Down with Debt: An Analysis of Unfair Debt Practices

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Abstract

This paper will present an in depth analysis of unfair debt practices as well address the

reemergence of so called debtors prisons in contemporary America. In the pages to follow the

author will present a thorough evaluation of the historical origins of these institutions, their

inhumane conditions, and legislation set in place to protect both the rights of the creditor and the

debtor. Furthermore, the author will cite numerous examples of pertinent case law which have

established the legal precedent for addressing matters of indigent debtors. Lastly, the author will

present and refute the basis of opinion for those who hold the belief that debtors prisons are

necessary institutions, and will suggest methods of legal and educational reform which may

assist in addressing this issue head on.

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Down with Debt: An Analysis of Unfair Debt Practices

Debtors Prisons?

What is a debtors prison? Debtors prisons are archaic institutions dating back to the

middle ages in which those who defaulted on their debts were essentially held for ransom in

inhumane facilities until members of their families agreed to pay the remaining debts plus

interest, often an impossible task for them to do. The issue is further stipulated through racial and

economic bias as generally speaking those imprisoned in these institutions are disproportionally

targeted groups such as minorities and lower class Americans. Though a historical and outdated

practice, debtors prisons still exists in nations such as Greece, The United Arab Emirates, and

more surprisingly the United States. The incarceration of debtors is a trend which continues to

grow overtime nationwide. Due to the vague nature of the laws concerning what constitutes the

willful failure to pay their debts that decision is often left to the discretion of the judges which

leads to legal leeway which could easily violate the rights of the defendant. The trend of cyclical

debt is easily acquired as it typically begins with a basic debt that in turn gives way to late fees

and high interest rates that leave the debt nearly impossible to repay which subsequently leads to

the imprisonment of these individuals. Many are arrested simply for failing to repay court fines

on unsolicited citations and fines (Serres, 2010).

Modern Reemergence

In the wake of the Great Recession taking place in the early 1990s many states turned

towards the criminal justice system as an alternative source of revenue to alleviate their budget

constraints. They did this by reviving the long discarded system of imposing high amounts of

debt upon individuals. According to Sobol (2015-1016) with the Maryland law review the
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growth in incarceration of individuals for failure to pay LFOs has accompanied the increase in

criminal justice debt. Indigents are jailed or imprisoned despite statutory and case law

prohibitions against incarceration based on their inability to pay their debts. The problem with

this system is that it taps into a greater underlying issue of racial bias and socioeconomic

disparity. In other words the poorest and most ostracized members of society are the ones being

targeted by this broken system. An article published by the Harvard Law Review indicated a

recent example of this backwards system of revenue by describing the experience of an Ohio

woman, Harriet Cleveland, who acquired a minor traffic infraction at a roadblock while

commuting her children to school ("State Bans on Debtors' Prisons and Criminal Justice Debt,"

2016). Cleveland unable to pay the fine in pull at that moment opted to pay portions at a time

while still transporting herself and her children to and from work and school. Outside collection

agencies inflated her fines and she incurred a substantially higher amount of debt and was

arrested unexpectedly. Unable to pay the now highly inflated fee she was separated from her

children for over 50 days in a county jail and upon release lost her job and still had substantial

fees to pay

Historical Context

Georgia Colony

The concept of the criminalization of debt, and heavy taxation is deeply ingrained in

American history, so much so that one of the original 13 American colonies founded for the sole

purpose of isolating indigent debtors. By the early 18th century British prisons were had an ever

increasing population of poor indebted individuals which led to terrible conditions within these

institutions which prompted British army officer and enlightenment era thinker James
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Oglethorpe, who suggested with the idea of founding a colony which could assist the poor and

indebted citizens of England circa early 18th century ("EstablishingtheGeorgiaColonyAmerican

MemoryTimelineClassroomPresentation|TeacherResourcesLibraryofCongress,"n.d.) . In honor

of then King George III, in 1733 the Georgia Colony was founded partially with the intention of

protecting the British colonies from infringements from neighboring Spanish and French claims

(a provision which acted as King Georges motivation for chartering the colony as he cared not

for the condition of English debtors); however, its true purpose was to experimentally test the

possibility of a sustainable society for imprisoned debtors, in turn detaching them from English

society. Unfortunately the colony proved to be an immense failure as its residents quickly

rebelled against the restrictive legislation enacted upon them.

Shays Rebellion

In 1786 the years following the American Revolution there was a separate rebellion

occurring on the home front. This one rooted in mistreatment of veterans, and financial hardship.

Daniel Shays, a farmer and Revolutionary War soldier of high appraisal, led a militia of fellow

farmers and laborers, and proceeded to attack various governmental institutions and tax

collecting offices. Upon return home from the war these farmers were heavily taxed and incurred

huge amounts of debt due to the destruction of their property during the years of the revolution;

furthermore, due to their agricultural profession years of unattended crops made it impossible for

these farmers to receive any feasible income. Properties were claimed by creditors, taxes we

levied, and tempers flourished. This exploitation of their service drove Shays and his militia to

demand change of the newfound government, and also prompted the creation of a stronger

system in lieu of the Articles of Confederation, thus leading to the drafting of the Constitution in

1787(Riggs 1194-1196). Though it would take years for the effects of the rebellion to take place
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the efforts of Shays Rebellion would permanently change the treatment of debtors in American

history, and we are able to observe budding forms of legislation better designed to protect the

rights of citizens.

Victorian England, Marshalsea, & Charles Dickens

Historically speaking there is no societal era that acts as a better example of the abuse and

mistreatment of the poor than Victorian England. Prior to the latter half of the 19th century the

poor working class of Victorian England faced harsh financial situations imposed upon them by

unfair legislation, and inflated prices. Tens of thousands of laborers were imprisoned for

defaulting upon their debts, and were confined to debtors institutions having all their assets

seized in process making up over half of the English prison population (Cammett,20122013).

Take into consideration that compared to neighboring western European nations who often had

progressive limits to the time that indigent debtors could serve, in England those sentencings

were often indefinite. Conditions became so severe that entire families would be confined to

these institutions, reproduce, and give birth in the dirty and malnourished facilities. Debtor

communities began to arise which led to an increase in child labor due to the fact the children

were the only ones permitted to leave in search for labor. This influx of child laborers which

spurred alongside the mid industrial revolution England led to the extremely poor labor

conditions, and subsequent child labor laws enacted all done in an effort to repay the debts of

their families. The most notorious of these debtor prisons was Marshalsea located in London

which housed the most indigent debtors. One of the more notable prisoners kept in this facility

was John Dickens, father to English novelist Charles Dickens who wrote the satirical publication

Little Dorrit ("Charles(JohnHuffam)Dickens,"2004). In which he criticized the contradictory

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nature of these institutions for imprisoning and individual for failing to repay a debt thus

preventing them from working, and permanently leaving them unable to repay their claim.

Australia Colony

One of the most notable examples of the ostracization of debtors lies in the founding of

Australia. Originally dubbed the colony of New South Wales, Australia was founded in 1788

with the intention of acting as a penal colony similar to the circumstances leading to the founding

of Georgia. British Naval Captain Arthur Phillip led the expedition alongside numerous ships

transporting English convicts. Over three fourths of the 1000 man expedition were criminals

most of whom were only given that status due to their financial status. On January 26th the penal

colony was formally established being an English colony citizens of the colony were obligated to

abide by English law. This being the case many of the harsher forms of legislation imposed on

the poorer population of England, were transferred over to the budding colony. In an article titled

Victorian Debt La Go Directly to Jail, the contributors Dick Gross & Carolyn Bond analyze the

legality of these Victorian Era laws particularly the Imprisonment of Fraudulent Debtors Act.

This act permits the submission of a fraud order on the behalf of the creditor which demands a

court summons of the debtor. Should the debtor fail to appear or refuse payment they face the

possibility of additional fines or as the name suggests, imprisonment. The act requires that

regardless of the defendants compliance to the issued warrants that the state magistrate issue a

warrant of commitment that calls for the indefinite imprisonment of the debtor until the debt is

paid in full presenting the defendant with the ultimatum of whether to immediately repay the

debt or risk permanent imprisonment (Gross&Bond,n.d.).

Ireland the Republic of Debtors

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Ireland is one of the few modern nations which has yet to reform its view of the criminalization

of debt. Numerous institutions exists for the sole purpose of imprisoning fraudulent debtors

including the Mount Joy correctional facility in Dublin. According to (Wells,1991) within the

past 5 years nearly two thousand individuals were jailed for their inability to repay outstanding

debts. Despite harsh criticisms from progressive reformers many of the outdated anachronistic

legislature is still in place; furthermore, they point out the sheer expense of housing these

prisoners which push an upwards of $1000 per week costing the state more than the debt is even

worth. Victims of oppressive debt laws also face social isolation as indecency is socially

degrading, Dublin resident James Boyce who was kept in the aforementioned Mount Joy prison

noted the conditions within e.g. no working plumbing, overcrowding, and disease and also noted

the difficult transition back into society following his service.

Relevant Legislation

14th Amendment

The Bill of rights exists as a safeguard to American citizens from oppressive government

infringes upon basic human rights. The fourteenth amendment guarantees every citizen equal

protection under the law stating that No state shall make or enforce any law which shall

abridge the privileges or immunities of citizens of the United States; nor shall any state deprive

any person of life, liberty, or property, without due process of law; nor deny to any person within

its jurisdiction the equal protection of the laws. ("14thAmendment,"n.d.)this means that any

citizen cannot be deprived of life, liberty, or property on the discriminatory basis of race,

religion, ethnicity, etc. this umbrella includes socioeconomic standing; Therefore, the existence
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of debtors prisons is inherently unconstitutional despite virtually all of them acting on a state

level. Because these institutions are targeted at lower income Americans in addition to the

observable bias towards minorities, they cannot under the supreme law of the land continue to

operate.

Fair Debt Collection Practices Act

The FDCPA, ratified in 1977, was designed to protect consumers from unfair debt

collection practices from third party agencies. These practices include contacting debtors outside

of specified hours, not ceasing contact upon the request of the victim, threatening legal action or

harm, or giving false information in regards to the status of that individuals credit report;

furthermore, according to studies conducted by nonprofit Urban Institute, these agencies were

much more likely to use aggressive collection tactics in areas of heavy African American or

Latino population, lower socioeconomic standing, and lower education merit (Crowell, 2016).

Despite the existence of protective legislation many still fall victim to the abusive methods of

these agencies. Annually debt collection agencies receive an upwards of $14 Billion these debts

come in a variety of different mediums aside from traditional consumer debt. Examples include:

medical fines, student loans, credit fees etc. Many of these collection agencies have in recent

years intertwined themselves with the criminal justice system. Making it legally permissible

for these agencies seize the assets of the indigent debtor; however, citizens remain unaware of

their protection from these aggressive collection tactics under the protection of the FDCPA. In

recent years a federal initiative has been set in place to counter the actions of unfair debt

collection practices through legislative action.

The End of Debtors Prisons Act of 2016

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The End of Debtors Prisons Act is a proposed bill originating from California House

Representative Mark Tanako. Congressman Tanako a vocal opponent to for-profit debt collection

agencies has taken the initiative to propose legislation capable of reforming the criminal justice

systems approach to debt collection. Elements of the proposed bill include ceasing federal

funding to state districts which permit the operation of debtor prisons, defining the term pay-

order probationer, and the bill itself acts as an amendment to the Omnibus Crime Code and Safe

Streets Act of 1968 (Tanako, H.R., 2016). The act has yet to be ratified by the House of

Representatives; however, it has garnered bipartisan (chiefly Democratic) support from other

House members.

Bearden v. Georgia (1983)

In September of 1980 petitioner Bearden, the recipient of stolen property, was formally

indicted on the felonious charges of theft and burglary. Due to the state of Georgias First

Offenders Act (Ga.Code Ann. 27-2727) the petitioner was not issued a guilty verdict from the

trial court instead he was sentenced to a total of four years of probation with the condition that he

also pay a $500 court fine, and $250 of restitution for the stolen property. The required that $100

be paid that day an additional $100 be paid the next day, and the remaining $550 be paid over the

course of 4 months. The petitioner successfully paid the first two fines; however, due to

extenuating circumstances lost his employment and due to his lack of education, and marketable

skills was unable to find another. Because the petitioner was not receiving income for this period

he became unable to pay the court issued and notified his probation office that his payment

would be late due to his financial situation. The state revoked his probation status and demanded

that he spend the remainder of the probationary period in prison. Petitioner then filed a hearing to

the Georgia Court of Appeals who rejected his claim that the ruling represented a violation of the
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Equal Protection Claus of the 14th Amendment. Further review was denied from the Georgia

Supreme Court. Following this ruling courts have decided that they may not revoke an

individuals probation, or imprison them for their inability to pay court fees if no evidence exists

that shows the willful disobedience of the court or showing that they have not made a bona

fide effort to retrieve employment (Bearden v. Georgia, 1983). the Fourteenth Amendment

requires that the sentencing court inquire into the reasons a defendant has failed to pay.'

Tate v. Short (1971)

The 1971 Supreme Court Case Tate v. Short was a case in which the petitioner Preston

Tate unable to pay nine traffic offenses totaling to $425. He was convicted in Houston Texas

Corporate Court, and issued a prison sentence of 85 days to work off the remainder of his debt at

a rate of $5 a day at a labor prison, then a permissible practice through Texas law. After 21 days

of incarceration he submitted a writ of habeas corpus which was denied. The presiding court over

that decision, the Texas Court of Criminal Appeals, upheld the decision to imprison him under

the Houston Code which reads as follows:

"Each person committed to the county jail or to the municipal prison farm for nonpayment of

their fine arising out of his conviction of a misdemeanor in the corporation court shall receive a

credit against such fine of five dollars ($5.00) for each day or fraction of a day that he has

served." (L.Goldfarb,1971).

Tate appealed that ruling to the Texas Supreme Court which held that imprisoning an individual

for their inability to pay a fine is Unconstitutional discrimination against the poor. Their

indigence should not act as the sole determination of their guilt, and Standards of imprisonment

must fall equally on all defendants irrespective of their economic conditions. Meaning that
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socioeconomic class is not the sole consideration for debt imprisonment, this case acted as a

spiritual predecessor to Bearden v. Georgia and is oftentimes cited as its precedent.

Kennedy v. City of Boloxi (2015)

This class action suit filed by the American Civil Liberties Union challenges the arrests of

multiple impoverished individuals by the city of Biloxi, Mississippi due to outstanding court

fines. Despite the growing trend in the city of increasing poverty the municipality refuses to

address the issue and instead chooses to pursue prosecuting these individuals. The case primarily

focuses on Qumotria Kennedy who had charges brought against them for failure to pay traffic

fines. She was jailed without being granted a court hearing violating her civil liberties As a result

of her imprisonment she lost her job further rendering her unable to pay the already existing fees.

This is just one example of thousands of Americans experiencing the same broken system. The

case resulted in a proposition for a series of reforms to the for-profit debt system. The case was

settled by an agreement with Kennedy and Boloxi chief of police John Miller. The parties agreed

on the following settlements: Judges must place a defendants income as a factor of consideration

prior to setting an individuals bail or allocating fines, reforming career training to better prepare

public defenders for cases of this nature, and reformation of for profit probation institutions.

Fuentes v. Benton County (2016)

In a case quite similar to the aforementioned Kennedy v. City of Boloxi, In October of

2015 the ACLU filed a class action suit against Benton County, WA for the unconstitutional

imprisonment of individuals who failed to pay court imposed debts. The money received through

the extortion of these debts went towards funding services and providing additional revenue

towards the county. Benton County had the habit of imposing court fines up to thousands of
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dollars with complete disregard the individuals ability to pay those fines. At these sentencings

the defendant is given no reasonable opportunity to explain their financial status. This countys

policy are in blatant violation of the both the Federal and Washington state constitutions. Which

have already established that an individual may not be incarcerated for their inability to pay

county mandated fines?

Contrasting Opinion

A distinction must be made between consumer and non-consumer debt. Many would

argue the legality of institutions set in place to benefit the creditor as they feel no compelling

obligation to supplant the debt incurred by fiscally irresponsible individuals via tax payments;

however, the type of debt which they are often describing is consumer debt, or debt incurred by

the purchase of consumer goods or services, furthermore consumer debt is entirely preventable,

and is indicative of poor financial decisions on the behalf of the debtor. Conversely there exists

non consumer debt, which is often the debt incurred by individuals in these facilities. Non-

consumer debt is any debt incurred via required expenses such as medical bills, utilities, or

natural disaster, and is oftentimes unpredictable and can be further agitated by outside factors

such as lack of insurance, lack of supplemental income etc. Consider the following example.

Jane is the primary source of income for her family since the death of her husband, and is also

the caretaker for her elderly mother. Jane suffers an accident one day which requires medical

attention and misses work because of it. For the time where she is incapacitated she must hire a

living assistant to help her mother while she recovers. Once she has recovered she must still

attend physical therapy she has incurred tremendous debt due to the cost of the assistant,

uninsured medical fees, physical therapy, in addition to basic expenses such as food, water,

electricity, and rent. Due to her absence she was fired by her job and now has no income to
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provide for her family or pay her expenses. Her credit deteriorates as a result and she now faces

potential legal repercussions. Is it just to imprison her for her outstanding debt? This is but one

example of a continuing trend of uncontrollable debt which people are being punished for, and

the aforementioned question is one that we as a society must be able to answer. We must

determine our attitude towards how we should treat debtors.

Potential Solutions

Theres a necessity for educational reform in regards to debt in recent years there has

been a slight initiative to educate students on basic financial management; however, these

courses are often only semester courses that do not emphasize the dangers of incurring debt.

There should be a mandate to incorporate a financial component to basic social studies courses

required of students such as government, civics, or history; furthermore, there exists a need to

clarify the existing vagueness of laws pertaining to the criminalization of debt, and present more

definite punitive acts to respond to indigent debtors besides indefinite imprisonment. The

Constitution fails to explicitly state formal protections against infringements of individual rights

in relation to criminal debt nor does it explicitly state the illegality of debtor facilities; however,

layered in its amendments particularly the 14 th are protective clauses embedded within which are

in need of further extrapolation.

Conclusion

The criminalization of debt is a concept in need of immediate reform the first, and most

important of which being the abolishment of debtor prisons, and for profit debt collection

agencies. These inhumane institutions bear no place in our modern society instead there exists a

necessity for alternative thinking which would provide enlightened solutions to an idea of the
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dark ages. These solutions arent meant to prove bias towards the debtor at the expense of the

creditor. Rather they are designed to protect the fundamental rights of all parties involved while

upholding the values of American society.

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