On April 23, 2015, Governor Snyder signed into law two House bills, set to take effect on September 30, 2015, which will reform Michigan’s cumbersome and risky wage garnishment procedure.

Under the current law, dealers bear the majority of the burden to properly garnish an employee’s wages, and the creditor is only required to pay the dealer $6.00 for their administration of the garnishment. The current law also allows the creditor to mail the garnishment forms to the local dealership, rather than the dealer’s registered agent, which often results in mishandling of the garnishment forms by staff who are unfamiliar with garnishment rules. Garnishments must also be renewed every six months, which creates increased opportunities for mishandling or noncompliance by the dealer’s staff. Finally, a dealer’s failure to properly comply with a garnishment allows the creditor to obtain a judgment against the dealer for the full amount of the employee’s debt.

The new law will provide long-awaited relief to dealers through the following changes:

• Creditors will have to pay $35.00 to the dealer for the handling of the garnishment.
• Garnishments will remain in effect until the judgment is satisfied and will not be renewed every 6 months, reducing the opportunity for administrative error.
• Garnishments will have to be properly served on the dealer in compliance with the Michigan Court Rules regarding service to ensure that the dealer receives proper notice of the garnishment.
• Dealers will have increased opportunities to cure any mishandling of a garnishment, including prior to a request by the creditor for default, after a request but prior to the entry of default, and even after the entry of default by requesting to have it set aside.

The new law ensures that the responsibility for the debt of the employee remains with the employee and doesn’t unnecessarily burden the dealer. Dealers will now be more fairly compensated for administering garnishments and will have greater protection from judgments against them based on minor administrative errors.

Until September 30, 2015, dealers must continue to comply with the existing garnishment statute and rules. To learn more about the changes to the garnishment law and the dealership’s responsibilities, please do not hesitate to contact our office by calling 248-645-9300 or by email at [email protected]