire law to proceed for now.

The proposition creating the Predatory Debt Collection Protection Act passed with an overwhelming 72% of more than 2.4 million votes cast. The 1.75 million who voted for the proposition were the most of any of the 10 measures on the ballot. Only Proposition 211, relating to dark money in politics, had a larger margin of victory, with 72.3% in favor.

Greater Phoenix Chamber Vice President of Public Affairs Mike Huckins said he was only “a little bit surprised” at the passage of the measure, which he credited to successful marketing by its supporters. Arizona Healthcare Rising celebrated the passage last November of Proposition 209. (Special to AFN)

“The proponents did a great job of naming it,” Huckins said. “When you have a title like Predatory Debt Collection Protection … it’s an easy one, I

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Valley’s nation-leading inflation may ease this year

BY HALEY SMILOW

Cronkite News

After a year in which the Valley saw the nation’s highest inflation rate for metro areas, experts say consumers can expect inflation to ease in 2023 – but warn that it’s not going away entirely.

The consumer price index for PhoenixMesa-Scottsdale in October, the most recent month for which data is available from the Bureau of Labor Statistics, was 12.1% higher than it was in October 2021. The next-highest metro areas were Atlanta, which posted a 10.7% increase for the year, followed by Tampa-St. Petersburg at 10.5% and Miami at 10.1%.

Price increases were up across the board, with higher prices for fuel, food, clothing and more. In Arizona, the biggest increases came in the price of gas, which was up 41% from October 2021 to October 2022 – although that recently reversed course – but experts say the biggest driver of the inflation index was the cost of housing.

Mark Stapp, a professor at Arizona State University’s W.P. Carey School of Business, said shelter accounts for onethird of the consumer price index, which is why Arizona is facing such high inflation rates.

“The index is a composite. One of the larger elements of that composite is related to shelter,” said Stapp, who is also the director of the Center for Real Estate Theory and Practice at the Carey School. “It can make up 30-40%, so a significant part of the estimate of what inflation is in Arizona is that shelter component.”

George Hammond, the director of the Economic and Business Research Center at the University of Arizona’s Eller College of Management, agreed that shelter has driven inflation in the Phoenix area.

“The major reason why Phoenix’s inflation rate is running so much faster than the national average, is what’s going on in the housing market,” Hammond said. “Housing is by far the biggest single category in the price index, so it has a huge influence on what happens.”

There are several reasons for the rise, they both say. The steady increase in the number of people moving to Arizona jumped with COVID-19, creating more demand for what was already a short supply of housing for renters and homeowners. It created what Hammond described as a “recipe for really rapidly rising house prices and rents.”

“The shelter component has been very difficult to come back down because of the amount of growth that we’ve had here and the lack of supply in ownership and rental housing,” Stapp said.

While housing has been the biggest part of Valley inflation, gas prices may have had the biggest emotional punch. A gallon of gas cost as much $5.39 a gallon in June, according to AAA. Prices started falling after the summer peak and were at $3.36 a gallon last week, almost 19 cents lower per gallon than it cost a year ago. But the spikes still had an impact.

Dennis Hoffman, an economics professor at the Carey School, said transportation costs play a large role in inflation for a sprawling area like Phoenix.

“We’re quite a commuter region,” said Hoffman, who is also director of the L. William Seidman Research Institute at the Carey School. “A lot of people commute, so they pay the costs of used cars,

DEBT from page 16 think, for people to vote for.”

Given that, Huckins said he does not think business groups and other opponents had “the resources … to get the message out to the voters.”

Proposition 209 makes several changes to state law that supporters said will protect consumers from crushing debt that can lead to a downward economic spiral, costing debtors their cars, which can cost them their jobs, which can cost them their homes.

The measure’s backers said it was aimed at medical debt, the No. 1 cause for calls from debt collectors and what McLeod said is a leading cause of personal bankruptcies. But much of the new law actually applies to all debt.

The new law lowers the interest rate that businesses or debt collectors can levy on medical debt from the previous 10% to 3%. It will also increase the value of homes, cars and bank accounts that are protected from debt collectors for all debt, while lowering the amount of disposable income that can be garnished to settle a debt, from the previous 25% to 10%.

“Any time a debt collector tries to take someone to court for unpaid debt, you know, the … judges will be operating under these new guidelines for what is allowed to be claimed by the debt collector,” McLeod said.

Opponents insist that the long-term impact of the law will end up backfiring on the people it is intended to protect.

“I think it’s going to affect all consumers, not just those that have medical debt because … it raises the exemptions from automobiles, your house, your salary,” Huckins said. “There may be a little bit of buyer’s remorse for some folks for voting for this once they see the impact

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and cars of course need gasoline.”

Hoffman said Arizonans typically pay more for gas because there are no refineries in the state, relying instead on California and Texas for its gas. Arizona was hit hard when some California refineries shut down in September.

Another increase that hit home for consumers was the price of food, which was up by 12.6% over the year, led by a 16.4% increase in dairy products, according to the BLS.

Beth Fiorenza, the executive director at Nourish Phoenix, said that has caused the number of people seeking help from her pantry to roughly double in the last three to four months over normal levels.

“If people were already living paycheck to paycheck, and then inflation and higher expenses hit, now they’re really struggling to get by every month,” Fiorenza said.

The latest surge in inflation capped three years of steady increases, according to the BLS. It said inflation in Phoenix rose by 0.7% from October 2019 to October 2020 and then rose 7.1% from 2020 to 2021 before spiking over the past year.

But the economists believe that things may be turning around and that the high prices will slowly decrease over the next couple of months. Stapp noted that gas prices have already fallen and he expects the same should happen with housing.

Hammond agreed that housing prices should start to fall in the new year, and he thinks Arizona will likely follow the rest of the U.S. economy, which has been generally cooling in recent months.

Hoffman was more confident, saying he thinks the worst is in the past and that the economy will soon start to stabilize.

“I think we’re going to see inflation rates come down over the next year pretty dramatically,” he said. 

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it’s going to have on interest rates down down the line.”

That was echoed by Michael Guymon, president and CEO of the Tucson Metro Chamber, who said in a written statement that the new law will be “bad for the Arizona economy, bad for many of our businesses and bad for overall lending in the state.”

Guymon complained about the supporters’ framing of the measure, which he said was “marketed and described on the ballot as a medical debt initiative and it is not.”

“It only references medical debt specifically as it pertains to the interest rate change. The public did not understand that it was going to have an impact on ALL debt and therefore have a detrimental effect on lending, the Arizona rental market, etc.,” Guymon wrote.

He said businesses will be forced to raise prices for everybody to make up for the debt they will no longer be able to collect, an argument advanced by Huckins as well.

“When you put these sort of protections around folks, where they don’t have to pay back their debts to a certain extent, it’s still going to raise the interest rates

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for the rest of us and it’s going to reduce the credit market for those folks that … probably are going to need it the most – those folks that don’t have the cash to pay for stuff up front,” Huckins said.

But McLeod said that consumers need protection now – which was evidenced by the roughly 470,000 signatures that were submitted to put the measure on the ballot and by the overwhelming support at the ballot box. He said the chambers of commerce need to recognize that.

“We’re really pleased and thankful that the overwhelming majority of Arizonans agree with us,” McLeod said. “We would like to see the chamber of commerce join us in that belief.

“We just believe so strongly that you know, somebody with a medical bill they can’t pay should not be forced out on the street or lose their cars and couldn’t get to their job anymore,” he said.

But McLeod said the law alone will not protect consumers.

“What consumers can do to protect themselves is have a lawyer who is up on the law,” he said. “The sad reality is that the overwhelming number of consumers who go to court for this sort of thing are not represented by a lawyer.” 