The United States outlawed federal imprisonment for debt in 1833, and most states did at the same time.  Prior to that, incarceration for debt was a widespread practice.  Today, prison for debts other than taxes and failure to support a minor child are rare, but may be making a comeback.

The Minneapolis-St Paul Tribune ran a recent article regarding ordinary people who found themselves tossed in jail for failure to pay consumer debt.

“It’s not a crime to owe money, and debtors’ prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.”

“Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals. Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect.”

In Illinois and Indiana, people have been jailed for relatively small debts.  A man was jailed until he could come up with $300 toward a lumberyard bill.  Part of the reason for this is the growing number of very aggressive firms that purchase bad debt and pursue any and all tactics to collect.  These debts are purchased for a few cents on the dollar, and charged back to the consumer at full boat plus interest, attorneys’ costs and the like.  They take the person to court and use friendly courts for enforcement.  Some of them are racking up huge profit margins.  To wit:

Portfolio Recovery Associates of Norfolk, Va., a publicly traded debt buyer with the biggest profits and market capitalization, earned $44 million last year on $281 million in revenue — a 16 percent net margin. Encore Capital Group, another large debt buyer based in San Diego, had a margin last year of 10 percent. By comparison, Wal-Mart’s profit margin was 3.5 percent.

Todd Lansky, chief operating officer at Resurgence Financial LLC, a Northbrook, Ill.-based debt buyer, said firms like his operate within the law, which says people who ignore court orders can be arrested for contempt. By the time a warrant is issued, a debtor may have been contacted up to 12 times, he said.

Let’s just say that it’s not that you don’t want to pay this bill, it’s that you can’t.  With an actual unemployment rate of nearly 18%, approximately 1 in 6 Americans is struggling to keep a roof over their heads and food on the table.   If you have had to move or go to a shelter, your address and phone number could be in a state of flux.  Here are a few stories from people on this matter:

One afternoon last spring, Deborah Poplawski, 38, of Minneapolis was digging in her purse for coins to feed a downtown parking meter when she saw the flashing lights of a Minneapolis police squad car behind her. Poplawski, a restaurant cook, assumed she had parked illegally. Instead, she was headed to jail over a $250 credit card debt.

Less than a month earlier, she learned by chance from an employment counselor that she had an outstanding warrant. Debt Equities, a Golden Valley debt buyer, had sued her, but she says nobody served her with court documents. Thanks to interest and fees, Poplawski was now on the hook for $1,138.

and

“Thank God, the police had mercy and left me and my baby alone,” said Nielsen, who later paid the debt. “But to send someone to arrest me two weeks after a massive surgery that takes most women eight weeks to recover from was just unbelievable.”

Haekyung Nielsen, 27, of Bloomington, said police showed up at her house on a civil warrant two weeks after she gave birth through Caesarean section. A debt buyer had sent her court papers for an old credit-card debt while she was in the hospital; Nielsen said she did not have time to respond.

Her baby boy, Tyler, lay in the crib as she begged the officer not to take her away.

“Thank God, the police had mercy and left me and my baby alone,” said Nielsen, who later paid the debt. “But to send someone to arrest me two weeks after a massive surgery that takes most women eight weeks to recover from was just unbelievable.”

Or, how about this one?

“Many debtors, like Robert Vee, 36, of Brooklyn Park, get a second surprise after being arrested — their bail is exactly the amount of money owed.”

Here’s a list of the top five companies that employ the courts to collect their debts.  The number after their name is the number of warrants issued for them in Minnesota, per the Star Tribune:

Unifund CCR Partners Cincinnati Debt buyer 247

Portfolio Recovery Assoc. Norfolk, Va. Debt buyer 130

Debt Equities LLC Golden Valley Debt buyer 92

Capital One Bank McLean, Va. Credit card issuer 53

Lakes Gas Co. Forest Lake Propane supplier 41

Now, don’t get me wrong.  I honestly believe that people should pay their debts when due, or make reasonable arrangements to do so.  Collect the money, mess up their credit, repossess or whatever – just don’t criminialize a civil matter. Police, jails and other public entities are being used to make a profit for private companies. Most municipalities are having trouble rendering adequate city services, and most jails are crowded with criminals.  How much are these cities spending incarcerating some poor soul who lost his/her job and their home, and was unaware that they had a court date regarding their MasterCard bill?  Down here, people get probation for some pretty sordid crimes.  Shall we gives petty criminals more probation so that we can incarcerate people who didn’t pay their gas bill?  Are the rest of us going to pay escalating taxes so that we can accommodate them in the Greybar Inn?  Also, some municipalities bill people for their incarceration expenses.  How are these going to be paid?  All I can say, is OMG.

This is an open thread.