Debt Collectors Unconstitutional Threat of Jail Time Is Key to $10 Billion Profit: ACLU Report
Third-party debt collectors are using the threat of jail to scrape cash out of millions of people, in flagrant violation of the Constitution and numerous laws banning the use of debtors’ prisons, a new report from the American Civil Liberties Union shows. Worse, the companies are getting a huge assist from both judges and prosecutors to skirt people’s rights on an industrial scale.
They contract with local district attorneys to print threatening letters on official prosecutor letterhead and file a deluge of small-dollar collections suits to judges who sign off on them without any meaningful due process or verification of claims.
The debts in question are often tiny. One lawyer in Washington told the ACLU he’s documented “over 10,000 [bounced] checks for under $10 that triggered letters threatening consumers with jail.” The debts claimed in court are also inflated dramatically from what a person might have initially owed, courtesy of the under-regulated debt-buying industry’s proclivity for tacking on arbitrary fees to expand their takings.
Third-party debt collection is a snaky thing. Once a hospital or grocery store or auto mechanic has decided that a given debt on their books isn’t really worth the effort to collect, they’ll sell it on the secondary market for pennies on the dollar. To turn a profit, the company buying the debt has to convince the debtor to pay full freight on something their own business practices just priced far lower - and that’s if the collector can even find the person from the records they’ve bought.
Despite those headwinds, the industry is pulling down annual revenues north of $10 billion. The threat of jail time is a key ingredient in that profiteering.
It’s illegal to imprison people for being poor, at least in theory. But the ACLU’s review of more than a thousand small-claims court cases involving debt collectors found that judges are happy to take a bit of a bank-shot around those prohibitions to help corral an alleged debtor. American courts are putting out arrest warrants by the tens of thousands, the group found, often setting bail for the warrant at the exact same level of the debt claimed by the company that filed the collections suit.
Judges are allowed to issue arrest warrants for debt cases in 44 states. Collectors contract with more than 200 local prosecutors’ offices around the country for auto-generated official letters threatening arrest and jail should a person not pay up immediately. Con't...
Read more, https://thinkprogress.org/debt-collections-courts-prosecutors-e7e489e0839e/
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