Creditors’ Use of Consumer Debt Criminalization Practices and their Financial Abuse of Women

Abstract

Hospitals ... [send you] a $100,000 bill on something, [but] they are not calling up the sheriff's department to go in and arrest the person because the bill wasn't paid. --Jana Dinatale, charged with and arrested for the felony of failing to return rental property. (1) INTRODUCTION In 1998, while a practicing attorney, helped a legal aid client file for Chapter 7 bankruptcy relief because she was no longer able to manage her debts. As required under bankruptcy law, had to help her file a list of all her creditors, as well as a statement of intention, which provides a snapshot as to how certain will be treated. My client, Brenda, a single mother, became fearful as discussed with her the possibility of not paying a rent-to-own (RTO) company from which she had obtained a living room set. She told me that we had to pay the company because, as she said, I don't want them to put me in jail. was completely dumbfounded that she thought that could really happen to her. explained to her that the RTO company could not put her in jail for failing to pay a civil debt. But she insisted we had to pay because, I'm not going to jail. Little did know was really the ignorant one. Debtors' prison is viewed by most as an archaic system revealed to the world in a Charles Dickens novel, and abolished in the 1800s in the United States. To many cash-strapped consumers, however, the debtors' prison is alive and well in the twenty-first century. My research has uncovered routine abuse of the criminal justice system by not only rent-to-own companies, (2) but payday lenders, (3) car title lenders, (4) and auto dealerships. (5) Over the years, advocates and academics have exposed these creditors for perpetrating unfair and deceptive practices as well as charging usurious interest rates. (6) Moreover, lawmakers have passed laws and regulators have filed enforcement actions to curb abuses by RTO dealers, car title lenders, auto dealerships, and payday lenders, collectively referred to hereafter as the lenders. (7) Federal regulators and state lawmakers are continuing their efforts to protect consumers from high-cost lenders; (8) however, little attention has been paid to the need for additional legislation to protect consumers from abusive debt collection practices that terrorize consumers with arrests. (9) While male and female consumers can both be subjected to abusive debt collection practices, this Article focuses on women. This Article posits that consumer debt criminalization tactics, i.e., initiating or threatening to initiate criminal action against consumers, appears to be more effective in coercing women into paying debts, sometimes even paying phantom debts (e.g., they do not owe). (10) Various types of companies involved in issuing consumer credit resort to criminalization tactics to coerce payments from consumers. (11) This Article, however, focuses on two--RTO dealers and payday lenders--because one can find numerous instances of their alleged manipulation of criminal laws to intimidate consumers into paying debts. (12) Part describes criminalization tactics used by some RTO companies to falsely accuse their customers of essentially stealing merchandise when they can no longer make payments. (13) Such criminalization tactics belie the RTO industry's claims that consumers can enter into RTO contracts to buy household items but later get out of them without suffering penalties. (14) Part then shifts to lenders and debt collection companies that exploit criminal laws (e.g., bad-check statutes) to falsely accuse consumers of stealing money when they stop making payments on payday loans. (15) Companies that only threaten consumers with arrests nevertheless terrorize them by painting a portrait of consumers immediately experiencing horrific consequences, including losing custody of their children, suffering the humiliation of being arrested in front of relatives, and eventually losing their jobs. …