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ACLU, consumer rights advocates call for debt collection reform

Amy Hennen

There are alternative forms of collection available for the plaintiff to avoid resorting to arrest warrants, says Amy Hennen, a housing and consumer law attorney with Maryland Volunteer Lawyer Service.

A nationwide report on debt collection practices found Maryland judges are issuing arrest warrants for debtors who owe relatively small amounts and who fail to show up to court, often because they were unaware that collection proceedings had been initiated against them.

In “A Pound of Flesh: The Criminalization of Private Debt,” released Wednesday, the ACLU analyzed more than 1,000 cases in 26 states, including Maryland, and concluded the process is “stacked against the defendants” once a proceeding is initiated.

ACLU attorney Jennifer Turner, who spent more than a year researching debt collection and the courts, called the practices “positively Dickensian.”

Debt collectors can request a body attachment after a lawsuit is served on a debtor and they fail to attend court for an oral exam then an order to show cause hearing. Turner said individuals are jailed or even threatened with jail as a means of collection.

Many Maryland cases where a warrant was issued involved debts less than $1,000, according to Turner.

“Because debt collectors can say, legally, that they can obtain a warrant, it can be very coercive,” Turner said. “People are so terrified that they will be taken into custody, even before the warrant has been served, that they will pay up.”

‘Bad service’

A key problem advocates see with arrest warrants in civil cases are the alternative forms of service available for the plaintiff, according to Amy Hennen, a housing and consumer law attorney with Maryland Volunteer Lawyers Service. Because someone who says they are the defendant or claims to be a co-resident can accept service, it’s possible for a default judgment to be entered without the defendant’s knowledge.

Hennen, a former creditor’s rights attorney, said the Maryland Rules allow for “bad service” to result in a default and arrest warrant.

“It shouldn’t be made harder for them to get service on people but I think that’s a significant flaw in the process,” she said. “You can get a civil arrest warrant for someone without them ever having been served.”

The ACLU found one case in Maryland where an 83-year-old man and his wife, 78, were jailed for not appearing at an order to show cause hearing in district court for a $2,300 debt, according to Turner. The defendants were never served because they were out of the country, and service was effected on two other individuals who were at their address.

“I wasn’t expecting to find how unfair the practice was,” Turner said of her research.

Hennen said her creditor’s law firm had a policy against body attachment, but she saw others request a warrant be issued in their cases.

“I saw, basically, what the process looked like in order for a creditor to request a body attachment, and it’s kind of frustrating how easy it is,” she said. “There are no roadblocks that are effectively in the way other than getting service on somebody.”

Legislative proposals

Maryland legislators have several proposed reforms in the General Assembly pipeline this session, some addressing the concerns raised by the report.

Delegates have introduced a bill to provide counsel to debtors in some circumstances (House Bill 982) and another, called the Jared Kushner Act (House Bill 545), named for President Donald Trump’s son-in-law, whose real estate company is under state investigation for debt collection practices.

Sen. William C. “Will” Smith, D-Montgomery, introduced a bill to allow individuals arrested for civil debt to fill out a form under penalty of perjury before a court commissioner stating their assets then be released. The bill is cross-filed with House Bill 1081.

Smith said the bill allows creditors to get the information they would at the hearing the individual failed to appear for but doesn’t permit jailing someone for unpaid debt or assigning bond.

Debt collectors have pushed back on past reforms because they argue that, in some cases, a body attachment is necessary. But Smith said there are other cases where debtors are not intentionally ignoring a court order.

“In some cases I get it, but this is a perversion of the process,” he said.

Hennen said her organization is supporting House Bill 1081 and Senate Bill 1050, but don’t think they go far enough.

“We think that the truly missing piece is the piece about substitute service,” she said. “There is a genuine due process right that is currently being gone around, being circumvented, by allowing a body attachment to be ordered when somebody hasn’t been physically handed the papers.”

Smith said he is willing to consider an amendment to address the substitute service issue.

Hearings on House Bills 545, 982 and 1081 are scheduled for 1 p.m. Wednesday in the House Judiciary Committee. A hearing on Senate Bill 1050 is scheduled for 1 p.m. in the Senate Judicial Proceedings Committee.

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