I may be a little behind the times, but this article is the first I have heard of the phenomenon of creditors using courts to force borrowers to appear before a judge and having them jailed until the court date. I find this absolutely mindblowing, especially the possibility of being jailed over a three figure payday loan. It’s like we living in a Dickens novel.
Legal loan sharking.
The Diane Rehm show had a long segment about this issue last week and it was quite interesting and depressing:
In some cases, there isn’t even a judge in the courtroom when the “judgement” is made – it’s just done by a bailiff.
Here’s a link to the text transcript of the show:
Dare I offer a Devil’s advocate position? (as in “NOT MY OWN OPINION”)
I’ve known someone who was a debt collector. He says he’s one of the collectors who actually follow appropriate laws, but from what I’ve heard those may be few and far between. Anyway, when I asked him about whether his job weighs heavily on his conscience, he said he views himself as almost a financial police officer: someone obtained a product or service without paying for it, and that is essentially theft from his point of view. Jail seems like a logical extension from that perspective.
Honestly, I could somewhat see where he was coming from, but I think that implies a motivation on behalf of the debtor to defraud the merchent or service provider which is quite often not there. It sets up a cycle of victimization wherein the debtor has no realistic avenue for relief.
So, as mentioned in the aforementioned Diane Rehm show, one of the problems is that there are a lot of collection claims that are fraudulent and/or don’t have supporting evidence. Creditors sell their uncollected debts to secondary collection agencies for pennies on the dollar. They don’t bundle with them any of the evidentiary details needed to prosecute. Often, people pay their debts off to the original creditor, but the information is sold to the secondary collector anyhow, who has no idea that they haven’t paid. They then take these to court, in bulk, claiming that they served the person in debt with notice (which often seems not to be the case). They are awarded a default ruling because the person doesn’t show up to court to defend themselves.
Basically, I’m sure your friend who is a debt collector does things the right way and I don’t think anybody has a problem with that. It’s the secondary and tertiary collectors who are behaving badly.
I got a threatening call once from a collection agency about “my account” with a bank I’d never had any relationship with — the caller claimed to be from the bank itself, in fact. She sneered at my claims of ignorance, sighed with impatience at my questions, and asked me again and again what I was going to do about my debt.
When I finally got her to describe the form she had, it turned out to be the credit card account of a guy who’d once lived in my building in a different apartment. I pointed out the apartment number and different last name to her and she just sneered some more, saying it was MY account, because I had the same address. When I ended the call she said, “Well, Mr. [Many Jars], it SOUNDS like I’m going to have to turn this matter over to the ATTORNEYS…”
The next day I called the actual bank, and some terribly embarrassed employees apologized up and down to me and said I wouldn’t be hearing from the collection agency again (and I didn’t).
More recently, one of the main reasons I switched phone companies this year was to get away from the collection agencies calling someone named Danielle Walker. They’d swear they’d take my number of their call lists, but they never did. I’d come home to messages from a “debt collection law firm” (sheesh) seeking Danielle three times a week.
These people are basically threat spammers. They don’t care how poorly they cast their nets or what tactics they use as long as their methods generate a certain level of income.
Dan_Theman, nothing wrong with throwing out the old devil’s advocate argument, but I think you managed to poke a significant hole in it yourself - the kind of people your friend seems to pursue are out to cheat someone (or some company) and never intended to pay that back. I am no attorney, and I know there are some on the boards who can correct me if I am wrong, but my understanding is that intent to harm is a critical part of fraud, and fraud is a crime. And the courts and legal system are the place to address that.
The article I linked describes people in bad financial situations. At worst they are guilty of poor judgment, and often are people who just find themselves in a bad situation. That these people can find themselves jailed for no better reason than an inability to make payment on a debt is offensive to me. I am glad that some jurisdictions are working to correct the laws that allow this to happen, but the fact that people actually were ever jailed for this is disturbing.
I disagree with my father on many things, and this is one of them…
He is a well-off individual with a fairly unique name. That is there maybe 100 people nationwide with this exact combination of First + Last.
Well, someone with his name, living in the same city raked up credit card debt and hit the road. Different date of birth, different social number. Still, collectors would go directly to the phone book, find the only person in the city with such name and call my dad. So after years of dealing with collectors who would frequently get outright abusive, he now just pays entire loan every time he is called about it. I think he paid it about 3 or maybe 4 times. He does it so the collectors leave him alone.
The fact that he does this pisses me off, he is enabling these assholes. Doesn’t matter that this is trivial money for him, you should stand on principle and fight back.
@Sinij, apart from the annoyance of him being harrased by the debt collectors even though it is nothing to do with him, your dad is doing what all wealthy people should be doing, looking after those less wealthy. He is a perfect capitalist.
Now that is all wrong in many ways, as maybe the debter was just a con artist, and your dad is picking up his tab rather than deal with harrasment. So that is all wrong for sure (and i’d be tempted to call the debt collectors and tell them what is happening, you dad may unwittingly be creating a profile of himself as the actual debter, and all that may involve).
But in a truely functiong capitalist society, those that can should provide something for those that can’t. That keeps society stable and allows for growth. The kind of ‘greedy’ capitialism we have been running under for awhile just leads to social breakdown and eventual confiscation of the wealth held by the few wealthiest by all the vast impoverished pushed to desperation.
Zak, I’m all for charity, but there’s a big difference between ‘charity’ and ‘enabling fraudulent debt collectors’.
Especially when for lower paid people that means you WILL have lost your job…
I assumed the sarcasm meter was running for this…
your dad is doing what all wealthy people should be doing, looking after those less wealthy. He is a perfect capitalist.
If not then Zak is nuts crazy.
Not mutually exclusive options. Just sayin’.
Debtor prison only makes sense if the interest on the loan is nothing more then a fee to provide the principal to the borrower. However this still is, at best, a breach of contract. Nothing more.
In practice however the interest is frequently used as a risk tool. Higher risk leads to higher interest, which means that the whole “interest is only a fee” goes right out the window. The second a lender does this the loan turns from a service into an investment because by pricing in the risk the lender is admitting he already knows the loan might default.
For this reason I feel that debtors prison should ONLY be allowed for contracts that ask a standard government mandated fee/percentage. If your interest is anything more then that it’s not a loan, it’s an investment. This is the only way to prevent banks and their ilk from making crap loans they know won’t be repaid and tank the economy as a result.
Given Zak’s posting history in P&R, I feel like I’m justified in not giving him the benefit of the doubt.
Or to restate with the old adage, “Take out a loan for $1000, you the bank owns you. Take out a loan for $1,000,000, you own the bank.” As I believe the last few years have shown us, perfectly. Debtor’s prison has no place in society, except to tear away any illusions that it’s business that runs the world, not government.
Almost without exception, every single case I’ve seen involving creditor abuse can be prevented very simply. All that needs to happen is people need to be explained their rights and then have the courage to exercise those rights. Collections agencies notoriously act in violation of the law when attempting to collect debts, but they are so intimidating and people are so uninformed that the debtors don’t realize that they don’t have to stand for that shit. In fact, something as simple as writing a letter explaining that you are judgment proof can put a stop to the entire collections process and make it illegal for the collections agency to continue to contact you. There are also numerous non-profit attorneys that specialize in protecting debtors from creditor abuse. Victims can also usually recover punitive damages from collections agencies that violate their rights.
As someone who once worked in a law firm that specialized in collections I had to be intimately familar with the Fair Debt Collections Practices Act (available in PDF form here: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf). I highly recommend that everyone read up on their rights (and most states have an analogous law as well) so that they are informed in case something like what happened to Sinij’s father happens to you. Sorry to sermonize, but there are laws in place right now that protect people from this sort of abuse. What needs to happen is that people are informed.