Why are Minnesota's strapped courts and law-enforcement agencies increasingly doing unpaid grunt work for the highly profitable debt-collection industry?
A week ago, a shocking Star Tribune story by Chris Serres and Glenn Howatt revealed that a growing number of Minnesotans are being arrested, booked and even jailed after failing to make a court appearance over an old debt. The number of debtor-related arrest warrants issued in the state has risen 60 percent over the past four years, according to the story, which revealed 845 cases in 2009. That's a relatively small number, but it should alarm the thousands of families around the state facing medical bills or mounting debts after a job loss. Anyone who's ever battled a debt collector over a disputed charge or a case of stolen identity should also be unnerved.
Among those who faced arrest was a young mom from Bloomington, who said she had police show up at her door two weeks after she gave birth by Caesarean section. In another example, Deborah Poplawski, a 38-year-old restaurant cook from Minneapolis, had only recently learned by chance that she had an outstanding warrant related to a $1,138 unpaid debt. She was incarcerated slightly more than a day at the Hennepin County jail. "We hear every day about how there's no money for public services," Poplawski said. "But it seems like the collectors have found a way to get the police to do their work."
Even those who would criticize Poplawski for not paying her debt ought to share her outrage about the industry's co-opting of taxpayer dollars and resources. Buying up debts from companies for pennies on the dollar and trying to collect them is a distasteful but lucrative business. Portfolio Recovery Associates, one of the firms accounting for many Minnesota debt-related arrest warrants, netted $44 million on revenues of $281 million last year.
On Friday, Rozanne Andersen, CEO of the collection industry's largest trade organization, ACA International, said that debt-related arrest warrants are an "old story" and that it's actually debtors who don't show up in court who are abusing public resources. But Minnesota Attorney General Lori Swanson said that debtors often don't know they've been served with a legal notice (people with financial difficulties often move) or understand how important these documents are in the deluge of paperwork from collections agencies. Debt-buyer companies' names may also not be familiar, and consumers may ignore something from Portfolio Recovery Associates, for example, if they think they owe money to their doctor's office.
When a consumer doesn't show up in court, a judge may issue an arrest warrant for failure to appear. At that point courts and cops become debt collectors' pawns. Law-enforcement agencies would prefer to focus on serious crime; having to serving these warrants is not the best use of officers' time. Even more questionable is some courts' practice of setting a debtor's bail at precisely the amount owed; creditors can then petition for this money. In effect, public servants are doing collectors' work for them. "Why are law enforcement and the courts being used this way?" said State Sen. John Marty, DFL-Roseville.
Reform is needed to protect consumers and taxpayers. One proposal would allow debtors facing imminent arrest to fill out a financial-disclosure form -- the main point of the court appearance -- on the spot to avoid going to jail. It's a cost-conscious first step -- one that should be embraced by state lawmakers when they return to St. Paul next year.
