Government as Lone Shark Collector
I’ve written, periodically, about my belief that debt is the new method of indentured servitude. If we can get young adults to enter the working world with hundreds of thousands of dollars in education loans, some additional thousands in credit card debt (incurred on the expectation of profitable labor after graduation), with car loans a near necessity, and housing options pushing them toward entering into mortgages, we’ve taken away a great deal of the freedom that economic independence imparts. The situation gets chilling if this story is anything more than journalistic sensationalism of a few peculiar cases:
It’s not a crime to owe money, and debtors prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts.
In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.
Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals. Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect.
Whether a debtor is locked up depends largely on where the person lives, because enforcement is inconsistent from state to state, and even county to county.
In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man “to indefinite incarceration” until he came up with $300 toward a lumber yard debt.
I expect we’ll see this trend expand as the federal government takes on more responsibility in the finance sector, including the bailing out of too-big-to-fail banks. The reality that every loan shark has always known is that some debts cannot be collected. That’s the risk of lending. If the government begins stepping in to jail those who fall behind, the public is taking the role of the crooked-nosed debt collector banging on the door and the balance of risk and benefit that makes lending a healthy application of free will and mutual benefit begins to evaporate.