Unpaid debt? You could go to jail
Debtors' prisons may have been outlawed in the 1800s, but residents of some states are being arrested over unpaid bills.
Deborah Poplawski was feeding a parking meter in downtown Minneapolis when city police pulled up, arrested her and took her off to jail. She was forced to change into jail-issue underwear and an orange uniform and sleep in a room with a dozen women, one of whom offered her drugs. She spent 25 hours in jail.
Her crime? She failed to pay $250 in credit card debt.
Debtors' prisons were outlawed in the U.S. in the 1800s, but more debtors are being sent to jail through the efforts of aggressive third-party debt collectors, who are using the courts and the police to collect old debt they bought for pennies on the dollar.
The practice was detailed in a lengthy investigative story in the Minneapolis Star Tribune, which found that the use of arrest warrants against debtors in Minnesota had risen 60% in the last four years, with 845 cases in 2009.
Judith Fox, a professor at Notre Dame Law School, told the Star Tribune:
We have created a de facto debtors' prison system in the United States that is largely unconstitutional. In some parts of the country, people are so fearful of arrest they are scrambling to pay money they might not even owe.
According to the Star Tribune:
- The laws allowing for the arrest of someone for an unpaid debt are not new.
- What is new is the rise of well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect.
Technically speaking, the Minnesota debtors are being arrested and taken to jail not because they failed to pay the debt, but because they failed to comply with orders to show up in court or to fill out the forms necessary for their wages to be garnished. Bail is usually set at the amount they owe or $2,500, whichever is less, the Star Tribune reported.
"The law enforcement system has unwittingly become a tool of the debt collectors," Michael Kinkley, an attorney in Spokane, Wash., told the newspaper. "The debt collectors are abusing the system and intimidating people, and law enforcement is going along with it."
Whether you can be arrested and taken to jail over unpaid debt depends on where you live, even within Minnesota. Not only do laws vary state to state, but practices vary according to whether the local police are willing to allocate taxpayer resources to arrest people for failing to comply with civil court orders.
Lawyers for the companies trying to collect the debt argue that their firms have used numerous phone calls and letters to try to get the consumers to pay up before taking them to court.
"Admittedly, it's a harsh sanction," Steven Rosso, a partner in the Como Law Firm of St. Paul, Minn., told the Star Tribune. "But sometimes, it's the only sanction we have."
In some states, including Indiana and Illinois, people are being threatened with jail for not making court-ordered payments in small-claims cases. In Indiana, the number of cases has skyrocketed since the limit for small-claims cases was doubled, to $6,000, the Evansville Courier & Press reported last September.
That newspaper told the story of Deidre Carter, a 45-year-old disabled mother of four, who was threatened with jail for failing to make $110 in payments toward a $401.60 debt to a former landlord, a debt Carter said she did not owe. She was saved from a 30-day jail sentence when a stranger who was in court on an unrelated matter gave her $100. You can read details of Carter's court appearance here.
Katherine Rybak, an attorney with Indiana Legal Services in Evansville, has challenged several cases on constitutional grounds. She told the AARP Bulletin:
People say it's not imprisonment for not paying a debt, it's imprisonment for disobeying a court order to pay a debt. Well, excuse me -- that is the same thing.
According to the Bulletin article, no one has actually served time in jail in Indiana, but jail sentences and the threat of jail have been used to persuade debtors to pay creditors with benefits such as Social Security and disability checks that are exempt from collection orders.
In New York, a group of nonprofit organizations that provide legal services to low-income residents published a report last month called "Debt Deception: How Debt Buyers Abuse the Legal System to Prey on Lower-Income New Yorkers" (.pdf file).
While New York apparently is not jailing consumers who lose these debt-collection suits, the legal aid organizations found:
- Debt buyers prevailed in 94.3% of cases, usually by obtaining default judgments because the person sued did not appear in court.
- At least 71% of people sued were either not served with the required notice or served improperly.
- Of the suits brought by debt buyers, 35% were clearly meritless.
Some New York City judges have begun to question the claims of debt collectors, The New York Times reported. The Times wrote: "Privately, some judges say they are embarrassed that in many New York courts, debt-collection lawyers have grown so comfortable that they give the impression they are in charge of the proceedings and do not need prove their claims with strong evidence."
Industry officials argue that the stories about abusive collection cases create an unfair picture of the industry. "There are certainly colorful stories," Joann Needleman, an officer of the National Association of Retail Collection Attorneys, told the Times. "People think that handful is the rule, not the exception, but it's not."
The story quoted a Staten Island judge, Philip S. Straniere, comparing the "Land of Credit Cards" to the Land of Oz:
Like the Land of Oz, run by a Wizard who no one has ever seen, the Land of Credit Cards permits consumers to be bound by agreements they never sign, agreements they may never have received, subject to change without notice and the laws of a state other than those existing where they reside.
What do you think? Should law enforcement officials get involved with enforcing civil court orders involving debt repayment? Should people who don't pay their debts be taken to jail? Or does the entire debt-collection system need more consumer-protection measures?
If only the original debtor could collect upon a debt within the prescribed legal time limits for doing so then the practice of arrest for failure to appear would be perfectly acceptable. However as things stand I feel it is indeed allowing our tax dollars to be wasted and abused by predatory bogus collection agencies. Something none of us should be in agreement with.
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