The federal agency said it was responding to a letter sent by U.S. Sen. Al Franken questioning the practice.
Federal regulators are looking into the growing use of arrest warrants in Minnesota over unpaid debts, following a Star Tribune investigation and a letter calling attention to the practice from Sen. Al Franken.
A staff attorney with the Federal Trade Commission said Thursday the agency is trying to determine why debtors are being jailed in this state, and if they have been notified properly of any debt collection claims made against them in court. The agency said it was responding to a letter sent by Franken, which accused Minnesota debt collection firms of "abusing the state court system to reap profits." Franken urged FTC Chairman Jon Leibowitz to take "immediate enforcement action."
A Star Tribune series, "Hounded," found that debt collectors are increasingly turning to the courts and police to collect old debts. A June 9 story, "In Jail for Being in Debt," found the use of arrest warrants against debtors jumped 60 percent in the past four years, with 845 cases in 2009. In some cases, judges issued arrest warrants against debtors who owed less than $100. In many cases, people did not know that a collector had taken legal action against them.
"We're trying to identify what the practices are, under what conditions people who may have consumer debt collection claims against them may be jailed, and whether such practices are in conformity with federal law," said Julie Bush, a staff attorney in the FTC's division of financial practices. She said the inquiry was not a formal investigation.
A report by the FTC Monday urged better protection for consumers who face litigation or arbitration over debts. The report didn't address the use of arrest warrants. But it said debt collectors' lawsuits often don't contain enough detail for consumers to properly defend themselves. The FTC called on states, not federal agencies, to fix that problem.
Franken's letter cited the newspaper series and questioned "whether our current laws go far enough to protect consumers." He pledged to introduce legislation.
"Allegations that Minnesotans are being harassed for debts they don't owe and subject to jail for old bills are outrageous," Franken said in a written statement. "Minnesota families are hurting right now. They didn't cause this economic crisis, and they shouldn't be victimized by rogue debt collectors."
Chris Serres • 612-673-4308