ABA Journal


Consumer Law

Payday Lenders Using Courts to Create Modern-Day Debtors’ Prisons in Missouri, Critics Say

Aug 20, 2012, 10:52 pm CDT


So, they aren't actually being imprisoned for debt at all. They are getting in trouble by ignoring summonses and failing to appear when asked to come participate in what is essentially a basic hearing in aid of execution. Solution - don't hide assets, and pay your debts. Fallback solution - go to court when summoned. End of story.

By B. McLeod on 2012 08 20, 11:23 pm CDT

@1. B. McLeod,

I agree that the problem is probably overstated in the article. But I also see that the process could be abused by predatory lenders. There should be some reasonable limit on the frequency of "examinations".

By W.R.T. on 2012 08 21, 1:27 am CDT

Beware all ye who owe a dime, IMPRISONMENT AWAITS. This is just seeming impossible in a free nation. WHAT are we coming to?

By Peth on 2012 08 21, 3:25 am CDT

These are payday lenders, hence, predatory by nature. However, they probably have a good sense of their borrowers. They likely summon the debtors repeatedly to increase the chance of catching the debtor with the drug or gambling score du jour still close at hand. Of course, the debtors will come to court with nothing in their pockets and claim to have nothing. Once the debtor is also shiftless enough to simply skip a hearing, the court (by then well sick of the routine) naturally enough sets the amount of bond at the amount of debt and turns it over to the creditor. The debt is then paid, so that debtor is then finally off the docket (until the next payday loan). This isn't really imprisonment "for debt" as much as for gaming the system.

Or maybe the court just doesn't wantthem to leave. It is widely held that Missouri loves company.

By B. McLeod on 2012 08 21, 7:02 am CDT

@ #4: *"It is outrageous to think, in this day and age, that creditors are manipulating the courts, even threatening jail time, to extract whatever they could from people who could least afford to pay, "*

It's outrageous to think, in this day and age, that people still patronize payday lenders (and title loan companies too for that matter). I can only naively hope that these over-the-top practices will help people finally come to the realization that pay day lenders should be avoided at all costs. Since legislators refuse to ban them, and financial empowerment education is apparently not working, one would hope that payday loan customers will finally decide that 300%-600% interest PLUS the possibility of court appearances and jail time for the convenience of quick money is simply not worthwhile and force the lenders out of the market that way.

Unfortunately I know too well that this will not be the case.

By Esq. on 2012 08 21, 2:53 pm CDT

It isn't the "shiftless" debtors who have problems getting to the court dates; it's the ones with jobs. Here on the western side of the state judges seem reluctant approve these tactics. Instead, the tactic seems to be service of a Request For Admissions with the petition.

By Alicia on 2012 08 21, 4:05 pm CDT

Well, there's plenty of attorneys who fail to show up for civil pre-trials, and I don't hear many stories about them being jailed. So it is a double-standard to jail debtors for the same conduct that is tolerated when attorneys do it.

By Joe on 2012 08 21, 7:10 pm CDT

I'm not sure you all have a good sense of who these borrowers are -- they are not shiftless, drug dealers, or people hiding assets. These are people who need money TODAY for rent or to prevent the car repossession, who don't have enough education to know that they should instead go to credit counseling or a bankruptcy attorney, but instead put up their paycheck. It's a vicious circle then, as the debts increase and the costs of payday loans bring them down. #6 Alicia is correct that the procedure should be a Request for Admissions. The payday people know that their customers have no other assets -- that's why they only had a paycheck to put up for the loan.

By mmm on 2012 08 21, 8:38 pm CDT

Some people are so stupid, there is no real way to help them unless you are willing to make them perpetual wards of the state. It isn't just the 300% interest. It is inherently brainless that a worker who had to borrow money to make it through the current pay period would somehow believe that in the next pay period, they will magically make enough money to meet expenses and pay back the loan. A lot of them repeatedly roll the payday loans over, hoping for an inheritance or a big tax return, I guess, as a possible event of future repayment.

By B. McLeod on 2012 08 22, 12:45 am CDT

This is the future of the USA under GOP control. Business and profit comes first and foremost.

By faddking on 2012 08 22, 3:52 am CDT

Hah. It is an old story. In the Tao Teh King, one may find mention that Nature's way is to take from those who have too much, to give where there is too little, while Man's way is to take from those who have too little, in order to enrich those who enjoy excess already. Before the GOP, and before the USA, this was the noted course of human civilization.

By B. McLeod on 2012 08 22, 5:16 am CDT

Add to this sewer service that was common practice in New York and you get jail without notice. It's amazing that the debtors prisons and failures of due process that led to the founding of the USA is coming full circle in the modern age.

By Shane on 2012 08 24, 9:51 am CDT

Sounds like a rather nominal concern compared to the widespread use of debtors prison to coerce payment of child support from family members of poor fathers.

By Holman on 2012 08 24, 10:29 am CDT

Comment removed by moderator.

By jinglin on 2012 08 24, 11:15 am CDT

I don't think characterizing those who go to payday lenders as "stupid" considers the economic reality of these borrowers. For many, many people the difference between breaking even and not being able to pay the rent or buy food is less than the price of a broken water pump on their car. For those who live every day on the brink of financial collapse a payday lender may be the only resource available even though their situation is so precarious they know they may never catch up. Knowing that next week they may be further behind won't stop them from borrowing a few hundred dollars this week so they don't lose their job or get evicted. These borrowers have no choice but to hope for the best.

There are all kinds of intermediate fixes for the economic situation in which these folks find themselves, and all sorts of ways that someone smarter, or better educated, or not suffering from mental illness or depression might do better, or might have done better in the past. The fact is, however, that no one, including B. McLeod, is ever more than a hair's breadth away from a disaster or change of life that could lead to ruin. Recognizing how precarious life is, we should be willing to pay (that's right, taxes) in order to create a society in which these conditions are ameliorated if they cannot be eliminated. What holds us back is the arrogance of those who do not understand that all they have and all they are is the result of the happy circumstances of their lives, and that the only appropriate response to good fortune is gratitude and charity to those less fortunate than themselves.

By Richard Hunt on 2012 08 24, 11:25 am CDT

I am amazed that our state legislature, which typically sells out to the lobbyist with the most $$, hasn't incorporated this novel approach by statute. (heavy sarcasm). Remember, we're the state where a Public Intox charge gets a $25 fine, but Court costs are $209, and because alcohol is involved you get sentenced to 10 days of jail time suspended for 6 months while you go to a $100 drug and alcohol program, during which time you have to check in with the contracted probation office at $35 per month. So, even if you make all your Court dates and other reporting deadlines, your $25 Public Intox charge actually costs more than $500. The college towns must be loving it! Oh - almost forgot - if you bond out from your charge, you pay a $35 "bond fee" for the privilege of your personal freedom prior to trial. Can you say, "....the poor get poorer"?

By JimfromBham on 2012 08 24, 11:35 am CDT

1. Failing to show up for court can always result in jail time. Whether its a speeding ticket, civil proceeding, divorce hearing, child support, etc. Stiff a judge and go to jail, in just about any context. Pretending this is about payday lending or consumer credit at all, is really misleading.
2. Payday loans are cheaper than having your utilities re-started. They are cheaper than overdraft. They are cheaper than many late fees on many bills. People calling payday borrowers "stupid," probably have never had their utitilies turned-off, suffered from overdraft, or paid excessive late fees. It's not as irrational as the media makes it out to be, when you consider the costly alternatives for people in a bind. Imagine the cost of not being able to get your car out of the shop - - a payday loan is better than no car.
3. It's shameful the way the media fuels folks who try to legislate their tastes. If you don't like payday loans, don't use them. But, don't publish articles pretending that lending results in jail time. Is there any ethical standards behind these types of fake, scare tactic articles?
4. Price controls, whether in credit, or any other market place, always fail. Merchants don't "get less expensive" when these ideas come around, they close. When payday lenders close, consumers are left with dangerous/unregulated alternatives. For once, it would be nice to see a writer think a bit more about why payday lenders are licensed, regulated, and around. People need a licensed/regulated way to get short term cash in a bind.

By JBM on 2012 08 24, 11:52 am CDT


Licensing and regulation of the payday lenders is probably a state-to-state issue. In Alabama, they are licensed but merely so that the state and local governments can get the licensing revenue which is usually based on a percentage of the gross. They are not licensed to control their activities. They are not "regulated" or certified in the classic sense, e.g., there is no state licensing authority with a regulatory board to punish wrongdoers. Some municipalities have become so inundated by complaints from their citizens about the abuses, that the municipalities are foregoing further revenue from future similar business and they are trying to limit future business licenses or zone them out of existence (neither of which is probably a legitimate response). By the way, our pawn shops, which are the original payday lenders, are allowed to charge 999% interest on a pawn by state law. Can you say, "...the poor get poorer"? I agree with an earlier comment, however - it is a complicated social problem when people act against their self interests and borrow money at these places anyway.

By JimfromBham on 2012 08 24, 12:09 pm CDT

As Coolidge said: They hired the money, didn't they?

By Andrew on 2012 08 24, 12:24 pm CDT

The problems with predatory lenders could be easily solved in the same way that excessively high interest rates on credit cards can be solved: all states should re-instate usury laws, capping interest rates at 10% simple interest per annum. If Chase or Citicorp or Payday Loans can't live with that interest rate, then let them go to India or wherever and charge whatever they like. Not only would they love to get 10% on their money in this country, when they only pay 1-2% to depositors, but they are not going to give up access to customers. Oh yes---an NO FEES for cards or any other "hidden" services. Those contracts for credit cards and payday loans are like leases and insurance contracts---a take-it or leave-it proposition weighted totally in favor of the bank/lender. This kind of outrageous activity has to stop somewhere. If not with us, then with whom? If not now, when?

By H.M.S. Albatross on 2012 08 24, 12:27 pm CDT

Richard, the people who use these lenders are stupid. I don't think it's a colorable question.

As for charity, I support a range of charities of my choice. I support holding involuntary giving (taxes) to controlled levels. Go be generous with your own money.

By B. McLeod on 2012 08 24, 12:30 pm CDT

If a Judge orders you to court and you fail to appear you deserve to be arrested for contempt of court. That said, how often is this happening? I nohio, judges will issue civil bench warrants for failure to appear for debtor's exams but officers then do not go out to pick these people up. Almost always, they have to be stopped by police for another reasons to get picked up and put in jail.

As for debtor's exams, the easy fix seems to be to limit them to one a year.

By bmac on 2012 08 24, 12:57 pm CDT

I echo Richard Hunt's comment above. When poor, deperate people go to these lenders, they not only are mislead about the impact of the 300% interest rate they are signing up for (even though, by law, it is boldly stated in the contract), they are often given one to two month "teaser" rates to convince them they can manage the loan. The additional clauses in these contracts are unbelievable and, for example, the loans secured by car titles include a plethora of additional fees even after the individual's car is respossessed (towing, cleaning, storing, marketing for sale, legal, etc). So now you have a poor person who received cash for 1/3 of what their car is worth, have no car to get to job/court, and they still owe more money, have children to feed and rent to pay, and we wonder why they don't show up in court? Instead of aiding these payday/car title lenders, the Government needs to STOP them.

By Cynthia on 2012 08 24, 1:20 pm CDT

Distrust all in whom the impulse to punish is powerful. -Friedrich Wilhelm
Nietzsche, philosopher (1844-1900)

By Paul Silvan on 2012 08 24, 1:23 pm CDT

So, what is really happening is that people are being imprisoned for breach of contract.

Let's see: if a person has a job, which barely pays enough to survive in today's economy and life's bumps possibly apply (illness, rent went up, car broke down) and a person wants to keep the job, so it takes action to do the only thing left - get a payday advance, we as a society need to punish that person? Did everyone forget: this person is working, not on public assistance?

I'm not saying a person shouldn't pay his/her debts or show up for court, but it's not for the courts to enforce loansharking. Talk about kicking a person when they're down. Society complains and moans all the time that people are lazy and don't want to work. In this instance, a person is trying to keep it together. So, how do we reward? We drag them into court continually, so they lose their job and can't pay anyone. With an arrest record, how is the person to get another job?

Just another example of how our legal systems need to wake up.

By G on 2012 08 24, 1:25 pm CDT

I am amazed that most readers do not understand that "debtors prison" certainly does exist in this country. Any time a non-custodial parent is unable to pay child support, they are certainly likely to end up in jail. Often judges and the courts ignore the fact that these individuals want to meet their obligations, but are unable to do so.

By Paul on 2012 08 24, 1:46 pm CDT

G @ 25 right on...the "Catch-22" never ends.

By Karma on 2012 08 24, 1:50 pm CDT

They are not being "imprisoned" for a debt. They are being arrested for contempt of court, for not answering a lawful summons to appear before the court. Additionally, in my experience Judge's very rarely set the bond at anywhere near the amount of the debt as they (1) know it is unlikely the debtor has the ability to pay and (2) therefore, do not want the county responsible for the costs of holding them. In fact, in Greene County, more often than not the Sheriff will call the debtor, inform them of the writ of body attachment and have the debtor voluntarily appear at the courthouse, then call the attorney who comes over, does the judgment debtor examination and the debtor is released. Nobody is "manipulating" the Court, doing what is allowed by the law is not "maniuplating the court. If you want to change the practice, change the law that allows it.

By Doug on 2012 08 24, 1:58 pm CDT

My article, Creditors' Contempt, provides some helpful background on the topic of debtors' examinations:

By Lea Krivinskas Shepard on 2012 08 24, 1:58 pm CDT

Its debtors prison and the "legal genius'" who think otherwise should be disbarred. Every attorney doing it should be reported to the bar and sanctioned. They know these are unsecured loans. They have avenues to collect bank info etc . When you are incarcerated you get credit for tune served here you get nothing on an open ended commitment. This is ridiculous and speaks volumes about where the practice of law is today

By Todd on 2012 08 24, 2:06 pm CDT

Maybe if we returned to a world where 90% of the population wasn't judgment-proof, credit would become more widely available and less expensive across the board.

Does anybody understand who these people are? As a former small-business employer, I can tell you. These are generally the kind of people who take a slack approach to every area of life. They go to check-cashing stores because they have written so many hot checks that no bank will take them as customers. They use payday loans because they need money and their credit is so ruined that no traditional form of borrowing is even remotely possible. You will also find they often have poor employment records from tardiness, pilferage, insubordination and quitting without notice (often to immediately file a fraudulent unemployment claim or apply for public assistance). They typically also have bad traffic records that make maintaining a license or paying for insurance problematic (which makes it hard to hold down a job). And then there are the chronic gambling and substance-abuse problems. In short, this is a difficult-to-serve population that goody-two-shoes lawyers from upper middle class backgrounds are clueless about when they blindly label them as hapless victims.

Does anybody understand how hard it is to provide goods and services to these people? Remember Williams v. Walker-Thomas Furniture and "unconscionability" from law school? How do you loan money to a customer base with a tremendous fraud and default rate and ever hope to stay in business, unless you resort to contract terms and interest rates that would be considered outrageous when applied to the middle class? This goes for the rent-to-own store, the check-cashing store, the payday loan company, and even the Korean grocer trying to sell the essentials of life in an urban food desert. In each of these cases, all the "respectable" players exited the market decades ago because the alternative was either massive losses from evenly applied terms or bad PR from terms that matched economic reality.

Does anybody understand economics? Anyone who thinks this problem can be solved by government regulation, like stricter usury laws, is living in fairyland. All the legitimate players would exit the market if this approach were taken, but the market would still provide an alternative: the black market. Take away the payday loan store and the loanshark will happily fill the void, but his rates will be higher and his self-help penalties far more harsh than a night in jail. Free markets sort these things out for the best -- not what many of us would consider the ideal -- but the best practical solution. Any attempt to tinker with the market by regulation will provide an even worse outcome.

Lawyers must realized that we were trained to resolve disputes, not change the world or become latter-day Robin Hoods. I know that goes down hard for lawyers active in the ABA, but it is the truth. We are not the only people who have ever thought about the problems of poverty, and it's awfully arrogant and simplistic to think we can pass a few laws and, voila, justice!

By Anon 7 on 2012 08 24, 2:14 pm CDT

Many payday borrowers have good reason to expect to receive money before their payment is due, but then something unexpected happens.

There is quite a difference between desperation and stupidity and even between hope against hope and stupidity.

As to saying that rich stealing from the poor is just the way it is and always has been and citing Tao Ching in support, "Examine the growing disparity between rich and poor and correct it," says Lao-tzu.

By Larry on 2012 08 24, 2:20 pm CDT

As many have suggested, the article is a typical liberal misrepresentation of the basic facts.

The people are jailed for not responding to a summons.

Not unique to Missouri. That's the law everywhere I've practiced. It's the only way to compel people to obey them.

Unlike the disingenous author, my heart isn't going to bleed for these folks.

If they published this story in the tabloids instead of here, maybe it would have a favorable deterrent effect...

By John2510 on 2012 08 24, 2:24 pm CDT

I employ very similar techniques in Texas and I really don't feel sorry for these deadbeats one little bit. How is taking money and than refusing to pay it back substantially different from robbing a bank or a convenience store? It isn't. Pay your bills babies.

By Jason Van Dyke on 2012 08 24, 2:26 pm CDT


By MikeKC on 2012 08 24, 2:35 pm CDT

@34 & @35

That's a stretch way in the other extreme.

Most of the people who borrow money intend (usually unrealistically) to pay it back. If you can prove they had a present sense intention not to pay, then file a criminal complaint for fraud. Maybe that'll put them in jail.

When you lend someone money, you have a fishing license to use legal process to get the money back, but that doesn't include imprisoning them for nonpayment.

That's the way the system works.

Besides, I don't have much more use for these sleazebag lenders than I do for the deadbeat debtors.

By John2510 on 2012 08 24, 2:42 pm CDT

Let's have some facts please.

Here, a judgment debtor can be summoned to court to answer "debtor interrogatories" but no more than once every six months. The only time a debtor may be arrested and brought to court (via capias) is if he was PERSONALLY served process for the DI (no posting or family service), did not show (contempt of court) and capias ordered by the judge. They are picked up (if the sheriff can find them) the night before court and only held until morning. It is rarely used anymore; it was occasionally used when I started in creditor's rights 30 years ago. It is purely for contempt of court; the creditor cannot "drop" it. (For other service, the court issues a show cause, and the court, not the creditor, deals with the debtor who ignored the process.)

Because the procedure has its own filing fee and service fee, and must be conducted by a licensed attorney, few smart creditors use them unless there is good reason. Debtors know they can routinely ignore them (as they did the "return date' when judgment was entered) without consequence.

My point is, that with procedural and practical safeguards, there will be few arrests and no "debtor's prison." if I had a "poverty law" agenda I could make our process sound like the article, too. Tain't happening in reality. In the real world the drastic and expensive measures are used when the creditor knows the debtor has assets and is lying or hiding them. The smart creditors work with the honest debtors; they get more money that way, and that is their incentive.

And you can't lump payday borrowers, or payday lender/collectors, together. Every borrower--every one--took someone else's money and promised to give it back. Every one walked into the business on his own. Every judgment debtor took someone else's money and did not give it back. Whether they were hungry, greedy, cheating, desperate, planning to run off or planning to pay back, they are the same, and they are not the same. But one person's desperation does not make a private enterprise a free source of goods and services: not a bank, not a drug or gorcery store, not an emergency room, not a utility company, not a landlord. The solution for their problems is elsewhere.

BTW, in Accomack, Virginia, across the street from the county courthouse, stands the Debtor's Prison built and used in the early 1700's, been closed ever since. There is no movement to reopen it, but in the case of some debtors, the thought is appealing. An old collections lawyer told me, "If you can't find their property, take their liberty. You will quickly find their property."

By Hadley V. Baxendale on 2012 08 24, 2:43 pm CDT

@34 The same process is followed in Florida. Although I do feel sorry for those who cannot pay their bills, the remedy is there for my client and the debtor must cooperate in order to show inability to pay. Of course, there can be no contempt without providing a purge which the debtor is able to pay. This rule also applies in family law cases.

There is nothing unusual about the procedure discussed in this Article. That it involves a "Pay Day" loan has no significance at all. The fact is that all judges should use bodily attachment to enforce a judgment only as a last resort.

By John in Florida on 2012 08 24, 2:48 pm CDT

@todd #30 - First they end up in jail for refusing a direct order of the court to appear at a specific time and place. It really doesn't matter what the underlying case is, it can be a domestic case where there is a judgment to pay, etc. Most cases reduced to judgment are secured by a judgment lien on real estate if there is any real estate in that county.

Just what avenues are there to obtain bank information? It doesn't appear on credit reports?

I fail to see why an attorney following the law and acceptable procedures should be sanctioned. The Missouri legislature wrote the applicable laws. That is where your remedy lies.

PS - If these people would only show up, claim a right against self incrimination, they would be done. Yes, in Missouri, in contrast to most other states, a judgment debtor does not have to testify to their assets (outside of bankruptcy court).

By Gregg on 2012 08 24, 2:52 pm CDT

This process would come to a screaming halt if Judges would stop (1) setting bonds to the amount of the debt or (2) turning over bonds proceeds to the creditor. Of course, it would also stop if (1) creditors used standard post-judgment discovery or (2) debtors showed up in court and answered questions about their assets. Answers do not equal money.

By Pa lawyer on 2012 08 24, 2:57 pm CDT

Anon7, you nailed it. More and more Americans are seeing the world this way and are tired of the irresponsible, and those who protect and worse, encourage, irresponsibility.

Larry, you seem to think that a person should get out of his obligations "because something unexpected happens." Seriously? Did you use that to skip the bar exam? Miss a mortgage payment? To everyone, the "unexpected" happens but you deal with it, not use it as an excuse to keep someone else's property or ignore an obligation.

And for another dose of reality, outside crimes, there is no "rich stealing from the poor." Stealing is a crime. Why don't you consider the 'stealing" to be the other way: obtainined property on credit and not paying for it?
By saying the rich are stealing, you are accusing me and every successful American of being a thief, and I resent that. It's almost as ignorant, or absurd, or insulting, as saying I didn't start my own business and earn what I have from my own hard work. You owe an apology to me and the other actual taxpayers who support your ilk.

By Hadley V. Baxendale on 2012 08 24, 3:21 pm CDT

@40 - the problem with that is simple. When it comes to most of these serial debtors, when their lips are moving they are lying. Once they think they will go to jail if they don't cough up the cash, those assets they conveniently forgot to disclose in their post-judgment interrogatories magically appear. Or a relative coughs up the cash to help out. As a collection attorney, I don't really care where they get the money as long as it gets paid.

By Jason Van Dyke on 2012 08 24, 3:23 pm CDT

The legislature here in Illinois is dabbling with the problem. HB3935 was just this week signed into law by the Guv as Public Act 97-1039. This law requires payday lenders to report details concerning the body attachments (arrests) caused by their attorneys. Conversely, SB3234, which would severely limit the use of such body attachments, is still being kicked around in the Senate.

By lawsailor on 2012 08 24, 3:46 pm CDT

B. McLeod @ 4 : "They likely summon the debtors repeatedly to increase the chance of catching the debtor with the drug or gambling score du jour still close at hand." That doesn't make any sense. If they are making significant money off drug deals or gambling, they aren't using payday loans, because they don't have jobs.

Anon 7 @ 31: This IS loansharking-- but with the help of the courts. These companies give punitive loans to people with poor prospects of repaying them, without security. While the "self-help penalties" are harsher for the black market version, a loan shark can't get warrants issued, so in many ways I think this is worse.

"Imprisonment for owing $500" and "Imprisonment for not coming to court because you were sued for owing $500" is a distinction without a difference, as the latter effectively acts as debtor's prison. To me, this is abuse of judicial process-- particularly when the entire thing can happen without any proof of service-- but isn't called out as such because the victims can't afford lawyers, and the courts don't sua sponte police this sort of thing.

I remember a US without payday loans, and it seems to me the economy was doing better. In fact, I would hazard that everyone was better off when this sort of usury was prohibited-- or at least denied enforcement by the courts, which might be the "split the difference" approach. If you only allowed the asset examination for debt principals over $5000, it seems that would abate the problems without making it illegal.

By Voice of Reason on 2012 08 24, 3:55 pm CDT

Re: "and the courts don’t sua sponte police this sort of thing. "

ours do. Like so many failings in the judicial process (e.g. discovery abuse) the solution may lie with the court doing its job.

By Hadley V. Baxendale on 2012 08 24, 4:09 pm CDT

#41: Thanks, I seldom get a compliment on this board. I think maybe the tide may be turning, though, on issues like this, because as lawyers, whether liberal or conservative, we have all worked very hard and often fought through the strong temptation not to. We may not be able to control the talent we were born with or how it was nurtured in childhood, nor the affluence in which we were raised, but I think most of us can agree that we do have control over our attitude and conduct; our entire legal system is premised on the individual's ability to comply with social norms and obligations. Insanity and incapacity are the rarely invoked exceptions. That said, the vast majority of the so-called problem decried in the above article would go away if people would just choose to do their best and not be slackers. The true hardship cases are just a tiny fraction, and if they could be reliably identified, could be handled by private charity. A famous urban preacher expressed it well when he said something like, "Jesus taught the strong to bear the burdens of of the weak, not the troubles of the 'sorry' (as in, sorry excuse for a human being)." Is that making nineteenth-century moral distinctions between the worthy poor and the unworthy poor? You betcha! (Outraged moral relativists should read Marvin Olasky, The Tragedy of American Compassion.)

Bring back capias ad satisfaciendum (debtor's prison) and reduce the amount of property exempt from execution, but temper it with private charity and a common-sense bankruptcy option for true hardships, and you will see much more responsible behavior.

By Anon 7 on 2012 08 24, 4:09 pm CDT

@44: Are you serious? I mean really? At least the debtors who use these payday loan companies have a bankruptcy option which would essentially grind any type of debtor's exam or capias to a halt because of the automatic stay. I have absolutely zero sympathy for these people who go out and get PayDay loans typically to buy crap that they don't need. It is not loan sharking. If anything could be considered loansharking it is the student loan industry which enslaves people with hundreds of thousands of dollars of debt from which there is absolutely no hope of escape no matter how your circumstances change. When they start doing something to make those debts dischargable, then maybe I would be more inclined to show mercy towards other victims of so-called predatory lending. Until that day comes, they won't get an ounce of pity from me.

By Jason Van Dyke on 2012 08 24, 4:22 pm CDT

Based on the amount of tattoos, the cigarette smell, etc. of the defendants I see (those who appear) on civil dockets involving payday loans, I don' t have much sympathy. Don't be getting a tat, smoking or going to the boat (casino) and then expect to not pay back the money you borrowed.

If people want to talk about debtor's prison, take a look at those with non-support convictions. The largest amount of those are from where the intended recipient of the child support filed for state support. The state gets paid back it's not going to the kids. Really want to talk about debtor's prison ... try not paying your taxes. State/IRS doesn't have to prove their case to a judge to file a lien, after a certain amount of time it is presumed. Try to bankrupt on them, special rules. Or try student loans ... special bankruptcy rules and the most aggressive collection tactics out there!!

By Gregg on 2012 08 24, 4:37 pm CDT

i have a great idea ........... pass federal legislation that would require these loan sharks to place in their paperwork, bold print, at least 3 points larger than any other printing in the document: "This debt is dischargeable in bankruptcy in spite of anything this lender tells you"

there is a certain kernel of truth to the statements that they are providing a service to the community and that payday loan advance places are allowed because they are better than the traditional loan sharks .............. but at 300 to 600% interest !?!

if they are such a benefit to the community, can't they provide the same benefit at 30%?

By rtp on 2012 08 24, 4:42 pm CDT

@48 - EXACTLY right. I just had a situation where I paid the IRS money that I did legitimately owe and they cashed the check but misapplied the funds. I was literally in line to file suit in U.S. Tax Court when one of their customer service reps called to tell me that they had found the source of their error and I owed no money.

@49 - That is fine with me. I am not against fair disclosure to customers. I do think it is a double standard to let people who buy frivolous things with payday loans get a break in bankruptcy while people like me who went to law school and couldn't get a job got screwed for life.

By Jason Van Dyke on 2012 08 24, 4:45 pm CDT

McLeod @9 Well, not everyone can score a high-paying job as a professional Internet commenter.

By kc on 2012 08 24, 4:56 pm CDT

Re: require these loan sharks to place in their paperwork, : “This debt is dischargeable in bankruptcy in spite of anything this lender tells you”

Holy Unintended Consequences, Batman!

Three problems, at least:

1. it's not necessarily true. in addition to possible fraud exceptions, the debtor might not qualify for a discharge, typically due to his many many previous and recent bankruptcy discharges.

2. The Loanshark" now becomes a "Debt Relief Agency" (for advising a "qualified person" about bankruptcy) and not only has to have the debtor fill out a three page disclosure, is now REQUIRED by Federal law to state on all advertising "We are a debt relief agency. We help people file for bankruptcy" which is 100% false and and 100% required. Put that in your TILA pipe and smoke it.

3. The "loanshark" is now required to give legal advice to a person it does not, and cannot, represent. Is there conflict of interest in the unauthorized practice?

Typical lack of critical thinking in the world of Consumer Protection Law.

By Hadley V. Baxendale on 2012 08 24, 5:04 pm CDT

@ 31: "Does anybody understand who these people are? As a former small-business employer, I can tell you."

This is why I alluded to financial literacy programs in an earlier comment. There are people (of all income brackets) who are chronically cash strapped due to abysmal money management skills. Those with the lowest incomes tend to run into the most dire straits.

One of the biggest examples are low income individuals who receive substantial tax refunds (as much as 40% of their earned income) every year due to substantial tax credits. Instead of saving any portion of that money for a rainy day, they go on shopping sprees (and sometimes quit their job) and are back to living hand to mouth in a matter of weeks. Many have also started taking advance of "refund anticipation loans" that charge a hefty sum in order the get the refund money a mere 3-5 days earlier. And federal and state governments have now begun to offer tax refunds on debit cards, which even further encourages people to go out and spend the money instead of saving or budgeting it. See

In a free society, financial literacy and other programs can only do so much because compliance with them is voluntary. The only thing the government can do to affirmatively seek to save people from themselves by directing payments to what they deem to be people's actual needs needs and to elminate the options of using payday lenders and other predatory financial services by shutting them down.

By Esq. on 2012 08 24, 5:10 pm CDT

I was interested in this article as I am just finished with successfully defending two (2) criminal cases where the borrower in a payday loan situation stopped payment on the post-dated checks.

I also just finished mailing a demand letter to the payday loan people to avoid suit requesting actual and punitive damages.

As was pointed out above, Art. 1, Sec. 19 (I think) of the Missouri Constitution allows you to refuse to answer any question after your name in a debtor exam. I even have a handy-dandy form that I send with clients that can't afford to pay me to appear with them.

Interest on the payday loan above was $100 on $500 or 20% for 14 days. My very rough calculation is that is 520% interest, without compounding.

Having said that, I am in the middle of a fuss trying to collect a judgment where, I believe, the Defendant made certain statements at the hearing that are, apparently, now questionable. Getting a sheiff to serve an execution is not an easy thing.

In other words, I have been and am on both sides of the issue.

However, I will always remember the comment from a woman from a title loan place, when I asked her what the interest rate was. Her answer: "It's exorbitant." That answer cracked up the courtroom, including the Judge. It was also true.

By Wayne Gifford on 2012 08 24, 5:37 pm CDT

hi 52 ......... michigan currently requires all types of disclosures in all types of consumer transaction paperwork ....... it is not the authorized practice of law, nor is it a conflict of interest

the only impediment to getting a payday loan discharged is whether you have had a prior ch 7 discharge in the past 8 years ...... but they could file a 13 instead .... even if they had to pay 100% of the loan, it could be a 5 year payment plan, and the interest rate would be as low as 2% .... further, go ahead and file all the 11 usc 523 or 727 [fraud] actions you want ............... every circuit in the us has ruled that payday advance loans are unsecured debts in spite of all the machinations attempted to make it so that they are not

some creditors are deserving of pity ......... but not payday advance lenders

By rtp on 2012 08 24, 5:49 pm CDT

1. There is a limit on the number of examinations that can be conducted within specific time periods. In California, the limit is one every six months. This is perfectly acceptable given that debtors often change bank accounts and transfer assets after being examined.

2. They are not arrested for failing to pay a debt, the court issues a bench warrant for ignoring a court order. In California it is called an Order to Appear for Examination and Production of Documents. Most often, the bond is NOT for the full amount of the judgment/debt, and in most cases is minimal. Debtors are also given a chance to turn themselves in and have the bench warrant recalled.

3. In order for a debtor's examination to be conducted, there needs to be a judgment in place. This means that the process has gone long past the point of a debt collector demanding payment. These debtors have been sued and they lost.

This article was very poorly written and researched. It gives the impression that a perfectly acceptable, and in many cases necessary, tool for judgment creditors, is somehow an illegal and unethical practice. The ABA needs to get its act together.

By Maria on 2012 08 24, 5:56 pm CDT

well, definitely the 6th circuit ......... should never employ terms that imply an absolute .............. just ain't lawyerly

By rtp on 2012 08 24, 5:57 pm CDT

What you just wrote above is exactly why I have no pity for customers of payday loan companies. They made idiotic financial decisions and got a pay day loan. The probably spent it on cigarettes, booze, and tattoos. They can go get a discharge in a 7 or 13. I made an idiotic financial decision and went to law school. Five years later I still don't have a real job. I practice law part time. My situation is one of absolute hopelessness. So why should I show mercy to the payday loan customers? They sure as hell won't get it from me. If a payday lender was my client, I would have no qualms about getting his deadbeats locked up. Not a second of sleep would be lost over it.

Think of about 20% of attorneys who have been licensed in the past five years (probably more like 33.3%). They have a law degree, a law license, six figures of non-dischargeable debt, and no job. Does the ABA - or anyone else for that matter - really expect me to feel sorry for these people? From the looks of the comments, most others don't feel much sorrier for them than I do. I hope the ABA is proud of how they are helping enslave an entire generation by accrediting more law diploma mills that charge $100,000.00 for degrees that are not worth the paper they are printed on.

By Jason Van Dyke on 2012 08 24, 5:58 pm CDT

I'm outraged myself. Sure, it's valid to summon someone to court for disclosure of assets. But doing it repeatedly to catch them with more cash in their pocket on the date of examination is not "disclosure" device, it's a collection device. The courts have absolutely no business doing that.

The mortgage crisis taught us how shoddy paperwork gets when done on a mass basis. If real estate ownership can be in error so often, then surely a person's whereabouts and their ability to get mail reliably are in doubt a whole lot more often - especially if we're talking about poor people. "So just come to court and it's no problem" is easy to say (Comment #1), but it's only the beginning of the story! And there are eight million different stories in my city alone.

Some "judges often set the debtor's release bond at the amount of the debt and turn the bond money over to the creditor" ?? Sounds like a tantrum, not a "judge." I wonder if it's literally a crime.

By Avon on 2012 08 24, 6:00 pm CDT

The debtor fails to abide by an order from the court to appear, so another order is personally served on the debtor to show what cause they have, if any, to not be held in contempt of court for failing to appear as ordered. Only if the debtor fails to appear for the rule to show cause hearing is a body attachment issued for failing to abide by the court's order to appear.

So, the debtor is not being jailed for failing to pay a debt; the debtor is being jailed for failing to appear in court after being ordered to - twice - by the court. If a witness is subpoenaed to appear in court and fails to do so, the exact same procedure is followed.

This is just a political hot-button issue that grabs people's attention because of headlines that are inaccurate.

By Mike on 2012 08 24, 6:59 pm CDT

Remember the old saw from law school: bad facts make bad law. Well, debtor/creditor law is full of bad facts and has become, to many of us with heart and conscience, bad law. As for whether lawyers should seek to change the law, I was taught, down a long line of lawyers, that the practitioners of law ought always to be in the forefront of social change.

By James Matheus Guy on 2012 08 24, 7:10 pm CDT

I would expect to read a story of this caliber writing in the Yahoo "News" section of my innerwebs.

But in the ABA Journal?

I mean, the first commenter debunked the notion clear, plain and simple!

These people borrowed money they had not paid back. Then they got sued. Then the judgment entered against them. Then they ignored MORE LEGAL PROCESS commanding them to appear in court - to make sure they pay back the money they didn't pay back in the first place. Then, they got arrested. FOR disobeying court orders - not for failing to pay back debt.

Shame on you, ABA.

By Ken on 2012 08 24, 7:20 pm CDT

A similar procedure is used in California. In many counties, the first time a judgment debtor (remember, there has to be a judgment before this procedure is available) fails to appear for an examination, the court issues an OSC which the judgment creditor has to serve on the judgment debtor. If the judgment debtor again fails to appear, a bench warrant may be issued, and if the judgment debtor is arrested, the court contacts the judgment creditor and sets a time for the debtor to appear in court, usually within 24 hours. If the judgment creditor cannot appear, the court sets an examination date farther in the future and releases the judgment debtor. If the judgment debtor bonds out and then again fails to appear, some courts will apply the bond to the judgment, but others will only apply it to the costs of the judgment creditors' appearance. In no case is the judgment debtor held until the judgment is paid in full, unlike the possible result of failing to pay child or spousal support.

I don't find the Missouri court procedure anything to get excited about. The payday lenders' business model is another matter.

By Michael Norton on 2012 08 24, 7:34 pm CDT

Easy solution: Limit the frequency with which a debtor can be summoned for examination. Here in California, it is only once every 180 days.
The payday lenders aren't going to pay lawyers to examine impecunious debtors any way ... this story has holes in it. Debtor examinations are usually reserved for large debts.

By David from San Diego on 2012 08 24, 7:47 pm CDT

Folks, get real!
For example, #60 Mike and #62 Ken, what makes you think a payday loan company would ever shell out the cost of a process server to make personal delivery of papers? More likely it's a computerized postcard, sent to whatever typo-strewn obsolete address they may have on file. Or, an outright error (such as have infected such a huge percentage of mortgage foreclosure cases recently).

But the real problem is the judge acting as agent of one of the parties.
Mike's argument sounds fair in a petty case, but actually doing it is just plain wrong. What if it's a larger loan? It would outrage anyone for a judge to compel presence in court on a home-mortgage foreclosure by collecting the full outstanding amount of the home loan, AND disbursing it to the lender, before the borrower could even be freed to leave detention (let alone file an Answer).
No court should ever be collecting the full amount of a claim as a disciplinary measure. That is doubly true where no defense to the claim on its merits has yet been heard. (And with borrowing, there can be all kinds of merits.)

By Avon on 2012 08 24, 8:53 pm CDT

See "Michael Ballard v, Wall 413 F. 3d 510 (Fed. 5th Cir. 2005). The lawyers were liable, he judge was immune.

By Dennis R. Whalen on 2012 08 24, 9:22 pm CDT

Avaon, you are full of opinions on the topic but clearly do not know collections law--just like the people who get all spun up about "they're using debtors prison in Missouri" that the so-called article is about.
Debtors do not come to court with money in their pockets so there is no "catching them" (your post 59).
Capias are not available unless there is personal service. Postcards are not used for service.

Money is not confiscated and paid over "before an answer." what "answer" do you mean? to the suit? it's over. To the interrogatories? it's oral. Judges can't "collect the full balancedue" and I often have to disavow my clients of this notion. Any bond that is set, is set due to the debtor's contempt.

Everyone is entitled to his own opinion but not to his own facts.

By Hadley V. Baxendale on 2012 08 24, 10:05 pm CDT

Hadley #67,
I'm just taking the facts as given! Don't blame ME for them.
"judges often set the debtor's release bond at the amount of the debt and turn the bond money over to the creditor" is right in the article.
"catching" the debtor with money in his pocket is my comment on B.McLeod's language in #4 above, and it's a phenomenon I'm criticizing. Why else would a debtor be summoned monthly? But I'll admit that neither of us knows what really is in debtors' pockets, except anecdotally.
Of course I don't dispute the judge's basis to require a bond, only the amount and disbursement.

In my state, state law governs the collection of debts. The terms of a loan may do so too. Whether it's law or contract that provides for service and notices by mail, I don't know. But it's routine.

Your initial point is really the important point: collections law is indeed supposed to be recognized and applied. That's all I want. The point of the article is that you can't assume it actually happens.

By Avon on 2012 08 24, 10:24 pm CDT

Computerized postcards won't work in CA. Personal service is required for the original order to appear; there is no remedy for a failure to appear if any other kind of service is used. It's really pretty hard to do anything horrible to a judgment debtor in CA by using the examination procedure -- unless the judgment debtor actually commits perjury in the presence of the court. That's unlikely, since the examinations are usually held out in the corridor without a reporter.

By Michael Norton on 2012 08 24, 10:47 pm CDT

In Oregon, contempt is available for failure to respond to judgment debtor interrogatories and for failure to appear at judgment debtor examinations. My experience is that on the first failure to respond to interrogatories, the court will issue a show cause for contempt, but it usually takes two or three orders before the court issues a show cause for failure to appear for an examination.

I've never asked for confinement as the contempt remedy for either, only fines and fees and restraining orders against disposition of assets.

By Daniel R. Reitman on 2012 08 25, 12:27 am CDT

Send them to Australia?
First class.
Round trip, of course.

By Tom Youngjohn on 2012 08 25, 2:49 am CDT

When you read the headlines you think, " OMG, they can do that???. However anyone who has worked on collection matters and specifically judgment debtor collections should be readily familiar with this practice. Creditors are not doing anything new or different. Any judgment creditor has the same ability to execute on the judgment and the " ORAP ( Order to Appear for Examination) or JDE (Judgment Debtor Exam) is one of the tools available to a creditor, even an individual seeking to enforce a judgment against a debtor.. So what is the the hoopla about??? Seems like someone never heard of this long established enforcement tool and decided to make an issue about it. Once the Order to Appear has been served, it clearly states on the form that the judgment debtor can be subjected to arrest if they were personally served and fail to appear. Old news!!!

By Angelo Roman, Jr. on 2012 08 25, 4:41 am CDT

Can't even get past the first comment on an article like this before coming across a defender of the faith. We've been indoctrinated into believing that debt repayment is sacred and created an entire system designed to protect the rights of creditors. History has shown that it is the exact opposite that needs to be done or debt enslavement will lead to social breakdown. More here -

By nahummer on 2012 08 25, 11:45 am CDT

I understand that Nevada is worse and failing to pay a Casino line of credit is a crime in Nevada's code. Does anyone have any more details on that ? And even if it is I cannot imagine another State enforcing a warrant on same, but I understand they will.

By Jay on 2012 08 25, 12:02 pm CDT

We forget what debtor's prison actually was. After they seized your assets and sold them for whatever they could get, and after they took your home and chased off your wife and children, they put you in debtor's prison so you couldn't do any further damage. They fully expected you to die of whooping cough or something like that, so it really wasn't a matter of punishing you and holding you until you could pay your bills.
Otherwise, contempt of court is serious business. You ignore the orders of the court at your own peril. I dislike loan sharks, but you have to have some legal structure that actually works. When I was working for a debt collection firm there were people who showed up to each and every examination they were ordered to only to tell us that they didn't have any money. That's the way they lived their lives, but they never defied the orders of the court, and that kept them out of jail.

By Pogo on 2012 08 25, 1:46 pm CDT

@20: The problem is the bad decision in Marquette v. First of Omaha (1978) 439 U.S. 299--34 years and counting has led to explosion of debt because credit card companies like Citibank can move (and did move in 1981) to South Dakota which has no usury and can then export their interest rates (no limit) all over the country; like a deadly virus, thereby nullifying state usury laws. Congress could amend the National Bank Act which causes this problem but both parties have been bought off by banks. That's how the bankruptcy laws were changed in 2005 to make it harder to file bankruptcy. Democratic party had opportunity to filibuster new law but did not; and in 2009/10 had opportunity to repeal it and could have easily amended the Act with their big majorities but squandered their power on stupid side issues and Obama-care instead.

By Scott on 2012 08 25, 5:34 pm CDT

@B. McLeod: God should abdicate the throne to you immediately since it appears you've already assumed it and proceeded to judgment. You lost me at "shiftless" because, as some have noted, these are lower middle class people, often government employees, who've been working for DECADES. "Payday loans" require a CHECKSTUB. I have known some of these borrowers and have never seen anyone take out a payday loan to purchase frivolous, or luxury, items. This is not an issue that can be resolved by self-righteous, judgmental responses. It is a predatory, usurious, circular situation which does not lend itself to oversimplified analyses. Thank you Richard Hunt, and mmm, for your well-considered responses, based on the actual experiences of these people. It is so easy to "sit in the scorner's seat or wear the cynic's band" when you haven't walked in the other person's shoes. Yes--- government DOES have a legitimate role in protecting the consumer but we also know that government alone is never the answer. I agree that Request for Admissions is a viable alternative. If there's no answer, the admissions are 'deemed' to be true but the court system does not become involved in imprisoning debtors for private loan sharks. @Richard Hunt: your post is simply profound, the mark of a true intellect.

By scalesofjustice on 2012 08 25, 6:53 pm CDT

Scott @ 76, thank you.

And, at the risk of being deleted for getting religious, Matthew 6:12 seems relevant. "And forgive us our debts, As we also have forgiven our debtors;"

By Tom Youngjohn on 2012 08 25, 8:44 pm CDT

@77 and 78. Sorry, but you seemed to miss the fact that a heartless disregard for the less fortunate is the theme of this thread.

By John in Florida on 2012 08 25, 10:32 pm CDT

No. 77, join the real world. A "check stub" does not make someone middle class. Neither are the people taking out these loans "lower middle class." But, none of that really matters. What matters is they were fools, and took out the loans, which they then did not repay. (As an aside, I agree with the posters above who opine that these borrowers go to this source of credit because nobody else in the world will loan to them). Then, they ignored court summons, and suffered the consequences. I have no sympathy for them. If you want to help them out, you can go forth and give them as much money as you want from your own pocket. You could even set up your own, kinder and gentler payday loan business to service them on nicer terms (but I think you will soon be out of business).

As for all the venom you spew at payday lenders, we all know they aren't choirboys. However, if you get rid of them, these wonderful borrowers you love so much will be back to Benny the loanshark, and then when they don't pay, it will be broken bones or curtains for them. I don't see how that is better.

By B. McLeod on 2012 08 26, 3:28 am CDT

Because of a protection in the Magna Carta debtors prisons, back in the day, first required a judgment and also required that the judgment not be fulfilled. Being jailed for contempt requires willful disobedience of a court order that one is able to fulfill and a purge amount the person is also able to pay. Setting the purge equal to the amount of debt, with no hearing on whether the person can pay or not, and turning over the purge to the creditor, brings me to the conclusion that this is debtor's prison.

What's wrong with debtors prison? Let's start with that there is a Constitutional ban in Missouri, which should be more than enough to prohibit the practice but I'll continue. Since public resources -- that is, my taxes -- pay for courts, jails, and police, I'm subsidizing the collection of these high priced loans. For those who argue people borrowed I argue that somebody else lent, and the lender usually had a better understanding of what they were getting into. Forcing me, and everybody else, to force their debtors to run their business is garbage. There is also a public safety issue since the police are chasing down debtors, and jailers watching them, while ignoring real criminals.

When lenders lent they knew about the challenges of collection, and built that into their pricing, which is apparently the reason these loans are so expensive. Whining, after the fact, about these same constraints is disingenuous. However, in much the same way that we saw private student loans become ineligible for bankruptcy discharge, they'll probably move to change the laws and, thanks to crooked politicians, they'll probably win. Never mind that when Congress contemplated doing this in favor of mortgage borrowers to cram-down underwater mortgages lenders whined about the terms of a contract being changed after-the-fact, when they'd done exactly the same to student loan borrowers only a few years earlier.

In this day and age the law doesn't matter anymore: lawyers, like many above, think there should be debtors prison; never mind the state Constitution and make it so. Winning justifies everything, right? Just keep Newton's third law of motion in mind; to every action there is an equal and opposite reaction. No whining when these tricks come back the other direction, which they eventually will.

By Michael on 2012 08 26, 1:40 pm CDT

"When lenders lent they knew about the challenges of collection, and built that into their pricing, which is apparently the reason these loans are so expensive."

That's the thought that was running through my mind as I read through the posts. They could lend only to people with squeaky clean credit, but the pay off would be lower. It's that whole risk-reward thing, isn't it?

And the contempt for poor people dripping off some of the comments here is almost nauseating. These lenders have a market, and I'm sure they're making a lot of money, because of these poor, desperate people.

By Rebecca on 2012 08 26, 4:51 pm CDT

Mr. McLeod: I forget where you practice, the $425.00 figure given as an example would be a small claims matter in NJ. Summonses in small claims are served by mail, not in person. Consequentally the summons may never have been seen by the defendant before the court date and a warrant was issued. I also do not agree with your characterization that people who resort to these loans are drug addicts, stupid or lazy. If they're getting a "pay day" loan they have jobs. They just don't make much and the reason for getting the loan could be a doctor's bill or a car repair. I've been poor and I remember living pay check to pay check and sinking money into an old car because I couldn't afford to replace it and going years without seeing a dentist so I could pay my wife and daughter's medical bills. I managed to have enough not to resort to one of these loan sharks but not everyone was as luck as I was. If you want to seize assets such as they are or garnisch wages to enforce a judgment you're entitled. You are not entitled to put people in jail for being poor.

By George Sly on 2012 08 26, 8:18 pm CDT

I think the key here, George, is they weren't putting people in jail "for being poor." Whatever the mechanics of service, the jailed people missed a court date. I think I have a good idea who the borrowers are, George, because I worked in poorly-paid food service jobs and later in (better) manufacturing and metal fabricating jobs before law school. Most of my co-workers spent unwisely, the majority used drugs, and some dealt drugs as well for supplemental income. We didn't have "payday loans" back then. When people spent themselves out of money, they went to friends for it, or when that source was exhausted, they went to unsavory, unregulated lenders or simply did without. Now we have this "payday loan" industry, and it seems to make a good bit of work for lawyers. It has its problems, but it's important to keep in mind what we'd be setting the closck back to if we were to prohibit these businesses.

By B. McLeod on 2012 08 26, 9:07 pm CDT

Mr. McLeod: I disagree, I think these companies are abusing service. In any event, the last time I was in small claims court defending a client, the other defendant did not show up and default judgment was entered against that defendant. Plaintiff simply has the right to enforce its judgment by garnishing wages or seizing assets not put someone in jail. That's my point. You don't jail people, the court enters default, it finds for the plaintiff and the plaintiff then enforces its judgment by garnishment or seizure of assets whatever those assets are. For $450, defendant's car, tv, radio etc. can probably add up to $450, and if as I maintain defendant usually has a job, garnishment of wages at 10% every pay period can probably pay it off in a couple of months.

By the way I apologize for my poor typing. I've notice a few typos in my postings. Unfortunately there's no spell check for the comments and one has a tendency to read what one expects to see.

By George Sly on 2012 08 26, 9:58 pm CDT

No.80 @ B. McLeod: You are the one who needs to join the real world. You base your "analysis" on faulty, self-righteous assumptions rather than actual knowledge and this is the most egregious thing about your comments. You come across as a miserable person who attempts to feel better by belittling and demeaning others.

By scalesofjustice on 2012 08 26, 10:23 pm CDT

Plaintiff indeed has the right to enforce its judgment by garishment and seizure of assets, George, but in many states (apparently including Missouri) there is also a mechanism to discover assets by summoning the debtor to appear and answer under oath concerning what they have and where they have it. Bear in mind that to be successful as to assets, you need to find one not already locked up by a competing creditor's security interest, and when using garnishments, you may find you are in line with 100 other creditors for the portion of pay your state law will allow to be attached through garnishment. Hence, it really is important to have a mechanism whereby you can require the debtor to come in periodically for examination (the hope being to catch them with actual cash, or perhaps they will forget to drop the jewelry before appearing). It is failure to come to this hearing that gets the debtor pulled in on a warrant, not simply the fact that they have not paid their debt. I suppose that arguably, given that the purpose of the summons was to make the debtor attend the hearing to discover assets, what the court should do to be most correct would be to reset the hearing as soon as possible and hold the debtor in custody until then. Without knowing particulars of Missouri practice, I would guess that is what the arrest and custody are for, but that the procedure there also gives debtors an option to bond out or even pay the debt as an alternative to staying in custody until the hearing. I don't think there is anything remarkable about it, and the real and simple fact remains the debtors aren't being imprisoned for the debt.

By B. McLeod on 2012 08 26, 11:08 pm CDT

@79: Ah-- but the joke is on them. A wise man once said "if you can meet with Triumph and Disaster, and treat those two IMPOSTERS just the same." Remember Steve Jobs, that brilliant billionaire (whom I too admired). His billions couldn't buy him good health. Have you ever seen a U-haul attached to a hearse? In the end, McLeod and the others will have the same six feet of real estate as those payday paupers they so despise. Ashes to ashes, dust to dust. Gotta love it.

By scalesofjustice on 2012 08 27, 3:28 am CDT

But until then, we're going to be eating a lot better, dressing better, mixing our drinks with a better brand of liquor, and generally accomplishing more in the world and enjoying a better quality of life than all those payday paupers.

"Every man dies, but not every man really lives."

By B. McLeod on 2012 08 27, 3:55 am CDT

But not sleeping better until that time, and probably drinking a whole lot more of that name brand liquor.

You're obviously a creditor lawyer who can't stand your job since you comments on every post the ABA releases; you do anything to get away from your work. A quick check shows nine posts out of 89 by you, 1/10th the total. Do you issue summons to debtors every week, knowing they have jobs and will eventually miss one?

Quality of life is made of more than things, and torturing people desperate or stupid enough to take out these high interest loans -- then using a workaround to create a new debtors prison -- has to wear you down.

By Michael on 2012 08 27, 11:48 am CDT

No problems sleeping, and still plenty of hours in the day for work. Creditors' rights is an important area of the law, and if it tortures the stupid, I guess the lesson is, "don't be stupid."

By B. McLeod on 2012 08 27, 12:24 pm CDT

Since I have done this a couple of times, let me explain by telling what I did the last time. This was a bank debt from a business loan. I took a default judgment against a debtor for $65,000.00 plus interest and attorney's fees. Debtor tells people he has a job, people tell bank, bank tells me and I garnish. Repeatedly. I send post judgment interrogatories which are largely drawn from bankruptcy forms to locate assets. No answer. Send golden rule letter (please answer). No answer. File Motion to compel. No appearance, motion granted. File for a general execution (required to get debtor's exam) and pay sheriff $40.00. Nothing found. File motion for debtor's examination, appear in court on motion. Motion granted. Have order served by sheriff (another $40.00). Appear at time on order, no appearance by debtor. File Motion for Body attachment, appear at hearing, motion granted. Wait. Two weeks later debtor gets pulled over by Police, and gets put in jail under the order. Bonds out on $200.00. Finally appears at new hearing, takes the fifth and refuses to testify. So far I have incurred over $400 in court costs and service fees. Have collected nothing. Deposed his father (lives with father), find out nothing. Dad is willfully ignorant (and a former client of mine with an unpaid balance).

This is a pretty common situation on body attachments. It isn't like the debtor has tried other less expensive alternatives.

By Gregg on 2012 08 27, 2:41 pm CDT


Sounds about normal, except you should probably have paid an investigator first to track the guy before you started your legal motions.

By Wayne Gifford on 2012 08 27, 2:53 pm CDT

The impression I get from B. McLeod's posts here, and from other threads re: student loan debt and similar topics, that he favors a "social Darwinism" approach: "let natural selection weed out the sicklyweak/poor math skills/ just plain stupid."

That sentiment is echoed by others as well, and while I have some amount of sympathy for the "hold people accountable for their decisions" mindset, it has many shortcomings and flaws which belie the "fairness" that the social Darwinists claim to want.

First, the central premise is flawed as it is not "natural order of things", it's a system rigged by the wealthy for the benefit of the wealthy. Society could (and should) just prohibit the practice of entirely.

Second, the system actually did prohibit it previously, with anti-usury laws, that "unconscionability" defense we learned in law school but never seems to apply in real life, and the restrictions regarding "contracts of adhesion." I think we should "turn back the clock" in contract law, as those rules existed for a purpose-- so that persons other than lawyers had a chance at a fair deal. This "ha-ha-ha, gotcha!" approach to loans, service contracts, etc. is absurd. The system has been crafted to poorly educate the majority of the population on financial matters and then punish them for failing to understand the terms of their financial transactions.

Third, the B. McLeod philosophy of "don't be stupid" borders on inhuman, as it might as well include "don't be blind if you don't want me to steal from you" or "don't use a wheelchair if you want to get to the second floor courtroom." Compassion, an essential aspect of society, requires that the able help the less able function-- because it works to our mutual benefit, and of those we love when they suddenly find themselves among the less able. Lack of compassion will make those agreeing with B. McLeod first against the wall when the revolution comes.

While it would be to my professional advantage (for a while) if this trend of "punitive freedom-to-contract" continues, it needs to stop. Devices such as click-through EULAs are going to bite everyone in the @$$ someday, as there will be some malware-- or maybe just a profound design defect-- coming through a core product that will cause a massive computer failure (or a nice cancer or infectious disease outbread) costing society billions of dollars, but we'll all be obligated to arbitrate in Beirut-- and the corporation will just declare bankruptcy anyway. Rules help everyone.

By Voice of Reason on 2012 08 27, 3:16 pm CDT

Medieval Missouri. Next step? A poorhouse for debtors?

By jlghome on 2012 08 27, 3:53 pm CDT

How is Missouri medieval? Our courts routinely have ruled that under the self incrimination provisions of the Missouri Constitution, one can assert that right against testifying about one's assets. Recently the Missouri Supreme Court ruled that the statute enacted years ago that allows a local prosecuting attorney to issue a waiver on this issue did not overcome the constitutional burden.

Now contrast this against KS which routinely has a debtor fill out a questionnaire on assets and employment when a judgment is entered against them. (I once had a creditors attorney threaten me with jail for not testifying on an LLC's assets when I was the registered agent and attorney for the LLC.)

Now contrast this with that liberal mecca New York which allows worldwide garnishments under the Koehler decision.

By Gregg on 2012 08 27, 4:10 pm CDT

JimFromBahm - your comment is not accurate.The Alabama Deferred Presentment Services Act strictly regulates the industry, imposing specific duties and disclosure requirements on companies. See for example Alabama Code 5-18A-1 et seq. It mandates specific terms, specific amounts, includes prohibitions, and gives the State Banking Department the authority to regulate, including explicit statutory authority to punish wrongdoers. You don't have to like an industry, but spreading falsehoods doesn't aid the discourse.

By JBM on 2012 08 27, 4:48 pm CDT

@ 90 Michael: thanks for the laugh. @94 VoiceofReason: your comment is powerful. @B.McLeod: Interesting and eminently sad how you equate material things with happiness and ASSUME you're "accomplishing more" than these debtors. Some of them may be making a huge difference in the world but when your analysis is based largely on stereotypes, your conclusions are bound to be faulty. You are funnier than you think. I keep picturing Ebenezer Scrooge standing beside Oprah at Scrooge's gravesite, with Oprah pointing and saying "And YOU get six feet of real estate, and YOU get six feet of real estate, and B. Mcleod gets six feet!" Keep imbibing your expensive liquor and desperately striving to feel superior to others; ashes to ashes, dust to dust.

By scalesofjustice on 2012 08 27, 6:26 pm CDT

I wish people would get back to the topic. We'd come a lot closer to finding common ground - or at least saving our breaths wasted on mutual ridicule.

I think the topic is whether a release bond, after a debtor has been jailed for failure to appear at a post-judgment asset-discovery hearing, can fairly be fixed for the full amount of the underlying debt.

I say No, so long as the judge is required to be impartial on the outcome of the asset discovery. I think some of the others of you would say No also. Especially if it were that $65,000 debt we heard about (#92), where it's frustrating to hear that zero can be collected, so far as the story goes, but it would be equally appalling to hear that the man can be jailed til the whole $65,000 is collected.

I appreciate those who have pointed out that a court notice to appear is sometimes mailed (at least for Small Claims sums), and that factors like an old car are part of the life of the less well off. No matter how diligent a poor person's attitude, things can (and do) go wrong in their lives, and without a financial cushion they may well miss a court date, or fail to get their mail, or whatever.

I didn't understand my clients (who come from all walks of life, including dirt-poor) until I took to heart the adage, "the problem with being poor is that it takes up all of your time." The tedium and exhaustion that come of doing everything without resources, from commuting by roundabout bus route to paying a bill without a bank account, combined with the angst and worthlessness one feels when something unpredictable like bad weather or an auto breakdown prevent fulfilling one's duties, add up to a potentially miserable life. I can imagine that most payday-loan defaulters have repaid many times without incident, but if something goes wrong once, the worst might happen.

By Avon on 2012 08 27, 8:07 pm CDT

@Avon - Typically I think holding the debtor in jail until the 65k is raised would be a problem. However, as in most things in law, there are exceptions. My experience indicates that the underlying article is focused on the exceptions. As we all know, bad facts make bad law. If we were to just focus on the exceptions then we will have bad law.

The real problem here is the Missouri has a disjointed collection system. We statutorily allow debtor's exam and then allow the debtor to elect to not testify. The Rules of Civil Procedure specifically provide for post judgment interrogatories then allow the debtor to claim the Mo Const. version of the 5th. You wonder why creditors resort to tactics like those described. Each time the legislature has passed a remedy for various things, the Supreme Court finds a new right to block the remedy. (Wonder why the Missouri plan is in trouble?)

By Gregg on 2012 08 27, 8:40 pm CDT

I agree with you more than you think I do.

I have no problem with the Missouri collection system (I don't know it). As I said in the first place (#59), I have a problem with what the article says are individual judges who exact an enforcement bond in the amount of the underlying debt, and then hand that bond sum over to the creditor on the ground that a defaulting party has forfeited all his rights, so the judge should render 100% immediate collection, on the enforcement action, whether that's unjust or not.

I think the payday loans are the "bad fact" here, leading some commenters to conclude that unjust enforcement is good (or at least not so outrageous) if it's only for $300 - even if it's not OK in principle.

A just principle should govern collections of loans of all sizes. I find distasteful a harsh principle of law for poor people's loans and a more lenient outcome for rich people's (on the ground that any loan as big as $65,000 is a "bad fact," or on any other ground).

By Avon on 2012 08 27, 9:07 pm CDT

@99 Avon: Touche--- point well taken.

By scalesofjustice on 2012 08 27, 10:09 pm CDT

The assumptions made by people who should have been trained in law school not to assume facts not in evidence are breathtaking. #4 assumes that people use payday loans for gambling and drugs. #47 assumes that people use payday loans to buy crap they don't need. Lots of people assume that people who use payday loans are just plain stupid.

Everyone has a lot to say about the industry.

Has it occurred to anyone to wonder why a person might think a payday loan is a good option? Let's start with the assumption that a person has a job - after all, it's a payday loan, secured by the paycheck. Here's some math: federal minimum wage = $7.50/hour. $7.50 x 40 hours a week = $290. $290 x 52 weeks a year (they probably don't get paid vacation or sick leave) = $15,080 a year. Anyone should be able to live on that and also gamble, buy drugs, cigarettes, tattoos, and other crap they don't need, right? And of course they'll have a stellar credit rating that allows them access to cheaper sources of credit.

As long as we can distinguish ourselves from "them" - those lazy, shiftless, unreliable, irresponsible, cheating, lying slackers who are too stupid to understand what's not in their best interests - then we can justify not doing something to change the system (like insisting that the minimum wage be raised) or even putting a cap on the interest rates and fees that can be charged on loans.

By Cal on 2012 08 27, 10:30 pm CDT

Cal, I have in no way asserted that borrowers use payday loans for gambling and drugs. I simply suggested that many of them will have side incomes from these actvities, such that lenders may be well advised to try to seek out that cash.

Gregg, "we're better than Kansas" is just a classical defense of Missouri civilization. Seriously. But now I have to ask, how do you compare with Hell, and Texas?

Scales (@98) your beloved debtors also equate material things with happiness. That's why they're taking out these loans instead of doing without whatever it is they're buying. And yes, I'm accomplishing more in life than any of them, and I would already be there is I sat down today and did nothing further for the rest of my life.

Voice of (alleged) reason, as I have already pointed out, if you eliminate the business entirely, no reputable lender will loan to these people. They'll be to doing without in all cases, or back to getting their legs broken by the old-fashioned kind of loan sharks. You can't help these people. They'll just get in trouble some other way.

Finally, this segment of the lending business is permitted and regulated. So is debt collection. So long as they stay within the law, payday lenders are entitled to competent legal representation. Likewise, so long as they stay within the law, creditors' counsel are entitled (and indeed, ethically required) to zealously represent their clients via every legitimate means to collect the money owed. I don't care if some of you don't like it. For God's sake, try to remember you're supposed to be legal professionals.

By B. McLeod on 2012 08 27, 11:09 pm CDT

Whoever said go to court when summoned needs to learn a thing or two about sewer service. 9 times out of 10 there is no service of process. Just a perjured affirmation sitting in the court house. Most people are legally too unsavvy to know how to challenge debt collector lies.

By indio007 on 2012 08 28, 2:48 am CDT

Instead of throwing about dull-witted cliches about "sewer service," it would be best to learn the applicable rules of the relevant jurisdiction. Where the proceding at issue is a hearing to discover assets, it is very possibly a simple matter of a filing in an existing case where personal jurisdiction is continuing from the original service of summons, and where the debtor has an obligation to update mailing addresses. Where this is so, the debtor may be deemed validly "served" by simple, first-class mail at the last address the debtor left on file, and trying to dodge service by changing addresses without notice is only likely to get the debtor in trouble.

By B. McLeod on 2012 08 28, 7:54 am CDT

#9: Half are below the mediam in intelligence, by definition. The population is large enough that the "average" and the "median" are for all intents and purposes, synonomous.

The real problem is that these predatory lenders, as well as credit card companies charging interest at rates that a few decades ago were only seen in the loan sharking business, are allowed to operate.

By TMJ on 2012 08 28, 8:58 am CDT

So what? There's being below average intelligence, and then there's being stupid enough to borrow at 300% on your next check when your having to borrow to supplement your current check. These are not the same thing by any means.

Anybody have a statistic on % of the population that take out these loans?

By B. McLeod on 2012 08 28, 12:24 pm CDT

Nationally it is around 5.5% having at least one payday loan in the last 5 years. Higher in states with payday lenders and lower in states without them.

@105 - Sewer service, while it happens occasionally, is largely a myth. I use both sheriff's and special process servers and have never had a doubt about a single service.

Note that the article attributes the setting of the bond amount at the debt to "critics". Consider the source.

As to the KS comment, I'm close to KS physically so I am more familiar with their procedures. If I were in St. Louis then perhaps I would have used Illinois.

By Gregg on 2012 08 28, 1:50 pm CDT

@ #109: The actual numbers are likely higher when counting those who patronize pawn shops and title loan companies which of course employ the same business model with respect to fees, usurious interest and payment terms. The only difference is that they don't have to even consider employing body attachment because there is always collateral behind the loan.

Rent to own companies are also close cousins. If you've ever studied them closely, they're essentially selling used merchandise at 150-300% of what the merchandise would cost new.

By Esq. on 2012 08 28, 7:37 pm CDT

@109 - Not Pawn Shops! Say it ain't so. Those wonderful places we see on TV. They charge high, but not unreasonable interest. Customers turn the stuff over to them at the time of the loan. They do not engage in collection efforts. They never engage in any unfair collection practices.

Some may be the best friend of the thief, but in that regard they are not much different than swap meets and auction web sites.

By John in Florida on 2012 08 28, 8:19 pm CDT

@103: Exactly-- it is disturbing to think trained lawyers are simply assuming 'facts' that haven't been asserted anywhere except in their heads; worse, they base their so-called 'facts' on their own personal repertoire of stereotypes. They stack one assumption (or stereotype) on top of another and reach a superficial conclusion built on quicksand. They call others lazy yet habitually use stereotypes, the hallmark of a lazy mind. It makes me wonder which law schools are graduating students who haven't developed the basic skill of critical thinking. Perhaps the greatest irony is that at least one of these 'superior' lawyers doesn't know the difference between 'your '(as in belonging to you) and 'you're '(a contraction for 'you are'). The whole thing would be depressing if not for the eloquent and perceptive comments by many who have posted here.

By scalesofjustice on 2012 08 29, 6:48 am CDT

OMG, you found a typo!! Well, that's way better than being "superficial," so congratulations on that special accomplishment. Feel free to get yourself an extra truffle on the way out.

By B. McLeod on 2012 08 29, 8:16 am CDT

Comment removed by moderator.

By scalesofjustice on 2012 08 29, 6:25 pm CDT

Hey, B.McLeod's excellent rebuttal (113) takes the day! What an excellent tactic - to have the last word by being outrageous enough to ensure any replies will be removed by the moderator. (Not that 114 didn't deserve to be; my Inbox is still cringing from it.)

Something else that doesn't sit well, and can drive one to intemperate reactions, is to be on the receiving end of sewer service. Anyone who is unsympathetic to a complaint of sewer service has most likely never suffered from having to prove one. I assure you, being wrongly defaulted is infuriating - and it's way too common. In my field, it's only occasional, and then apparently due to a few bad apples in the service companies' barrels. But it's absolutely true that at certain levels of civil litigation (with the emphasis on civil), it's a lot less common. I'm sure the Wall Street firms pay a fortune for a paper to be delivered, and it's done right every time.

Back on topic, though, I still think the real problem with serving a suit for $300 is not sewer service but clerical mess-ups of the sort that occurred at the peak of the mortgage-foreclosure zoo, since court rules governing such small claims are more likely to provide for mailing or other notice. And, per 106, I think mailing is even more often permitted than that - it could in fact be stipulated to in the payday loan agreement itself, just as arbitration clauses exist in so many consumer situations.

By Avon on 2012 08 29, 8:27 pm CDT

Well, you know, every now and then, someone doesn't read the little ruley thingies in the comment policy before they post. That can lead to posts that are simply immoderate, and in such cases, the moderator (naturally enough) comes along and removes them.

By B. McLeod on 2012 08 29, 11:03 pm CDT

I opted to take Trial Advocacy instead of Little Ruley Thingies, so I have no idea what you're talking about. (Of course I know there are probably Terms of Use, but I have felt no need to go look.)

I like the literal meaning of the word "moderator" and I wish more folks would appreciate it! Unruly voices, in any number of "civic" and other situations, take umbrage when a moderator moderates.

By Avon on 2012 08 29, 11:11 pm CDT

Perhaps, but if it isn't their umbrage, someone will probably come after them for that.

By B. McLeod on 2012 08 29, 11:16 pm CDT

Groan. (And not in a good way. I'm allergic to corn.) Time for me to get off the internet!

By Avon on 2012 08 29, 11:22 pm CDT

Now that nearly four years have passed, I suppose I can safely admit that I did move some cheese once, while the Moderator wasn't looking. But I really don't know anything about the umbrage.

By B. McLeod on 2012 08 29, 11:37 pm CDT

No umbrage taken--- it's all good.

By scalesofjustice on 2012 08 30, 4:04 am CDT

Install usury laws.

Charging anything more than 5% over prime is illegal, punishable by loss of citizenship and deportation to your homeland.

By AC on 2012 09 01, 2:08 am CDT

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