Monday, April 18, 2011

Welcome to Debtors' Prison, 2011 Edition

When I first heard that dads were being jailed because of child support debts, I was surprised because I thought that the debtors prison was a medieval concept that no modern nation would use. I thought that it was surely outlawed by our Constitution or Declaration of Independence or something like that.

Now the WSJ reports:
Some lawmakers, judges and regulators are trying to rein in the U.S. debt-collection industry's use of arrest warrants to recoup money owed by borrowers who are behind on credit-card payments, auto loans and other bills.

More than a third of all U.S. states allow borrowers who can't or won't pay to be jailed. Judges have signed off on more than 5,000 such warrants since the start of 2010 in nine counties with a total population of 13.6 million people, according to a tally by The Wall Street Journal of filings in those counties. Nationwide figures aren't known because many courts don't keep track of warrants by alleged offense. In interviews, 20 judges across the nation said the number of borrowers threatened with arrest in their courtrooms has surged since the financial crisis began.

The backlash is a reaction to sloppy, incomplete or even false documentation that can result in borrowers having no idea before being locked up that they were sued to collect an outstanding debt. The debt-collection industry says such errors are extremely rare, adding that warrants usually are sought only after all other efforts to persuade borrowers to pay have failed.
I realize that borrowed money keeps our economy humming, but no one went to prison from General Motors, AIG, Fannie Mae, or Lehman Brothers. Failure to pay a debt should not be a crime. It is a byproduct of a foolish lender as much as anything else.

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