What is the Consumer Credit Protection Act? (with picture)

The Consumer Credit Protection Act (CCPA) is another name for the federal wage garnishment law which went into effect in the United States in 1968 and states that employers who must withhold part of an employee's wages to repay a single debt cannot fire that employee because of the debt. For example, an employer who is required by court order to withhold part of one employee's paycheck to pay off a debt to the IRS cannot decide to fire that employee simply because of the debt. If the employee owes more than one debt, however, then 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 against losing their jobs, but it also states the maximum amount a company can withhold from a paycheck. This protects an employee from losing an entire paycheck to debt repayment. Only certain debts require an employer to withhold 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 fashion. The debt is not owed to the employer, but rather the employer takes the money and pays it to the government or the appropriate person as appointed by the court.

Withholding this money is a legal process known as wage garnishment. Wage garnishment is not the same as voluntarily agreeing to withhold money. If, for example, an employee asked an employer to withhold a certain amount from each paycheck to repay a person or company then this is not based on any court order and is not wage garnishment. Wage garnishment only goes 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 considered as personal income is covered by this act. Additional money earned that is considered a tip is not considered as part of a person's earnings under the Consumer Credit Protection Act.

Exceptions exist in cases of child support and alimony. In this case, up to 50 percent of the worker's earnings can be withheld and paid as child support. If the person does not have a current spouse or child to support, then the court may order 60 percent of earnings to go toward child support.