Consumer Law

'Debtors’ Prison' Is a Reality for Borrowers Who Skip Court Dates, Ignore Court Payment Orders

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A form of “debtors’ prison” is alive and well in the United States, as the debt collection industry relies on arrest warrants to help recover money owed by borrowers.

More than a third of states allow borrowers to be jailed when they ignore a court order to repay a debt or when they fail to appear in court, the Wall Street Journal (sub. req.) reports. Retailers, credit-card companies, landlords and debt collectors are relying on the laws in an effort to collect.

The Wall Street Journal checked records in nine counties that keep statistics on the breakdown of arrest warrants by offense and learned that more than 5,000 warrants have been issued for delinquent borrowers since the beginning of 2010. The newspaper also interviewed 20 judges from across the nation who confirmed they are seeing an increasing number of borrowers threatened with arrest.

Regulators in Illinois and the Federal Trade Commission are investigating arrest warrant practices in debt cases.

Among the companies that have sought arrest warrants in debt cases are Capital One Financial Corp. and a unit of American International Group, the story says. Another company, Encore Capital Group, changed its practices and now has a code of conduct that bars its law firms from taking action that puts a consumer behind bars.

Related coverage: “Ore. AG Announces Shutdown of Debt-Collection Law Firm”

Updated at 3:06 p.m. to link to related post.

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