A Seattle-area state lawmaker wants to end the practice by collection agencies of having debtors thrown in jail, then seizing their bail money to pay off the debt.
The House Business and Financial Services Committee has scheduled a hearing Thursday on a bill introduced this week by first-term State Rep. Derek Stanford, D-Bothell, to end what he calls “modern debtors’ prison.” The original version of HB 1864 — which Stanford says was inspired by my reports last year for Crosscut and Northwest Public Radio — would have barred collection agencies from asking judges to issue civil bench warrants for the arrest of debtors who fail to show up for hearings.
Today (Feb. 16), he announced a new version that would preserve the possibility of bench warrants; his office said the original provision would have taken away a "legitimate remedy" for collection agencies. The substitute bill still would require more detailed notice to debtors and would prohibit collection agencies from asking judges to forfeit debtors' bail money to them.
Testifying at the hearing will be Janelle Leslie, a mother of three living near Newport, who was featured in my reports (Doug Nadvornick co-reported the radio piece). Last July, she was arrested and jailed overnight, in a cell with three drug defendants, in connection with a 2006 debt judgment stemming from an unpaid $1,000 medical bill for her son. She said she had been living out of state for several years and knew nothing about the case or why she was being arrested.
Stanford said his bill would fix loopholes used by collection agencies that are “bad actors” to abuse the system. “I think this will reduce the number of people jailed in connection with civil debt,” he said. He’s in talks with the Washington Collectors Association, a trade group, and hopes to gain the group’s support for the new rules. David Grimm, the group’s president, said it’s too soon to comment on the bill’s specific language.
In October, Crosscut reported that even though the constitutions of Washington and most other states explicitly prohibit jailing people for debt, many people in Washington and throughout the country are still being incarcerated in civil debt cases. They typically are charged with contempt of court for failure to appear at a hearing to examine their finances and determine what assets can be seized.
In many cases, judges order that their bail money be turned over to the collection agency to satisfy their unpaid debt — a practice the Federal Trade Commission has urged Congress to halt. Sometimes bail is set at the same amount as the judgment debt, which makes the court look like an arm of the collection agency. Using bail money to satisfy judgments allows collectors to sidestep rules that block them from seizing exempt assets such as Social Security payments. And, the FTC said, it gives the public “the misimpression that judgments debtors are being incarcerated for failing to pay the judgment creditor.”
Stanford’s bill, which borrows from proposals by the FTC and U.S. Sen. Al Franken, D-Minn., would require that courts and collection agencies provide fuller information to debtors in notifying them about court dates — including the name of the original creditor, proof that it’s a valid debt, and the amount of the debt broken down by principal, interest, fees, and other charges.
“A lot of people aren’t showing up for hearings because they don’t have enough information and they don’t recognize the debt or think it’s just junk mail,” said Stanford, a statistician who works for Globys in Seattle. “This would add more notification requirements to make sure they can respond appropriately.”
There are no statistics available on how many people in Washington are jailed for contempt of court in civil debt cases. But observation of the Yakima County District Court’s debt collection calendar hearings showed that bench warrants and arrests are routine. Experts say these practices are common in some other Washington counties as well.
Defenders of the practice say it’s sometimes necessary for judges to issue bench warrants to enforce their orders for debtors to appear — though violators of other types of civil court orders are rarely if ever arrested. Collection agencies argue this is the only way to get the attention of people who have ignored repeated notices to pay up or appear in court.
But attorneys who represent debtors say incarcerating civil debtors, even briefly, is abusive, unfair, and often legally flawed. They say collectors are using the bench warrants as a way of harassing and pressuring people who often owe less than $2,000 and whose debts frequently arise from unpaid medical bills.
Stanford’s bill, which amends the state Consumer Protection Act, would not create a new legal cause of action against collection agencies that violate the provisions. But he said debtors would be able to sue for alleged violations under the existing authority of that act.
Janelle Leslie’s story, he said, really brought the problem home to him. “In this economy, when people are dealing with medical debt, it just seems like a real injustice to haul them off to jail.”
