Debtors prison making a comeback?

According to The Wall St Journal judges have signed off on more than 5,000 arrest warrants since the start of 2010 in nine counties for individuals who have either failed to or refuse to pay back debt they owe. More than a third of all U.S. states allow borrowers who can’t or won’t pay to be jailed.

20 judges in interviews conducted across the country said the number of borrowers threatened with arrest in their courts has surged since the financial crisis began.

There is a growing backlash to what is seen as sloppy, incomplete or even false documentation that can result in borrowers being arrested without even knowing they were sued. The debt-collection industry says that those type of errors are few and far between.

Earlier this month, Washington state’s House of Representatives passed by a 98-0 vote a bill that would require companies to provide proof a borrower has been notified about lawsuits against them before a judge could issue an arrest warrant. A trade group representing debt collectors says the bill is needed because some companies are having borrowers improperly arrested.

“Before we take away a person’s freedom, we want to ensure that there are procedural safeguards,” said Peter Evans, a Palm Beach County, Fla., state-court judge who proposed a training session on the issue for dozens of new and sitting judges in Florida.

Judges elsewhere are issuing fewer debt-related warrants because law-enforcement officials complained those cases take resources away from pursuing violent offenders.

In September, the Illinois Department of Financial and Professional Regulation issued an order to revoke the license of Easy Money Express Inc. The Paducah, Ky., payday lender had arrest warrants placed on at at least four of it’s customers, one of whom was incarcerated for five days in Carbondale, Ill., over a $275 debt. The lender “exploited the court system to obtain the arrest and incarceration of its customers,” said Sue Hofer, a spokeswoman for the agency. The company declined to comment but is fighting the state’s proposed ban. llinois regulators are investigating the use of warrants by other debt collectors and financial firms doing business in that state.

Arrest warrants generally can be issued if a borrower defies a court order to repay a debt or doesn’t show up in court. Retailers, credit-card issuers, landlords and debt collectors are the most frequent seekers of such orders, according to court filings and interviews with judges and lawyers.

Last year, officials in McIntosh County, Okla., south of Tulsa, issued about 1,500 debt-related arrest warrants, up from about 800 a year before the crisis, according to a court clerk. More than 950 borrowers got similar warrants in Salt Lake City courts last year. Maricopa County, Ariz., officials issued 260 debt-related warrants in 2010.

Some judges are worried that the jump in debt-related arrest warrants is creating a modern-day version of debtors’ prison. The practice ended in 1833 after decades of controversy, since borrowers owing as little as 60 cents could be held indefinitely in squalid jails until they paid off their debt.

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