On September 30, 2015, new laws will take effect that will reform Michigan’s cumber-some 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 non-compliance 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.

As an additional protection, a dealer may still be able to recover from the employee any amount the dealer is required to pay as a result of a judgment against the dealer for mishandling of the garnishment.

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. If you receive a Request and Writ for Garnishment and would like further instruction or guidance as to your rights and responsibilities, please do not hesitate to contact a member of the Dealer Practice Group.