Some U.S. borrowers jailed over civil debts, ACLU report shows

Kevin McCoy | USA TODAY

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Although the U.S. banned debtors' prisons nearly 200 years ago, some people who owe money are now being jailed for civil debts such as unpaid car loans, a new report says.

Private debt collectors partner with some local courts and prosecutors' offices and use the criminal justice system, including arrests and jailing, to try to force repayments, even when the debts are in dispute or when the debtor has no ability to repay, according to the report issued Wednesday by the American Civil Liberties Union.

The ACLU is an independent organization whose stated mission is defending and preserving individual rights guaranteed by the Constitution.

"Our records show the courts have been completely co-opted by the debt-collection industry," said Jennifer Turner, the report's researcher and author as well as the principal researcher in the ACLU's Human Rights Program. "It's really an unholy partnership."

All U.S. states prohibit imprisonment for failure to pay civil debts, like past-due utility bills or student loans. However, local judges are authorized to hold debtors in contempt of court for alleged failure to comply with orders like in-court examinations or installment payment plans, the report said.

This means debtors may face contempt citations and jail for disobeying court orders designed to satisfy money judgments, not for the original judgments themselves. "For debtors, this technical distinction matters little," the report said.

In 44 states, local judges are authorized to issue arrest warrants for debtors who fail to make post-judgment appearances in court or fail to provide information about their finances, the report said.

The total number of arrest warrants is unknown because the states and courts generally don't track them as a distinct category. However, data obtained by the ACLU showed that judges approved more than 8,500 arrest warrants for debt-collection proceedings in three states and four counties during 2016.

The ACLU examined more than 1,000 cases in 26 states where judges issued arrest warrants for debtors, sometimes to collect as little as $28. The report documented more than 20 cases, including some reported by media organizations, in which debtors had been jailed.

Americans now have the highest credit-card debt ever Americans credit card debt has just hit a disturbing record of $1.02 trillion according to the federal reserve.

For instance, the report cited a 2017 analysis by The Baltimore Sun that showed corporate entities affiliated with the family real estate business of Jared Kushner, the son-in-law and an adviser of President Trump, sought arrests of 105 tenants for failing to make court appearances over allegations of unpaid civil debts.

More than 20 former Kushner company tenants were detained, the analysis found.

The ACLU report separately documented the case of Michael Gray and Nicole Hart, a Washington State couple who were arrested and jailed overnight last year after they had defaulted on a Zions National Bank loan to buy a pickup truck.

The arrest came after the bank repossessed the truck and then retained collection company Busey & Bailey to pursue collection of the balance remaining on the loan, court records show. The firm started court proceedings that ultimately led to the issuance of bench warrants for the arrests of Gray and Hart.

The couple notified the bank that they had filed a Chapter 7 bankruptcy court proceeding, an action that normally would suspend the collection process and warrants. Although the bank notified Busey & Bailey, the collection company mistakenly believed nothing would happen with the bench warrants unless the firm affirmatively moved to proceed, the court records show.

Instead, Gray and Hart were arrested in May 2016. They later sued the bank and the company.

Unlike local courts, county district attorneys and other local prosecutors have no role in civil debt collections. However, they are required to review cases involving bad or bounced checks to determine whether the matters are subject to criminal prosecutions.

As of January, prosecutors in 200 counties and 17 local sheriffs and police departments had approved contracts that enabled private debt collectors to use the prosecutors' official letterheads on letters that threaten debtors with criminal prosecution, jail and fines, the report said.

The companies collect restitution for unpaid checks and generally add a variety of fees, including costs for diversion programs on financial responsibility that the firms themselves operate, the report said. Depending on the contract, a portion of the fees goes to the local prosecutors' offices.

Debtor cases cited by the ACLU include a woman from Los Angeles who inadvertently bounced a check for $3.87 to the Ralphs grocery store chain. She ultimately paid $444.87 to a private company running a check-diversion program after she was threatened with criminal prosecution and jail, the report said.

The ACLU recommended that state legislatures bar local courts from issuing arrest warrants in debt-collection cases and called for federal legislation to enact a similar prohibition.

The ACLU also urged state lawmakers and local prosecutors to end bad-check enforcement programs run by private collection companies.

Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc