Some lawmakers, judges and regulators are trying to rein in the U.S. debt-collection industry's use of arrest warrants to recoup money owed by borrowers who are behind on credit-card payments, auto loans and other bills. More than a third of all U.S. states allow borrowers who can't or won't pay to be jailed. Judges have signed off on more than 5,000 such warrants since the start of 2010 in nine counties with a total population of 13.6 million people, according to a tally by The Wall Street Journal of filings in those counties. Nationwide figures aren't known because many courts don't keep track of warrants by alleged offense. In interviews, 20 judges across the nation said the number of borrowers threatened with arrest in their courtrooms has surged since the financial crisis began.
The backlash is a reaction to sloppy, incomplete or even false documentation that can result in borrowers having no idea before being locked up that they were sued to collect an outstanding debt. The debt-collection industry says such errors are extremely rare, adding that warrants usually are sought only after all other efforts to persuade borrowers to pay have failed.
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Illinois regulators are investigating the use of warrants by debt collectors and other financial firms doing business in that state. In September, the Illinois Department of Financial and Professional Regulation issued an order seeking to revoke the license of Easy Money Express Inc. The Paducah, Ky., payday lender won arrest warrants against at least four customers. One spent five days in a Carbondale, Ill., jail last March after failing to pay a $275 debt, court filings show. The lender "exploited the court system to obtain the arrest and incarceration of its customers," said Sue Hofer, a spokeswoman for the agency. The company declined to comment but is fighting the state's proposed ban.
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