Sunday, April 3, 2011

Debt-Collection Practices Include Arrest Warrants and Incarceration

The Wall Street Journal report, "Welcome to Debtors' Prison, 2011 Edition," reveals that:
Some lawmakers, judges and regulators are trying to rein in the U.S. debt-collection industry's use of arrest warrants to recoup money owed by borrowers who are behind on credit-card payments, auto loans and other bills.

More than a third of all U.S. states allow borrowers who can't or won't pay to be jailed.
Last year the Star Tribune focused attention on the use of debt-arrest warrants.

Debtor Prisons

Prior to the federal/states' abolishment of debtor prisons, creditors commonly used this punitive action to force debt repayment. As noted by the media, influential debt-collection firms have persuaded states to revive this practice.

The Star Tribune recently raised the question: "Is jailing debtors the same as debtors jail?" 

Findings by the newspaper suggest that debt-arrest warrants are illegal measures:
"We have created a de facto debtors prison system in the United States that is largely unconstitutional," said Judith Fox, a law professor at Notre Dame Law School. "In some parts of the country, people are so fearful of arrest they are scrambling to pay money they might not even owe."

In states such as Indiana and Illinois, people are being locked up for not making court-ordered payments. Known as "pay or stay," it can mean days in jail and multiple arrests for the same debt. Some legal experts say the practice is unconstitutional because the arrest is directly linked to the failure to pay a debt.

In Minnesota, the issue is less clear because warrants to arrest debtors are issued for disobeying court orders, such as not filling out a financial disclosure form and missing a required hearing, not for failure to pay debt. So long as someone fulfills the court order, they can avoid incarceration.

Senate Bill 3888: End Debt Collector Abuse Act of 2010

Al Franken has proposed amending the Fair Debt Collection Practices Act to protect consumers from corporate malfeasance. Congress has declined to intervene in this matter.

Americans face numerous indignities, but industry-sponsored detention should not be one of them.

Debtor Rights

Debt-collection firms have a disturbing history of violating federal law. For additional information, please read the following reports.

State Statues of Limitation on Debt Collection

FTC Actions Taken Against Debt Collectors

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