Contemporary Debtors Prisons

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“Ours is an unforgiving age.” This is the first sentence of law professor Martha Minow’s recent book, “When Should Law Forgive?” The U.S., she writes, “is particularly punitive in defining, prosecuting, and punishing crimes.” But the same country “has a generally forgiving policy toward debt, especially business debt, with bankruptcy procedures allowing companies a fresh start.”

Bankruptcy, unlike criminal law, anticipates and accepts failures as inevitable. The question is how best to handle defaults such that individuals are not unfairly penalized and society is not excessively burdened. It’s a policy question. Without carrying the same social stigma (though there is certainly stigma attached), bankruptcy “provides a socially structured way for a debtor to start over after failing to repay debts.” The system is rooted in pragmatism, not moral condemnation. Still, those who benefit most tend to be those whom the government chooses to protect, which generally includes large corporations and lenders, not individuals trying to pay off student loans, medical debt, or court fines. And when it comes to those least privileged on the totem pole of debt, the criminal system is increasingly stepping in to dismantle the boundary between the two systems. Using contempt orders and cash bail, it pulls vulnerable people in debt away from the pragmatism of bankruptcy and toward the punitiveness of jail.

On a Tuesday last July, “Tres Biggs stepped into the courthouse in Coffeyville, Kansas, for medical debt collection day, a monthly ritual in this quiet city of 9,000,” writes Lizzie Presser for ProPublica. “He was one of 90 people who had been summoned, sued by the local hospital, or doctors, or an ambulance service over unpaid bills. Some wore eye patches and bandages; others limped to their seats by the wood-paneled walls. Biggs, who is 41, had to take a day off from work to be there. He knew from experience that if he didn’t show up, he could be put in jail.”

Before the morning’s hearing, people who were summoned traded their stories. “One woman recalled how, at four months pregnant, she had reported a money order scam to her local sheriff’s office only to discover that she had a warrant; she was arrested on the spot. A radiologist had sued her over a $230 bill, and she had missed one hearing too many. Another woman said she watched, a decade ago, as a deputy came to the door for her diabetic aunt and took her to jail in her final years of life. Now here she was, dealing with her own debt, trying to head off the same fate.” Biggs’s court dates had begun after his son developed leukemia, and they multiplied when his wife started having seizures. He had been arrested because of medical debt more than once.

The courtroom’s judge, David Casement, wears a black robe over his cowboy boots and silversmithed belt buckle. A cattle rancher, he was appointed a magistrate judge without ever having taken a course in law. In Kansas, and many other states, judges don’t need a law degree to preside over cases like these. “The first collector of the day was also the most notorious: Michael Hassenplug, a private attorney representing doctors and ambulance services. Every three months, Hassenplug called the same nonpaying defendants to court to list what they earned and what they owned, called a ‘debtor’s exam,’” writes Presser. If a person misses an exam, the judge typically issues a contempt citation, a charge for disobeying a court order, and if the person misses the contempt hearing, Hassenplug asks the judge for a bench warrant. “As long as the defendant had been properly served,” the judge’s answer is always yes. “In practice, this system has made Hassenplug and other collectors the real arbiters of who gets arrested and who is shown mercy. If debtors can post bail, the judge almost always applies the money to the debt. Hassenplug, like any collector working on commission, gets a cut of the cash he brings in.”

Under early English rule, monarchs were considered vicars of God, and disobeying them was tantamount to sin. Contempt, once the realm of kings, spread to English courts, and then American courts, which now use it to force compliance. If an order isn’t followed, courts aren’t required to issue contempt orders, but judges in the U.S. can choose to.

Contempt is also being used in Utah to jail people who are unable to repay predatory loans. Another ProPublica investigation, published Dec. 3, revealed that people who borrowed money at high interest rates were being sued for owing sums that ranged from $800 to $3,600, and when they missed a court date, the company obtained a warrant for their arrest. Congress banned debtors prisons in 1833, but across the country, debtors are routinely threatened with arrest and sometimes jailed. In Utah, it’s particularly aggressive.

After the Supreme Court relaxed restrictions on interest rates in 1978, Utah got rid of its interest rate limits in the hopes of luring credit card and other finance companies. A favorable regulatory climate in Utah made lenders feel welcome. The first payday loan store opened in Salt Lake City two years later, and other companies soon flocked to the favorable regulatory climate. “Today, Utah is home to some of the most expensive payday loans in the country,” writes Anjali Tsui. “The average annual interest rate hovers at 652%, according to the Center for Responsible Lending, a nonprofit research and policy organization… Payday lenders charged annual percentage rates as high as 2,607% in 2019, according to the Utah Department of Financial Services. Utah is one of six states where there are no interest rate caps governing payday loans.”

When it comes time to pay, a few weeks after getting a loan, most borrowers cannot afford to do so, and 80 percent of those loans are rolled over or renewed. Many borrowers eventually owe more in fees than the amount initially borrowed, and get stuck in a cycle of debt. In Utah, payday lenders and similar companies that offer high-interest, small-dollar loans dominate small claims court. In those courts, there are rarely lawyers, judges are not always legally trained, and the rules of evidence do not apply.

If a borrower doesn’t show up, the lender wins by default, and once a judgment is entered, the lending companies can garnish borrowers’ paychecks and seize their property. If borrowers fail to attend a supplemental hearing to answer questions about their income and assets, companies can ask the court to issue a bench warrant for their arrest. “Technically, debtors are arrested for not responding to a court summons requested by the creditor,” writes Tsui. “But for many low-income people, who are not familiar with court proceedings, lack access to transportation, child care options or time off, or move frequently and thus may not receive notifications, it’s a distinction without a difference.”

Even the bail system favors payday lenders. In Utah, a 2014 law allows creditors to get access to bail money posted in civil cases, so if a person bails out after being jailed for unpaid debts, the payday loan companies can pocket that money. “The law has transformed the state’s power to incarcerate into a powerful tool to guarantee that loan companies get paid,” Tsui writes. Law professor Christopher Peterson, who has studied the issue, said, “They’re handcuffing and incarcerating people in order to get money out of them and apply it towards insanely high interest rate loans.”