Judge denies challenge to Proposition 209, which gives medical debt relief to Arizona consumers

Stephanie Innes and Mary Jo Pitzl, Arizona Republic
·4 min read
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A Maricopa County Superior Court judge has denied an effort to overturn Arizona's Proposition 209, a statewide ballot measure that backers billed as protecting consumers from bankruptcy and poverty from medical debt.

Proposition 209, which voters passed by an overwhelming margin last month, reduces the maximum interest rate on medical debt, among other consumer debt protections.

The ballot initiative, titled the Predatory Debt Collection Act, is now fully in effect as law, Jim Barton, an attorney for Proposition 209 proponents from Healthcare Rising Arizona, said Thursday.

However, a coalition of debt collectors who challenged the measure as unconstitutional signaled Thursday it will appeal the ruling.

Portions of Proposition 209 had been on hold since Dec. 7, putting some rules over debt collection in Arizona in question.

The Arizona Creditors Bar Association and several debt collectors and lenders sued the state Dec. 5, the date the ballot measure took effect. They argued the ballot initiative is unenforceable because of too much vagueness and ambiguity.

The plaintiffs claimed Proposition 209 violates both the U.S. and Arizona constitutions, while the defendants from Healthcare Rising maintained that "manufactured confusion" is not the same thing as unconstitutional vagueness.

Maricopa County Superior Court Judge John Blanchard issued a temporary restraining order on Dec. 7 and gave both sides a chance to make arguments during a Dec. 16 evidentiary hearing.

In a ruling dated Dec. 20, Blanchard denied all of the plaintiffs' challenges to the law, ruling that "Prop. 209 should be permitted to take effect, without guidance or restriction from the court." In his decision, Blanchard wrote that the measure is not unconstitutionally vague.

"While the scope of the law is wide-ranging and impacts important and long-standing processes for collecting debts, the language at issue is neither vague nor unintelligible," he wrote. "In the court’s view, plaintiffs’ arguments are more akin to reasons why Arizona voters should reject the initiative. That time, however, has passed. The voters approved Prop 209."

In a statement Thursday, Healthcare Rising spokesperson Rodd McLeod applauded the ruling. Arizona voters wanted to lower interest rates on medical debt and protect people's homes, he said.

"Greedy debt collectors and their lawyers trying to overturn the will of the people should get the message," his statement says.

Voters supported Proposition 209 by a wide margin, 72% to 28%, in the Nov. 8 election. The initiative reduces the interest rate cap on medical debts from 10% to 3%, and that provision of the law took effect when the state's election results were certified Dec. 5.

In addition to reducing the maximum interest rate cap on medical debt, Proposition 209 also:

  • Increases the amount of equity in a person's home that is protected from certain creditors, including tax liens from state and local governments.

  • Increases the dollar value of personal property and assets exempt from the claims of creditors.

  • Increases the amount of earnings exempt from the claims of creditors.

At issue in the lawsuit was a "savings clause" that says, "this act applies prospectively only," and that it does not affect "rights and duties that matured before the effective date of this act, contracts entered into before the effective date of this act, or the interest rate on judgments that are based on a written agreement entered into before the effective date of this act."

The plaintiffs claim the initiative is unclear about whether its provisions apply to old debts, or only to debts incurred after Proposition 209 takes effect. In his decision, Blanchard said that since the law is new and untested, some element of uncertainty and confusion is to be expected. But such confusion does not make Prop. 209 unconstitutionally vague, Blanchard wrote.

"To be sure, Prop 209 is complex" and is "bound to require thought and work to implement," but that work is underway, Blanchard wrote.

"In essence, plaintiffs’ request for declaratory relief is asking the court to change the words of the law to confirm a more favorable interpretation of Prop 209. It is not the function of the courts to rewrite statutes," Blanchard wrote.

At a time when inflation and the economy are of concern to U.S. voters, Proposition 209 attracted national attention as a test case for other states, according to the Fairness Project, a national nonprofit that funds, organizes and advocates for ballot measures and supported Proposition 209.

“Before now, voters had never taken up medical debt on a statewide ballot measure, but Arizonans have charted a path forward to take on predatory lenders through direct democracy," Fairness Project Executive Director Kelly Hall said in a statement after Proposition 209 passed.

"We’re looking forward to working with citizens in other states who want to pass more ballot measures to protect working families from exploitative lending practices."

Reach health care reporter Stephanie Innes at Stephanie.Innes@gannett.com or at 602-444-8369. Follow her on Twitter @stephanieinnes.

This article originally appeared on Arizona Republic: Arizona Proposition 209 is not unconstitutionally vague, judge rules