Creditors' use of consumer debt criminalization practices and their financial abuse of women.

AuthorJohnson, Creola
PositionSymposium: Female Perspectives in Commercial and Consumer Law

"Hospitals ... [send you] a $100,000 bill on something, [but] they are not calling up the sheriff's department to go in and arrest the person because the bill wasn't paid."

--Jana Dinatale, charged with and arrested for the felony of failing to return rental property. (1)


In 1998, while a practicing attorney, I helped a legal aid client file for Chapter 7 bankruptcy relief because she was no longer able to manage her debts. As required under bankruptcy law, I had to help her file a list of all her creditors, as well as a statement of intention, which provides a snapshot as to how certain debts will be treated. My client, "Brenda," a single mother, became fearful as I discussed with her the possibility of not paying a rent-to-own ("RTO") company from which she had obtained a living room set. She told me that we had to pay the company because, as she said, "I don't want them to put me in jail." I was completely dumbfounded that she thought that could really happen to her. I explained to her that the RTO company could not put her in jail for failing to pay a civil debt. But she insisted we had to pay because, "I'm not going to jail." Little did I know I was really the ignorant one.

Debtors' prison is viewed by most as an archaic system revealed to the world in a Charles Dickens novel, and abolished in the 1800s in the United States. To many cash-strapped consumers, however, the debtors' prison is alive and well in the twenty-first century. My research has uncovered routine abuse of the criminal justice system by not only rent-to-own companies, (2) but payday lenders, (3) car title lenders, (4) and auto dealerships. (5) Over the years, advocates and academics have exposed these creditors for perpetrating unfair and deceptive practices as well as charging usurious interest rates. (6) Moreover, lawmakers have passed laws and regulators have filed enforcement actions to curb abuses by RTO dealers, car title lenders, auto dealerships, and payday lenders, collectively referred to hereafter as the "lenders." (7) Federal regulators and state lawmakers are continuing their efforts to protect consumers from high-cost lenders; (8) however, little attention has been paid to the need for additional legislation to protect consumers from abusive debt collection practices that terrorize consumers with arrests. (9) While male and female consumers can both be subjected to abusive debt collection practices, this Article focuses on women.

This Article posits that consumer debt criminalization tactics, i.e., initiating or threatening to initiate criminal action against consumers, appears to be more effective in coercing women into paying debts, sometimes even paying "phantom debts" (e.g., debts they do not owe). (10) Various types of companies involved in issuing consumer credit resort to criminalization tactics to coerce payments from consumers. (11) This Article, however, focuses on two--RTO dealers and payday lenders--because one can find numerous instances of their alleged manipulation of criminal laws to intimidate consumers into paying debts. (12) Part I describes criminalization tactics used by some RTO companies to falsely accuse their customers of essentially stealing merchandise when they can no longer make payments. (13) Such criminalization tactics belie the RTO industry's claims that consumers can enter into RTO contracts to buy household items but later get out of them without suffering penalties. (14) Part I then shifts to lenders and debt collection companies that exploit criminal laws (e.g., bad-check statutes) to falsely accuse consumers of stealing money when they stop making payments on payday loans. (15) Companies that only threaten consumers with arrests nevertheless terrorize them by painting a portrait of consumers immediately experiencing horrific consequences, including losing custody of their children, suffering the humiliation of being arrested in front of relatives, and eventually losing their jobs.

Part II of this Article analyzes several factors that may explain why some women, burdened with the stress of financial hardships, feel compelled to pay debts, even phantom debts, to get out of or avoid going to jail. (16) For instance, getting arrested is an untenable position for cash-strapped mothers of young children because single mothers are responsible for almost all, if not all, childcare and household chores, and married or cohabiting mothers do the majority of childcare activities and household chores. (17) Part II also argues that companies that resort to abusive debt collection practices engage in behavior that is parallel to the behavior of domestic violence abusers. (18)

Part III discusses how existing criminal laws are being twisted and law enforcement and prosecutors are being manipulated into acting as debt collectors and repossession agents for companies that rely on consumer debt criminalization tactics. (19) As a result, consumers not only make payments on non-existent debt, but on debts that have been inflated due to companies adding unlawful fees and penalties.

  1. Creditors and Debt Collection Companies Subject Women to Consumer Debt Criminalization Tactics

    To maintain order in communities, police serve a multi-faceted role in which they act as agents of the state to uphold criminal laws. In this Section, I demonstrate how lenders and other creditors are using police officers to abuse women and, thereby, disrupt families for the sole purpose of collecting civil debts. Prosecutors and judges are also being used to facilitate the profitable business model of extending predatory credit to consumers and then criminalizing them when they can no longer make payments. As a result, the criminal justice system is being manipulated, and such manipulation has a deleterious impact on women. This Article illuminates for the reader consumer debt criminalization tactics employed by the RTO and payday loan (20) industries because such tactics by these industries are commonplace. Companies that act as collectors of payday loan debts are highlighted because their criminalization tactics are so egregious that federal and state regulators regularly seek to shut down their operations. (21)

    1. RTO Dealers Exploiting Criminal Laws to Coerce Women into Paying and Turning Over Assets

      As indicated in the Introduction, Brenda, my former bankruptcy client, was the person who made me aware of the first form of consumer debt criminalization--exploiting existing criminal laws to coerce consumers into paying or turning over property. Brenda, a minority and a single mother, fits the profile of many RTO customers with credit-access problems. (22) In an RTO transaction, consumers, with the goal of ownership, (23) sign a written contract agreeing to make weekly payments to buy appliances, furniture, and other merchandise, and if the consumers complete the payments, they obtain ownership of the merchandise--often at more than triple the retail cost. (24) What most RTO customers do not realize is that they could end up having criminal charges filed against them if they stop making payments or fail to return the RTO property. MultiState Associates works with lobbyists of numerous businesses seeking passage of industry-friendly laws, (25) and it has compiled a fifty-state survey of theft-related crimes for the American Rental Association. (26) This survey reveals that most states have enacted criminal theft laws, such as fraudulent leasing or failing to return rental property. (27)

      Consider Florida law as an example. (28) Florida resident Alexis Sanders was charged with the crime of failing to return RTO property after she stopped making payments on an RTO agreement she signed to obtain a lamp, sofa, and chair from Buddy's Home Furnishings. (29) After she defaulted, Buddy's sent her a certified letter demanding that she return the furnishings, but the letter was returned, apparently because Ms. Sanders had moved without providing a forwarding address. (30) Buddy's then filed against her a criminal complaint that led to her arrest and eventual criminal prosecution under Florida law for failing to return RTO property. (31)

      In addition to the crime of failing to return RTO property, several states make it a crime to fraudulently lease RTO property. For instance, Laquetta Hall, a college student living in Jefferson County, Alabama, was arrested for fraudulently leasing a computer. (32) After two months of timely payments on her purchase rental agreement with a local RTO dealer, Bestway Rental, Ms. Hall was laid off from her job and could no longer make the weekly payments on her computer. (33) According to Ms. Hall, Bestway never tried to repossess the computer or sue her in civil court, but instead filed criminal charges against her. (34) She was charged under Alabama law with the crime of "theft by fraudulent leasing" and, after being arrested, she spent several hours in jail. (35) Terrified of being re-arrested, convicted, and serving a long prison sentence, she found a way to pay the $2,136 that Bestway claimed she owed. (36) That was much more than the price of a decent computer at a retail store such as Walmart. (37) After Ms. Hall paid the amount it demanded, Bestway dropped the criminal charges against her. (38) Feeling she had been unjustly treated, Ms. Hall sued Bestway in civil court for violating several consumer protection laws and for committing the tort of malicious prosecution, that is, for Bestway's wrongful criminal prosecution of her. (39) Without admitting wrongdoing, Bestway settled the case filed by Ms. Hall. (40)

      The examples above demonstrate how women who obtain RTO merchandise are subjected to actual criminalization. Some RTO companies do not file criminal charges, but only threaten to have customers arrested to get them to pay or surrender merchandise. For example, in defense of a 2009 lawsuit filed by Rent-A-Center against the State of Washington, James Sugarman, then-Attorney...

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