Debtors' Prison Legal In More Than One-Third Of U.S. States
Not paying off debts can eventually land you in jail -- at least in a sizable minority of U.S. states.
Borrowers who can't or don't pay their debts can be sent to jail in more than one-third of states, the Wall Street Journal reports. Judges may issue a warrant when a borrower either misses court ordered payments or doesn't show up in court after being sued for payments on outstanding debt. Though there are no national statistics on the practice of jailing debtors, a WSJ analysis found that judges have issued more than 5,000 debt-related warrants since the beginning of 2010.
As high joblessness, slow wage growth and plummeting home values push more Americans into debt, the aftermath of the recession also makes it increasingly difficult for consumers to pay it back, and the collectors of that debt are getting more aggressive as a result.
Some states are attempting to rein in the practice of putting borrowers in jail, even as the number of borrowers threatened with arrest has surged since the financial crisis, according to a separate WSJ report. Washington state's House of Representatives voted unanamously in March to require debt collection companies to provide proof that borrowers had been notified about lawsuits before judges could issue an arrest warrant.
But, the number of complaints about debt collectors filed to the Federal Trade Commission jumped to 140,036 in 2010 from 104,766 per year in 2008. The FTC has taken 10 debt collection companies to court in the past three years, compared to six companies in the three years before that.
Even as their tactics get more aggressive, the debt collection sector is set to grow. The industry expects to increase by 26 percent over the next three years.
In some cases, the debt collection agencies have used threats and lies to get consumers to pay back their debts. A U.S. district court froze the assets of seven related debt collection companies after the FTC filed a formal complaint that the companies intimidated borrowers in order to get them to pay back their debts. In some cases, those same collectors allegedly pressured consumers who didn't owe anything at all.
And in Kansas City, one man ended up in jail after missing only a furniture payment, KCTV5 reports. James Davis purchased a mattress, bed and computer, but soon lost his job to the recession, making it difficult for him to payoff the purchases. He was repeatedly pulled into court so that collectors could find ways for him to make the payments, but after missing one hearing a warrant was issued for his arrest. Davis is suing in federal court for the way he was treated.
In June, a Colorado woman was jailed because she hadn't paid off the fines and restitution related to a car accident, The Huffington Post then reported.