Jailed for a $425 Debt: The Criminalization of Poverty Reaches New Heights

A series of recent articles from the St. Louis Dispatch has been documenting a disturbing trend in Missouri: the return of the debtors’ prison. Debtors’ prisons are technically illegal in all states, and largely regarded as a relic of the past. Still, Missouri and other states are increasingly jailing people for failure to pay private debts by relying on a technicality that permits incarceration when the debtor misses a court date. The Dispatch’s most recent installment focuses on the role of payday lenders in enforcing debts through the courts, resulting in additional fees and deep humiliation for customers who end up spending time behind bars. Payday lenders, however, are not alone in enforcing such serious penalties for an inability to repay a debt; moreover, this trend can be understood as but one facet of the larger criminalization of poverty.

Here’s how the process works: once a creditor gets a civil judgment against a debtor, the debtor must appear in court for an “examination” to determine if they have any assets the creditor may seize. If a debtor doesn’t appear, the creditor can ask for a “body attachment,” which is “an order to arrest the debtor and hold him or her until a court hearing, or until the debtor posts bond.” These bonds are commonly assessed at the same level as the underlying debt, and turned over to the creditor if they’re paid—in essence “turning publicly financed police and court employees into private debt collectors for predatory lenders.”  Additionally, because debtors are regularly required to make multiple court appearances, the chances of missing one and facing jail time are significant. Some states, such as Illinois, have restricted body attachments for debt, but in Missouri they continue unchecked.

The Dispatch’s most recent article describes a woman who took out a $425 payday loan, missed a hearing, and wound up in jail with bail set at $1250. Two weeks after the body attachment, her original debt had grown to $855 due to interest and legal fees. Though she only spent three days in jail, three days is more than long enough to risk losing a job and becoming even more financially vulnerable; furthermore, the woman described the experience of being incarcerated so unexpectedly as “horrible” and “traumatic,” putting her off payday loans for good.

As we’ve written before, the role of payday lenders in low-income communities is more nuanced than simply dismissing them as “predatory,” end of discussion. Without a doubt, the often excessive interest rates tied to payday loans can cause consumers to become trapped in a devastating cycle of debt if they’re unable to repay the loan in time—and lenders are well aware of this. There is evidence that payday lenders are strategically located in low-income neighborhoods, and those making less than $40,000 a year are significantly more likely to use a payday lender.  

Nevertheless, these businesses also grew in response to the lack of affordable credit options and savings products in the mainstream financial services market. Perhaps more importantly, a family can’t predict when it will encounter an emergency—a car accident, a hospital stay— that necessitates access to immediate cash. With over 43% of U.S. households currently living in liquid asset poverty (i.e., without enough in savings to survive for three months at the poverty level in the absence of any income), it’s understandable that families turn to payday lenders in times of need, despite often being aware of the unfavorable terms of the loan.

Furthermore, what’s most despicable here is not the loan itself, but the enforcement mechanism, which puts the customer’s job security, personal life and emotional well-being at serious risk in the name of a few hundred dollars. While people should be responsible for their debts, putting customers in jail because they can’t make a payment only exacerbates the situation and could easily be characterized as an abuse of the legal system. And payday lenders are not alone in pursuing enforcement actions that result in the imprisonment of people solely because of their debt. In some states, where criminal justice debt has increased markedly due to “user fees” explicitly intended to fill gaps in state budgets, former offenders have the “choice” to serve more time in prison after completing their sentence as a way to reduce their debt burden—notwithstanding the fact that incarceration results in significant costs for the state. In both circumstances—both private loan debt and criminal justice debt—the difference between sleeping in your own bed and sleeping in a cell depends entirely on access to resources.

The new debtors’ prisons are perhaps the most literal example of the “criminalization of poverty” we’ve been witnessing over the past few years. Barbara Ehrenreich has offered a litany of examples of the way the status of being poor has itself become a sort of crime. From drug testing of TANF recipients to bans on sleeping in public (“criminal trespassing”) to ordinances forbidding sharing food with hungry people, the narrative of blaming the poor for their own circumstances has reached new heights. Of course, particularly at this moment in time, this is simply illogical, since it’s widely acknowledged that the recession has caused both poverty and homelessness to increase dramatically. But I think we know by now that public policy is not always rooted in logic, and there will always be people trying to explain poverty away by pointing to a series of bad personal choices. It’s hard to understand what the end goals of these policies are, but their message rings loud and clear.

Locking people up because they’re short on cash is a disgrace. Preventing churches from giving food to the homeless is just shameful. I’d like to think that public policy can still make room for compassion, but first we have to stop conflating poverty with criminality, and confusing need with personal failure.