FTC heeds Franken’s call for review of debtors being thrown in jail

Last week, Minnesota Senator Al Franken issued a press release calling for a review of the practices and procedures that are causing increasing numbers of consumers to be thrown in jail in debt collection cases. Here’s the press release:

WASHINGTON, D.C. [07/15/10] – U.S. Sen. Al Franken (D-Minn.) called on Federal Trade Commission Chairman Jon Leibowitz to take immediate action to address possible illegal activities by debt collection firms in Minnesota and across the country.

“Right now, Minnesotans are struggling to make ends meet. The last thing they need is to become victims of debt collection abuse,” said Sen. Franken. “Recent reports raise serious questions about whether our current laws go far enough to protect consumers, and I want to make sure Minnesotans aren’t at risk of being harassed or improperly jailed.”

Recently the Minneapolis Star Tribune published two articles detailing the disturbing practices of some debt collection agencies in Minnesota. The article cites a sharp rise in the use of arrest warrants against debtors, resulting in an increasing number of Minnesotans finding themselves behind bars for old or minor debts. The paper attributes the rise in arrests to the growing debt-buying industry that profits from buying people’s debts and the poor economy. Agencies can then use the court system to collect debts, as bail is frequently set at the amount the debtor owes.

The Star Tribune also discovered that Minnesotans are more frequently finding themselves pursued by debt collection agencies for debts that they don’t actually owe or debts that they already paid.

Sen. Franken’s letter to Chairman Leibowitz can be read here.

You can read the Star Tribune’s articles, “In Jail for Being in Debt,” and “Phantom Debts, Real Anguish” on their website.

In response to Franken’s letter, the Federal Trade Commission has agreed to take a harder look at the process for potential abuse.

“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.

Bravo to Chris Serres at the StarTribune, who’s excellent article has been the catalyst for political action (or at least lip service about political action).