Lawmakers investigating use of arrest warrants against debtors

Some lawmakers and regulators are probing the use of arrest warrants by the U.S. debt collection industry to recover money owed by borrowers behind on loans, credit card payments, and other bills. Warrants are generally issued for contempt of court after the borrower fails to comply with a court order to repay a debt or to appear in court. Although U.S. statistics are unknown because many courts do not track the number of warrants issued by offense, judges interviewed by the Wall Street Journal reported that the number of borrowers threatened with arrest has vastly increased since the beginning of the financial crisis.

For their part, those in the debt-collection industry say that warrants are sought only after all other measures have failed, in the most extreme situations. Most creditors are willing to make reasonable arrangements with people otherwise struggling to repay their debt. However, the vast majority of people fail to respond to creditors’ attempts to contact them. Indeed, by the time a warrant is issued, debtors have often been contacted numerous times, and have ignored multiple phone calls, letters, and court orders. Still, some companies actually prohibit law firms handling their cases from pursuing arrest warrants, recognizing, among other things, the negative publicity that can follow.

Nevertheless, many state lawmakers and regulators are addressing what they view as either potential or actual abuses of the system. Last year, the House of Representatives in Washington state unanimously passed a bill that would require companies to provide proof that a borrower has been notified about lawsuits against him before a judge could issue an arrest warrant. The bill was supported by a trade group representing debt collectors, stating that more regulation is needed to prevent abuse by a small number of companies.

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