By Keith Coffman

DENVER (Reuters) - The city of Colorado Springs has agreed to provide restitution to dozens of poor people wrongfully jailed because they could not afford to pay fines they incurred for petty infractions such as loitering or panhandling, attorneys said on Thursday.

The settlement calls for the city to pay each of some 60 named individuals $125 for every day they spent locked up under a since-repealed ordinance that allowed incarceration of offenders who failed to pay fines for otherwise non-jailable offenses.

The deal, providing for an estimated total payout of about $100,000, was announced in separate statements by the American Civil Liberties Union (ACLU) and Colorado's second-largest city.

The case grew out of an ACLU study last year finding that despite the outlawing of so-called debtor prisons, judges in the city of 440,000 routinely converted fines into jail sentences, said Mark Silverstein, legal director of the group's Colorado chapter.

"We hope today's settlement sends a loud and clear message to municipal courts throughout the state to stop using jail or the threat of jail to collect debts from persons who are too poor to pay," Silverstein said in a statement.

The settlement heads off a potential lawsuit against the city over so-called “pay-or-serve” sentences that have been the source of litigation in other states.

In October, the ACLU sued the city of Biloxi, Mississippi, in federal court over the issue, accusing the city of employing debtors prisons as an “illegal revenue generation scheme” that targeted the poor.

Last March, the U.S. Justice Department said it would issue federal guidelines for municipalities on the issue after finding the city of Ferguson, Missouri - the St. Louis suburb convulsed in 2014 by a white policeman's fatal shooting of an unarmed black teen - made widespread use of the practice.

One of the indigent Colorado Springs offenders, Shawn Hardman, was sentenced to jail on four occasions after he was unable to pay fines for panhandling citations.

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“I was trapped in a cell that it seemed like I could never get out of,” Hardman said in an ACLU statement. “I was told over and over that I either had to pay or go back to jail. I was homeless and jobless, so the cycle kept repeating.”

Colorado Springs Mayor John Suthers, the state’s former attorney general, said the city halted the practice last year after reviewing results of the ACLU study and will work to educate prosecutors and judges about the policy.





(Editing by Steve Gorman)