Readers of Victorian novels know what debtor’s prison is–a scabrous place where distressed maidens, handsome heroes and pitiable children who owe as little as 60 cents are locked up until their debts are paid. The U.S. abolished federal imprisonment for unpaid debts in 1833, and today, most of us are pretty sure that we can’t be sent to the pokey for blowing off a creditor.
We’d be wrong.
Creditors work the system to jail debtors
While we can’t be sent to a federal prison for ignoring bills, many states allow citizens to be popped into state or local lockups for unpaid debt. Savvy collection agencies use this process to do an end run around the Fair Debt Collection Practices Act. Here’s how it works:
The collection agency sues the debtor, often in small claims court, with perhaps only a mailed summons (legal in some states, Illinois for example) or, worse, an imaginary notice referred to as “sewer service”
The debtor tosses the paper threat unread or misunderstands its implications. The debtor automatically loses the case because he doesn’t show up in court. He’s ordered to pay the collection agency, and the judge issues a arrest warrant for failing to appear and/or make the court-ordered payments
Mr. Debtor is dragged out of a PTA meeting on the outstanding warrant and goes to jail
He makes bail, which is (amazingly!) set at the exact amount owed
The bail is turned over to the creditor. Taxpayers foot the bill for arresting and jailing the “evildoer”
If unable to come up with the money owed, Mr. Debtor rots in jail. According to a Minnesota Star Tribune article, an Illinois man was sentenced “to indefinite incarceration” until he paid his $300 lumber yard debt
Ok, so what. So they won’t go to jail for Massive Fraud… I think we’ll take whatever comes their way.
I guess not mowing is much more serious crime…YAWN ~
LVRJ-
A proposal that could put bankers behind bars for failing to maintain foreclosed homes in Las Vegas will likely advance, albeit with some changes to the wording.
The City Council recommending committee on Tuesday voted to hold another hearing Nov. 15 on the measure, proposed by Ward 6 Councilman Steve Ross, which would make it a misdemeanor offense for lenders to allow distressed houses to fall into disrepair.
The delay will give banking, real estate and other special interest groups more …
By MICHELLE CONLIN – Feb 6, 2011 7:29 PM ET
By The Associated Press
FORT LAUDERDALE, Fla. (AP) — During the housing crash, it was good to be a foreclosure king. David Stern was Florida’s top foreclosure lawyer, and he lived like an oil sheik. He piled up a collection of trophy properties, glided through town in a fleet of six-figure sports cars and, with his bombshell wife, partied on an ocean cruiser the size of a small hotel.
When homeowners fell behind on their mortgages, the banks flocked to “foreclosure mills” like Stern’s to push foreclosures through the courts on their behalf. To his megabank clients — Bank of America, Goldman Sachs, GMAC, Citibank and Wells Fargo — Stern was the ultimate Repo Man.
At industry gatherings, Stern bragged in his boyish voice of taking mortgages from the “cradle to the grave.” Of the federal government’s disastrous homeowner relief plan, which was supposed to keep people from getting evicted, he quipped: “Fortunately, it’s failing.”
The worse things got for homeowners, the better they got for Stern.
That is, until last fall, when the nation’s foreclosure machine blew apart and Stern’s gilded world came undone. Within a few months, Stern went from being the subject of a gushing magazine profile to being the subject of a Florida investigation, class-action lawsuits and blogger Schadenfreude that, at last long, the “foreclosure king” was dead.
“What Stern represents is an industry that was completely unrestrained, unchecked, unpunished and unsupervised,” says Florida defense attorney Matt Weidner. “This was business gone wild.”
The rise and fall of Stern, now 50, provides an inside look at how the foreclosure industry worked in the last decade — and how it fell apart. It also shows how banks, together with their law firms, built a quick-and-dirty foreclosure machine that was designed to take as many houses as fast as possible.
Earlier today, I did a podcast with Shahien Nasiripour from the Huffington Post on the current state of the justice system in America. The full transcript is on it’s way.
NEW YORK — After the last major banking crisis, some two decades ago, roughly 3,800 bankers were prosecuted and sentenced to prison terms, by the Justice Department’s count. Yet this time, some four years after the economy descended into the most punishing financial crisis since the Great Depression, the public still waits for the Obama administration to deliver a similar kind of justice.
The 2007-’09 financial crisis was “avoidable,” a bipartisan, congressionally-appointed panel concluded last week. Mortgage fraud “flourished” in the run up to the collapse. Securities fraud was apparently widespread.
“Lenders made loans that they knew borrowers could not afford and that could cause massive losses to investors in mortgage securities,” the Financial Crisis Inquiry Commission wrote in its report on the causes of the collapse. About $1 trillion worth of home loans made from 2005 to 2007 were “fraudulent,” the commission said, citing testimony from experts. The Illinois Attorney General, Lisa Madigan, told the commission that she defined fraud to include lenders’ “sale of unaffordable or structurally-unfair mortgage products to borrowers.”
And yet, the perp walk so many Americans crave — Treasury Secretary Timothy Geithner once referred to it as the “very deep public desire for Old Testament justice” — hasn’t occurred. Wall Street figures have largely gone untouched. Bank directors kept their jobs. In a sign that perhaps the fallout from the crisis has passed, outsized compensation is back.
“People need to go to jail,” said Liz Ryan Murray, policy director of National People’s Action, an advocacy organization that helped launch the website CrimeShouldntPay.com. “If you steal something, you go to jail. If you falsify documents, you go to jail. Why doesn’t that apply to big bank executives?”
Jose Pagliery Daily Business Review January 13, 2011
Representatives from six major banks that skipped a hearing in a Miami condo association receivership case could face the wrath of Miami-Dade Circuit Judge Jennifer Bailey today if they fail to show up a second time.
The judge already has declared lenders that own or are foreclosing on units at Bird Grove Condo are on the hook for $105,999 in expenses for the court-appointed receiver for the association. She also held the six in contempt of court.
Bailey last month granted a request by the receiver, Miami attorney Lisa Lehner, to be paid for pulling the building — an asset for the foreclosing banks — back from the brink of condemnation.
When Lehner was appointed in March, garbage hadn’t been collected for weeks, electricity was about to be cut off, the building had no insurance, and an elevator was broken. She turned it around in months.
“They have property and collateral that if I walk away from turn into nothing,” Lehner said. “Here I am, sitting as their property manager, working for free after practicing law for 28 years. It’s just not fair.”
Lehner’s demand for $5,579 in expenses per unit went uncontested at a Dec. 1 show cause hearing where Bank of America was the only lender to send a representative. Missing were Flagstar Bank, GMAC, PNC Bank, SunTrust Bank, U.S. Bank and Wells Fargo.
In November, banks owned two units and were foreclosing on another 17 units in the 39-unit building at 2734 Bird Ave. between a gas station and a gallery. A one-bedroom, one-bath unit is listed for sale for $50,000. Bank of America filed nine foreclosure cases, followed by GMAC with five.
The six lenders were ordered to send non-attorney representatives to today’s hearing, when Bailey will discuss whether the banks also should be required to pay the receiver’s upcoming maintenance fees. Bailey’s order threatened to have bankers arrested if they didn’t show, and she warned, “You may be held in jail up to 48 hours before a hearing is held.”
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