From Wall Street Schemes to Debtors' Prisons--Cities Confront Regressive Debt Collection

After years of watching cities finance their budgets and beat up on the poor by throwing people in jail for unpaid fines, tickets, and other public debts, the U.S. Department of Justice is finally taking action. 

Macomb_County_jail_Stojcevski102115.pngAccording to Matt Apuzzo of the New York Times, in a memo released last week, Vanita Gupta, top civil rights prosecutor at DOJ, along with court access program coordinator Lisa Foster, "warned against operating courthouses as for-profit ventures." 

The memo makes a genuine effort to contextualize individual debt as part of a system of socioeconomic inequality, and takes local law enforcement and city governments to task for undermining the rule of law: 

Individuals may confront escalating debt; face repeated, unnecessary incarceration for nonpayment despite posing no danger to the community; lose their jobs; and become trapped in cycles of poverty that can be nearly impossible to escape. Furthermore, in addition to being unlawful, to the extent that these practices are geared not toward addressing public safety, but rather toward raising revenue, they can cast doubt on the impartiality of the tribunal and erode trust between local governments and their constituents.

And the DOJ issued the following guidelines: 

(1) Courts must not incarcerate a person for nonpayment of fines or fees without first conducting an indigency determination and establishing that the failure to pay was willful;
(2) Courts must consider alternatives to incarceration for indigent defendants unable to pay fines and fees;
(3) Courts must not condition access to a judicial hearing on the prepayment of fines or fees;
(4) Courts must provide meaningful notice and, in appropriate cases, counsel, when enforcing fines and fees;
(5) Courts must not use arrest warrants or license suspensions as a means of coercing the payment of court debt when individuals have not been afforded constitutionally adequate procedural protections;
(6) Courts must not employ bail or bond practices that cause indigent defendants to remain incarcerated solely because they cannot afford to pay for their release; and
(7) Courts must safeguard against unconstitutional practices by court staff and private contractors.

This is big. The ACLU has this to say about such debt collection methods: 

Nearly two centuries ago, the United States formally abolished the incarceration of people who failed to pay off debts. Yet, recent years have witnessed the rise of modern-day debtors' prisons—the arrest and jailing of poor people for failure to pay legal debts they can never hope to afford, through criminal justice procedures that violate their most basic rights.

But why have courts and jurisdictions been doing this indefensible thing? One reason is certainly that those jurisdictions have banked on the probability that nobody would stand up for the poor. If nothing else, the DOJ directive provides some hope that the voiceless will have a bit of a voice. But economically speaking, a major reason for the practice of jailing debtors is that cities, counties, and states have lost hundreds of billions of dollars to Wall Street--in interest, fees, termination charges, risky derivatives and interest rate swaps, and the list goes on. 

The mainstream media has reluctantly recognized both sides of the story, linking fiscal shortfalls to cities jailing debtors

The high rates of unemployment and government fiscal shortfalls that followed the housing crash have increased the use of debtors' prisons, as states look for ways to replenish their coffers . . .  "It's like drawing blood from a stone. States are trying to increase their revenue on the backs of the poor."

. . . but few sources have interrogated the narrative from start to finish--bad Wall Street deals at the front end, jailed poor people at the back end. That remains the task of groups like the Public Banking Institute, and our What Wall Street Costs America project. Because while everyone knows there's a cost, tracking the human element of that cost requires explicit acknowledgment that, under a paradigm of high-interest, high-cost private financing of public goods, some people are getting rich, while others are losing everything. Kudos to the DOJ for treating one of this paradigm's most horrid symptoms. Now let's strike at the root of the disease itself. 



Become a Member New Economy Academy Find a Chapter


get updates