Time for the Feds to Step In: Illegal and Abusive Debt Collection Threatens to Exacerbate Racial Inequality

In 2012, a pregnant woman in Colorado was arrested and jailed after being pulled over for a traffic violation. The reason? A debt collector went to court for a warrant for her arrest—not because she committed any crime, but because she apparently had not answered written questions in a proceeding to collect unpaid credit card debt. Her bond was set at $5,806—an exorbitant sum that just so happened to be the full amount of the debt she owed plus interest. Unable to pay, the woman spent a night in jail in yet another modern twist on the banned practice of debtors' prisons.

This story is part of a deeply troubling trend: private companies involved in debt collection are enlisting the power and prestige of courts and prosecutors to coerce people into making civil debt payments that they cannot afford or are not obligated to make. Last week, the ACLU and the Brennan Center for Justice at New York University School of Law sent a letter requesting the Consumer Financial Protection Bureau to investigate and root out these abusive practices under its authority to enforce the Fair Debt Collection Practices Act (FDCPA) and other consumer financial protection laws. Our letter expresses concern about companies' improper efforts to secure debtors' arrest and jailing to coerce consumer debt payments, as well as other harmful practices. The Bureau should make clear that the misuse of judicial power and prosecutorial authority for private gain is precisely the type of deception and abuse that Congress sought to ban in passing the FDCPA.

The practices we identify are not only illegal, they also likely exacerbate what is, according to a 2011 Pew Research Center study, the largest racial wealth gap experienced in our country in the past century. That study found that the median wealth of white households has expanded to 20 times that of black households and 18 times that of Hispanic households. The last decade's racial discrimination in subprime lending—discrimination that the ACLU is challenging in Adkins v. Morgan Stanley—only worsened the problem by deliberately targeting minorities for loans that exposed them to higher rates of foreclosure and accompanying loss in wealth.

It is no surprise, then, that preliminary data suggests that communities of color may be more vulnerable than others to aggressive and abusive debt collection practices. A 2010 report found stark racial disparities after analyzing 2008 caller data from a legal hotline for people sued by a creditor or debt buyer. The study found that 69% of people sued by debt buyers were black or Latino, and that 66% of meritless cases were brought against black or Latino clients. A 2013 report found that the top six New York zip codes with the highest concentrations of default judgments against alleged debtors in 2011 lawsuits have populations that are over 90% non-white. (And on a micro-level, it is worth noting that the pregnant woman arrested and jailed in Colorado is Latina.) These figures support our concern that racial and ethnic minorities are disparately impacted by abusive and illegal debt collection practices, and that these practices threaten to worsen our country's already shameful racial wealth gap.

For these reasons, we call on the Consumer Financial Protection Bureau to be a leader in identifying race disparities resulting from abusive debt collection and to use its enforcement powers under federal laws to challenge practices that intentionally discriminate or result in that effect. After all, these practices should be abhorrent to the federal agency tasked with the mission to ensure that consumers are protected from not only deceptive, unfair, and abusive practices, but ones that discriminate as well.

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Vicki B.

It's precisely the type of deception and abuse that Charles Dickens wrote about in 'A Christmas Carol.'

Kimberly

Geico in VA does the same thing. Not only do they get a judgement against you for debt, but they then get a judgement against you without your knowledge and put a lien on your driver's lic. and won't let you be a legal driver if you don't pay them the money they want.

This was after I beat the ticket blaming me for the accident in a local court of law. 5 yrs later I find out they got a judgement against me in my absence for 10,000 and my va drivers lic was locked down until I negotiated with their lawyers and they released my lic.

Big business is crooked and buys their place in govt. Its unacceptable and I think its about time the ACLU actually does something with all this money people have been giving you! You won't help people who need it, so why bother even posting this. You are just as bad as the businesses you attack. You aren't about helping individuals.

Anonymous

The court, not the debt collector, issues a bench warrant when a party to a lawsuit fails to comply with a court order. The argument that these firms are targeting specific races purposefully is loosely tied and without any basis. These firms do not have demographic information on the debtor and even if they did, it would be meaningless to them. I would hope the ACLU would do a bit more digging on this issue before spending my hard earned donations fighting for it.

Anonymous

Your implication is that what the debt collector did was predatory and illegal. Your insinuation is misguided though certainly compassionate. When someone ignores a court order to simply respond to questions legally posed to them in either a civil or criminal action, the court has the power to enforce its orders and to issue an arrest order for contempt of court for failure to respond. Generally, it is extremely rare that the court would do so unless the individual was personally served with the motion for contempt (this is after an attempt or two to get the individual to respond without involving the court) and yet the individual still ignored the rules of civil procedure and the subsequent court order ordering the individual to respond to the creditor's/debt collector's questions ( these questions probably pertained to whether or not the individual was hiding assets in an attempt to evade payment of a legally obligated debt). This is not predatory or illegal. Most likely the individual had TWO (2) opportunities to comply and failed to respond to the collector OR the court in any manner. Civil court orders are binding as criminal court orders with no racial overtones at all(hopefully). Ignore a court order, you go to jail. If the individual had responded according to law, there would be no contempt order issued. Very simple.

Anonymous

It sounds like the debt collection agency had gotten a judgment against the woman. Colorado is notoriously backwards and really lacks much compassion for its own citizens. Moving on, this judgment has attached to it rules that allow a plaintiff to serve interrogatories (forced acquisition of financial information) that will provide the collection of money from various assets. If there was anything done incorrectly, say, service of the summons, misrepresentation of any kind on the part of the debt collector, these could be a cause for dismissal of the case.

Anonymous

The last time *I* checked 'predatory lending' was a BAD thing and against the rules, even for the over-glorified creditors who do it.
Some people act like anyone at any level of finance excrete gold bricks and defend any stupid--- thing they do.
I have no use for either the defenders or the culprits.

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