Hello, and welcome to your money 2.0. I’m Thomas Fox, community outreach director
at Cambridge Credit Counseling. Too many of us going to jail because we can’t
pay a bill sounds harsh. However, debtors prisons were a stark reality
throughout most of history. Thankfully, the law is caught up with the
times and we no longer send people to prison because they cannot afford to pay a bill. Or do we? Disturbing new reports indicate that debt
collectors in Missouri, Illinois, Alabama, and a few other states are using a legal loophole
to justify jailing poor citizens who legitimately cannot pay their debts. Now, jailing someone for unpaid debts is unconstitutional
at least since the early 1970’s, but payday lenders and others have found a way to, not
only imprison people, but also to have the court system act as a collection agency. How so? We’ll tell you. Debtors prisons were born out of financial
necessity, or at least that’s what creditors believed prior to the nineteenth-century. These institutions were a far too common way
to deal with unpaid obligations. Just like it sounds, people who are unable
to pay their debts were in prison until they had the means to do so. Ironically debtors were charged room and board
and were allowed no way of generating the necessary revenue to repay their debts. Given the impracticality of not allowing prisoners
to work off their debt, prisons utilize inmates for cheap labor many friends and family members
took it upon themselves to raise the cash needed to free their loved ones. Perhaps most famous among them being Charles
Dickens, who worked diligently to repay the debts of his father. It’s no coincidence that the dark and disturbing
nature of Dickens’ experiences come through vividly in his novels as you witness deplorable
treatments for the suffering in Marshalsea, a debtors prison in England. Fast forward to 2012 and there are a few civilized
human beings among us who would condone the imprisonment of the poor and destitute. Save for of course, payday lenders. The st. Louis Post-Dispatch detailed how lenders
are exploiting the judicial system. According to the newspaper creditors file
and receive a judgment in civil court after an obligation goes unpaid. The debtor is summoned to court for an examination
to review their financial situation and hopes of coming to an equitable resolution. If the debtor fails to appear, which is often
the case, the creditor can request a body attachment. Which, in reality, is in an arrest warrent. Once the warrant has been issued, the police
will enforce the action given the opportunity. If the debtor is jailed they’ll have to wait
for a court hearing or post bond. Here’s the problem, judges often set the debtors
bond at the amount of the debt and turn the bond money over to the creditor. So, not only are creditors circumventing the
loan, but they’re turning the judicial system into an extension of their collection average. Although the U.S.abolished debtors prisons
in the 1830’s, more than a third of the U.S. states allow the police to prison debtors
for non-payment due to the aforementioned clause. These bills include health care, credit cards,
and even auto loans. Imagine going to jail for your Discover bill. It’s crazy. Even worse, some states also apply poverty
penalties, including late fees, payment plan fees, and interest when people are unable
to pay all their debts and loans according to a report by the New York University’s Brennan
Center for Justice. For instance, Alabama charges a 30-percent
collection, while Florida allows private debt collectors to add a 40-percent surcharge on
the original debt. Some Florida counties, also use so-called
collection points, where debtors can be jailed and have no right to a public defender. Obviously, this practice does not sit well
with legislatures, especially since many of the victims are living on funds that are legally
protected from being used for outstanding debt. Judgment such as Social Security, unemployment,
insurance, or veterans benefits. The situation prompted Illinois legislatures
to pass the Debtors Right Act of 2012, which requires two pay or appear court notices to
be sent to debtors before an arrest can be made. It also prevents creditors from pulling from
multiple examinations, a common practice unless the debtors financial state, has significantly
changed. The bottom line is that whenever you receive
a notice to appear in court, make sure you do so. Now, I’m not a lawyer, so please don’t depend
on me for legal advice. You need to do your homework on this issue. For additional information on collection rights
please visit our website and download a free copy of our learn now or pay later guide. Until next time I’m Thomas Fox for Cambridge
Credit Counseling.