Free Access to NCLC’s Criminal Justice Debt Chapter, Litigation Guide

Free Access

At a time of national conversation around policing practices in African American communities, NCLC is providing free access to two new litigation resources on a lesser known, but pervasive criminal justice problem affecting these communities and communities of color in general. These two resources will help attorneys representing clients victimized by the piling on of government and private debt when arrested, tried, convicted, or incarcerated, as well as the draconian tools used to collect that debt.

Free digital access is temporarily available to NCLC’s just-revised digital version of Collection Actions Chapter 11 on criminal justice debt (the equivalent of 50 print pages). We are also offering, for a limited time, free access to NCLC’s Surviving Debt. This includes access to its Chapter 22—a condensed version of the issues covered in the Collection Actions chapter.

NCLC also has just released, free to the public, the Commercialized (In)Justice Litigation Guide (June 2020) (70 pp.). This litigation guide discusses how advocates can use federal and state consumer laws to challenge some of the widespread abuses involving the commercial bail industry, the private debt collection industry, and the “prison retail” industry. Prison retail is comprised of private companies, including telecommunications providers, technology companies, commissary operators, and money transmitters, that charge incarcerated people and their families for basic or essential goods and services. Check www.nclc.org for the schedule of a planned webinar on this topic.

Pervasive Abuses Disproportionately Affecting Communities of Color

Disproportionately affecting African American and other communities of color, state and local courts assess excessive criminal justice fines, fees, costs and surcharges, accompanied by draconian collection tactics. In at least forty-five jurisdictions individuals may be incarcerated for nonpayment of a criminal justice debt, such as where payment of the debt is a condition of a suspended sentence or of probation, so that non-payment leads to incarceration. In many states, non-payment can also lead to suspension of driver’s or professional licenses, restrictions on expungement of criminal records, and denial of the right to vote. Debtors may also face garnishment of their wages or benefits, seizure of their tax refunds or other assets, aggressive or problematic interactions with debt collection agencies, and credit reporting consequences.

Excessive assessment of criminal justice debt and punitive collection methods often can be explained by a jurisdiction’s eagerness to use criminal justice fines and fees as a source of government revenue. This quest for revenue results in charges for court-appointed criminal defense attorneys, costs for incarceration, surcharges on existing fines, and various other fees piled upon criminal defendants. Interest, late penalties, collection costs, and other charges may balloon the debt further into many thousands of dollars so that it is unaffordable for many lower income individuals, especially those already facing employment and housing barriers related to their criminal record. Individuals may come out of jail or prison with significantly higher debt than they had at sentencing and no realistic way to pay for it.

Private Companies Pile on Abuses Affecting Those Arrested and Incarcerated

Courts and local and state governments are not the only entities profiting from criminal justice fines and fees. A vast network of private companies—including commercial bail agents, telecommunications providers, technology companies, commissary operators, and money transmitters—pile on unfair charges for those arrested or incarcerated. This price gouging not only harms those who have been arrested and incarcerated, but also their families, loved ones, and broader communities.

Those who cannot afford bail must turn to commercial bail agents, which are generally backed by large insurance companies. These individuals must pay the bail agent a non-refundable premium, typically in the range of 10% of the bail amount. Even in cases of false arrest, where charges are dropped, or where the individual facing charges is found not guilty, the accused person does not get their money back.

Families who are not able to pay even the 10% of the bail amount sign on to abusive credit contracts, resulting in undisclosed or illegal fees, excessive rates of interest, and harassing collection practices, including false threats to send accused persons back to jail. Bail agents may force bail bond cosigners to turn over property pledged as collateral even where the accused complies with the terms of bail.

Prisons have given a handful of conglomerates—mostly owned by private equity firms—monopoly rights allowing them often to charge those incarcerated with unconscionably exorbitant rates for telephone calls, video calls, electronic messaging, money transfer services, commissary services, and a host of other services. The main victims of this price gouging typically are the families and the loved ones of those incarcerated.

Options to Deal with Criminal Justice Debt

NCLC’s Collection Actions, Chapter 11, Criminal Justice Debt (for a limited time, free to the public) examines steps to take in representing consumers with criminal justice debt. Below is a checklist of just some of the covered topics. Following that is a discussion of the topics found in NCLC’s Commercialized (In)Justice Litigation Guide covering claims against private companies involved with bail or with provision of services to those incarcerated.

Understanding the Debt and the Client’s Situation

The first step in any client representation is understanding the nature of the criminal justice debt and the client’s status:

• Is the criminal justice debt owed to the state, the municipality, the federal government, or a private entity? Is the debt criminal, civil, or juvenile?
• What are the components of the debt? Does it include a fine, an indigent defense attorney fee, a bail bond, a statutory surcharge, a “user fee” (such as testing fees, prosecution fees, prison fees, supervision fees), interest, or collection costs?
• What are the state’s statutory provisions and practices regarding the imposition and collection of criminal justice debt. See Criminal Justice Policy Program at Harvard Law School, 50-State Criminal Justice Debt Reform Builder, available at https://cjdebtreform.org/state-analysis.
• Is the client already on a payment plan, and what is the payment status? Is the client on probation or parole and could non-payment result in revocation of probation or parole, resulting in re-incarceration? Is the client otherwise at risk of incarceration for non-payment or for non-attendance at hearings regarding the debt? Are there other particularly concerning consequences for non-payment of the debt, such as suspension of driver’s licenses and limitations on expungement of their criminal record? See https://cjdebtreform.org/state-analysis.
• Who is the client’s criminal defense attorney(s), if any? Many individuals with court debt do not have appointed counsel or the appointed counsel may not be representing the individual regarding enforcement of the criminal justice debt. Attorneys funded through the Legal Services Corporation may represent clients in many, though not all, types of criminal justice debt proceedings. See NCLC’s Collection Actions § 11.4.2.

Preventing Incarceration for Non-Payment and Alternative Dispositions

An attorney representing a consumer unable to afford criminal justice debt has a number of options in representing the consumer:

• A client has a constitutional right to an ability-to-pay assessment prior to incarceration for nonpayment, and inability to pay should provide a constitutional defense to incarceration. NCLC’s Collection Actions § 11.4.4.1.
• When a revocation of a suspended sentence for non-payment of criminal justice debt is at stake, the absence of appointed counsel in the criminal case may provide a defense to incarceration. See NCLC’s Collection Actions § 11.4.5.
• Is the debt so old that it is no longer collectible based on a statute of limitations, laches, or other factors? See NCLC’s Collection Actions § 11.4.8.
• Wherever possible, seek from the court cancellation or reduction of the debt or an affordable payment plan. See NCLC’s Collection Actions § 11.4.6.
• If community service is an alternative to payment of criminal justice debt, make sure that the client fully understands and prefers community service before pursuing that option. Potential problems with the community service option may include transportation barriers; time obligations that conflict with work, childcare, or treatment obligations; fees associated with the service option; and the feasibility of actually completing the total number of service hours required. See NCLC’s Collection Actions § 11.4.6a.

Limits on Seizure of Wages, Bank Accounts, or Property to Pay for Criminal Justice Debt

Federal and state law provide a number of protections against seizure of consumers’ wages, bank accounts, or property for nonpayment of criminal justice debt:

• Federal wage garnishment protections should apply to state and municipal criminal justice debt. See NCLC’s Collection Actions §§ 11.5.4.2 (state debt), 11.5.3.1.5 (federal debt).
• Federal law protects from bank account freezes and seizures two months’ worth of electronically deposited amounts in an account for Social Security, SSI, VA, and certain other federal benefits, except for fines and restitution. See NCLC’s Collection Actions § 11.5.3.1.6.
• Federal student loans and grants should not be subject to seizure to pay state and municipal criminal justice debt. See NCLC’s Collection Actions § 11.5.4.4.
• Whether state exemptions apply to criminal justice debt varies by state and by type of debt. State exemptions may not apply to fines, but may apply to restitution orders, user fees, indigent defense fees, or incarceration costs. See NCLC’s Collection Actions § 11.5.5.1. Whether the client is on probation, parole, work release, or other special status also may affect application of a state’s exemptions. See NCLC’s Collection Actions § 11.5.5.1. A state-by-state summary of state exemptions is found at NCLC’s Collection Actions Appendix G (also free to the public for a limited time).
• For federal criminal justice debt, the Federal Debt Collection Procedures Act provides clients a choice of protection based on the federal Bankruptcy Code exemptions or all applicable state and non-bankruptcy federal exemptions. See NCLC’s Collection Actions § 11.5.3.1.2. Special rules apply to fines and restitution orders issued by a federal court. See NCLC’s Collection Actions § 11.5.3.1.3. Because of the application of the Claims Collection Act to certain federal criminal justice debt, different rules may also apply particularly to charges imposed by the federal prison or probation system. See NCLC’s Collection Actions § 11.5.3.1.4.

Bankruptcy’s Ability to Deal with Criminal Justice Debt

A bankruptcy filing is an important option when seeking to protect a consumer unable to pay criminal justice debt. A chapter 13 filing is generally a better option than a chapter 7 filing:

• The automatic stay available in bankruptcy prevents most collection activity, even involving criminal justice debt. But the stay may not apply to probation revocation. See NCLC’s Collection Actions § 11.6.2.
• A chapter 13 bankruptcy offers options to discharge criminal justice debt, but care must be taken in classifying criminal justice debt in proposing a chapter 13 plan. See NCLC’s Collection Actions § 11.6.4.3. Certain criminal justice debt can be included in a chapter 13 plan, meaning that the debt need only be paid in part or not at all. See NCLC’s Collection Actions § 11.6.4.1.
• Punitive fines and restitution ordered as part of a criminal sentence are not dischargeable upon completion of a chapter 13 plan. See NCLC’s Collection Actions § 11.6.4.2. Municipal court fines and traffic fines where the underlying action is civil rather than criminal are generally dischargeable in chapter 13, as is juvenile delinquency restitution debt. See NCLC’s Collection Actions § 11.6.4.2.
• Restitution orders and criminal and civil fines, including traffic and parking fines, are generally not dischargeable in a chapter 7 bankruptcy. See NCLC’s Collection Actions §§ 11.6.3.2, 11.6.3.3, § 11.6.3.4. But juvenile restitution owed by parents is generally dischargeable in the parents’ chapter 7 bankruptcy. See NCLC’s Collection Actions § 11.6.3.5.
• Whether a criminal justice debt related to “costs” or “fees” is dischargeable in chapter 7 may depend on the description of the cost or fee and whether that cost or fee is separately charged and not lumped in with other criminal justice debt. See NCLC’s Collection Actions § 11.6.3.6. Unclear in most states is whether costs of prosecution or incarceration or deferred judgment or indigent defense fees or surcharges or amounts owed on bail bonds are dischargeable in chapter 7. See NCLC’s Collection Actions §§ 11.6.3.7, 11.6.3.8, 11.6.3.9, 11.6.3.10, 11.6.3.11.
• Collection costs, at least those owed to non-governmental entities, are dischargeable in chapter 7, and whether interest on debt is dischargeable generally depends on whether the underlying debt is dischargeable. See NCLC’s Collection Actions § 11.6.3.12.

Affirmative Litigation Challenging Criminal Justice Debt Practices

There is a growing use of affirmative class, injunctive, and individual actions to challenge enforcement of criminal justice debt:

• Affirmative lawsuits seeking class or injunctive relief concerning some of the most unfair aspects of criminal justice debt enforcement have multiplied in recent years. See, e.g., NCLC’s Collection Actions § 11.7.1.5.
• Constitutional claims may involve due process, right to counsel, equal protection, bias based upon financial interests, or excessive fines. See NCLC’s Collection Actions § 11.7.1. Potential discrimination claims can include violation of the Civil Rights Act title VI or of the Equal Credit Opportunity Act. See NCLC’s Collection Actions §§ 11.7.2 and 11.7.3.
• Certain private collectors may be subject to the restrictions and remedies of the Fair Debt Collection Practices Act, though whether criminal justice debt is covered under the Act is complicated. State debt collection or deceptive practices statutes may provide alternative claims. See NCLC’s Collection Actions § 11.7.4. Abuse of process, other torts, or state statutory violations may provide additional claims. See NCLC’s Collection Actions § 11.7.5a.
• State or local agencies and private parties furnishing information to credit reporting agencies about criminal justice debt may be subject to the Fair Credit Reporting Act. See NCLC’s Collection Actions § 11.7.5.
• Any affirmative litigation must consider potential barriers to relief, including sovereign and qualified immunity, judicial immunity, and abstention. See NCLC’s Collection Actions § 11.7.6.

Challenging Bail Bond Practices

Bail agents (including private guarantors on immigration bonds) engage in harassing and abusive collection practices, including making false threats to send the accused back to jail, threatening the accused person’s friends, and even detaining the accused until someone pays. NCLC’s Commercialized (In)Justice Litigation Guide, at pp. 16–21, examines the application of various consumer laws to these and related collection abuses:

• The federal Fair Debt Collection Practices Act;
• State debt collection statutes;
• State unfair and deceptive acts and practices (UDAP) statutes; and
• Other state laws regulating co-signer rights, waivers, and the like.

Bail bond agents may require the accused or their indemnitor to sign over collateral, such as automobiles or homes, to cover the full bail amount. Agents may engage in illegal and abusive practices in connection with the repossession of such collateral, such as seizing property even where the accused complies with the terms of bail. Such conduct may be remedied under state Uniform Commercial Code Article 9 or similar state statutes. See NCLC’s Commercialized (In)Justice Litigation Guide, at pp. 23–25. See also pp. 21–23 for a discussion of federal Truth in Lending Act disclosure requirements and remedies where a bail bond premium is financed.

The vast majority of bail bonds are underwritten by a small handful of large insurance corporations. NCLC’s Commercialized (In)Justice Litigation Guide, at pp. 25–27, examines current anti-trust litigation against these companies. Pages 27–32 considers these insurance companies’ liability in tort, contract, RICO, and under other legal theories.

Challenging Private Companies’ Price Gouging of the Incarcerated

NCLC’s Commercialized (In)Justice Litigation Guide, at pp. 43–45, examines the opportunities and problems with legal theories seeking to remedy price gouging for prison telephone calls and related telecommunication charges for incarcerated individuals. These theories include Title II of the federal Communications Act, which requires “just and reasonable” rates and provides consumers with a private cause of action. State law may also provide a remedy in at least in some states. The section also addresses non-litigation strategies to fight these abuses.

Other price gouging involves companies assisting in money transfers and payments for inmates. These practices may be subject to litigation involving the common law of trusts, the Electronic Fund Transfer Act (EFTA), state money-transmitter statutes, and the Gramm-Leach-Bliley Act. See NCLC’s Commercialized (In)Justice Litigation Guide, at pp. 46–48. Pages 48–51 analyze legal claims involving the high cost of using “release cards” (prepaid debit cards that facilities use to pay amounts due to incarcerated people upon their release from custody), including the EFTA, Fifth Amendment takings, unjust enrichment, and conversion.

NCLC’s Commercialized (In)Justice Litigation Guide, at pp. 51–59, considers other litigation approaches to remedy not only telecommunication and money transfer abuses, but problems with a host of other services provided to the incarcerated—often called “prison retail.” These include:

• State unfair and deceptive practices (UDAP) statutes;
• State limitations on local government revenue authority;
• Antitrust law.

Outsourcing to Private Companies the Collection of Criminal Justice Debt

States and local governments are increasingly outsourcing the collection of criminal justice debts to private contractors. These private debt collectors often are authorized to charge the debtor significant collection costs on top of the principal owed, as high as 40%. Collection abuses can be challenged under the federal Fair Debt Collection Practices Act, state debt collection statutes, and state UDAP statutes. See NCLC’s Commercialized (In)Justice Litigation Guide, at pp. 60–62.