By Serena Nelson | Senior Managing Editor

November 30, 2023

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Fun fact: Debt collectors can harass formerly incarcerated individuals paying off court-related debt without legal repercussions. Why? Certain payments—justice-related charges—fall outside the regulatory scope of consumer protection law.

Justice-related Charges

Justice-related charges are an “assortment of fees assessed by the justice system” including “costs associated with pretrial detention,” “a public defender,” and “general court administration.”^[1] These charges also include fees associated with financial products and services incarcerated individuals must use throughout the criminal justice system.^[2] The Fair Debt Collection Practices Act of 1977 (FDCPA), the most comprehensive debt collection law, does not prohibit abusive collection practices involving justice-related charges.^[3] Justice-related charges fall outside the law’s definition of debt because these charges are not traditional forms of consumer debt like mortgage loans.^[4]

Why We Should Care About Justice-related Charges

Due to the increased number of incarcerated people in federal, state, and local correctional facilities over the past several decades, state legislatures have “sought ways to pay for these systems.”^[5] The most common solution imposes a variety of fees and fines on the individual charged with the crime.^[6] Reliance on these fees and fines could “incentivize certain policing behaviors”^[7] such as issuing more traffic tickets when localities face revenue declines.^[8] This reliance may incentivize certain policing behaviors and indicate that state legislatures are not taxing and budgeting properly. These actions open the door to an exploitive and unregulated debt collection market monopolized by a few private entities.

Federal and state agencies contract with private parties to collect justice-related charges.^[9] These private entities tend to control a large share of the justice-related debt collection market,^[10] using their government relationships to threaten formerly incarcerated individuals.^[11] Normally, these threats would violate the FDCPA if the law covered justice-related charges. In effect, governments and private entities work together to exploit these individuals and sabotage any chance for successful reentry into society.

Unsurprisingly, the consequences of incarceration and justice-related charges fall heavily on people of color,^[12] often leading to prolonged contact with the criminal justice system. These individuals face various financial challenges at each stage of the justice system, from arrest to reentry.^[13] At the pretrial stage, people may accept commercial bond agreements “under duress” without reviewing the terms and conditions.^[14] During incarceration, people and their families must use high-cost money-transfer services to pay for essential goods.^[15] Upon reentry, formerly incarcerated individuals often must choose between making payments they may struggle to afford and risk arrest, prosecution, or reincarceration.^[16]

Additionally, justice-involved individuals face “barriers” to accessing the broader financial marketplace, including consumer credit, jobs, housing, and higher education opportunities.^[17] These barriers increase the likelihood of continued involvement in the criminal justice system.^[18] This comes at a significant cost to the individual, the justice system, and their communities^[19] forcing a person to seek other avenues—potentially illegal avenues—to make income. Thus, the system jeopardizes a person’s attempts to successfully reenter society and avoid committing repeat offenses.

Ensuring successful reentry into society for justice-related individuals is in the public interest.^[20] In the interest of justice, fairness, and safety, Congress should amend the FDCPA to redefine “debt” to include justice-related fees and fines and close the loophole.

We Have the Tools to Address the Problem

Congress enacted the FDCPA to target debt collectors engaging in these abusive behaviors.^[21] Before the law’s enactment, debt collectors frequently used abusive and deceptive tactics including sending consumers “phony legal documents”; harassing consumers via “phone at home and work” by “impersonat[ing] attorneys and policemen”; and using “threats of bodily harm or death.”^[22] Once these practices began crossing state lines (through toll-free long-distance phone calls^[23]), Congress stepped in to prohibit these acts. ^[24] In a successful lawsuit, plaintiffs can collect actual and punitive damages.^[25]

The law protects consumers, promotes consistent and uniform state action in debt collection regulation, ^[26] and promotes fairness among debt collectors who already refrain from these practices.^[27] The key to winning an FDCPA lawsuit is proving the collection activity relates to a “debt” as defined by the FDCPA. Justice-related charges “claims” struggle to meet the FDCPA’s “debt” definition.^[28]

Why the FDCPA Ignores Justice-related Charges

The FDCPA defines “debt” narrowly, basing the definition on the debt most prevalent when Congress enacted the law—mortgages and other consumer loans.^[29] To determine whether something is FDCPA debt, courts look to the purpose of the debt at its initiation.^[30] A debt must arise out of a transaction for “personal, family, or household purposes.”^[31] For example, if a person purchases socks using a credit card, the purchaser incurred a “debt” for “personal” purposes.

In contrast, justice-related charges are public payments because they arise from a crime or a form of punishment.^[32] Public payments include delinquent tax payments^[33] and toll charges.^[34] However, courts consider some arguably public payments such as utility and parking fees to be FDCPA “debts.” For example, a homeowner’s obligation to pay government entities for water and sewer service is a FDCPA debt^[35] as is a debt to pay a parking ticket.^[36] Thus, justice-related charges imposed on a person are not considered “debts” under the FDCPA, leaving a hole in the most comprehensive debt collection law for debt collectors to manipulate.

How We Fix This

Congress must act now to bring the FDCPA into the 21st century. Expanding the FDCPA’s “debt” definition to include justice-related charges furthers the law’s original purpose to prevent abusive debt collection practices and promote fairness among debt collectors. Because incarceration rates increased over the past four decades,^[37] justice-related charges are slowly becoming one of the most prevalent forms of debt plaguing Americans—especially the poor and people of color. ^[38]

Amending the law also supports states’ recidivist goals. Under the FDCPA’s protections, formerly incarcerated individuals may successfully reenter society without living under the fear of abusive practices. Amending the FDCPA is Congress’s best option for tackling this issue because Congress is familiar with the FDCPA and already has an independent agency—the Consumer Financial Protection Bureau—dedicated to enforcing this law. Congress must amend the FDCPA’s definition of “debt” to include justice-related charges.

[1] U.S. Dep’t of Just.: Off. of Just. Programs Diagnostic Ctr., Resource Guide: Reforming the Assessment and Enforcement of Fines and Fees 2 (2016), https://www.ojp.gov/sites/g/files/xyckuh241/files/media/document/finesfeesresguide.pdf

[2] Consumer Fin. Prot. Bureau, Justice-Involved Individuals and the Consumer Financial Marketplace § 4, at 27 (2022), https://files.consumerfinance.gov/f/documents/cfpb_jic_report_2022-01.pdf (discussing “prepaid release cards,” the device correctional facilities use to return confiscated money to individuals once incarceration ends).

[3] U.S. Dep’t of Just., supra note 1, at 2; Consumer Fin. Prot. Bureau, supra note 2, § 4, at 27.

[4] Fair Debt Collection Practices Act of 1977, 15 U.S.C. § 1692a(5) (2018).

[5] Consumer Fin. Prot. Bureau, supra note 2, § 5.1, at 37.

[6] Id. (including charges related to court, court-appointed lawyers, drug testing, prison library use, jail or prison room and board, and probation supervision).

[7] Id. § 5.1, at 38–39, n.191. In 2012, 19,522 municipalities existed in the United States. Census Bureau Reports There Are 89,004 Local Governments in the United States, U. S. Census Bureau (Aug. 30, 2012), https://www.census.gov/newsroom/releases/archives/governments/cb12-161.html.

[8] Consumer Fin. Prot. Bureau, supra note 2, § 5.1, at 38–39.

[9] Id. § 5.2, at 41.

[10] See Parolee Restitution Payment Instructions, Cal. Dep’t of Corr. & Rehab., https://www.cdcr.ca.gov/victim-services/parolee-payment-instructions (last visited Nov.      6     , 2023). JPay, Inc. is one of the largest private entities. JPay offers corrections-related services in over 35 states across the United States. See About JPay, JPay, https://www.jpay.com/AboutUs.aspx (last visited Nov.      6     , 2023); see also CFPB Penalizes JPay for Siphoning Taxpayer-Funded Benefits Intended to Help People Re-enter Society After Incarceration, Consumer Fin. Prot. Bureau (Oct. 19, 2021), https://www.consumerfinance.gov/about-us/newsroom/cfpb-penalizes-jpay-for-siphoning-taxpayer-funded-benefits-intended-to-help-people-re-enter-society-after-incarceration. Because there is little to no choice over which service providers to use, incarcerated individuals—including formerly incarcerated individuals—and their loved ones are often backed into a corner. Consumer Fin. Prot. Bureau, supra note 2, § 1, at 4.

[11] Consumer Fin. Prot. Bureau, supra note 2, § 1, at 3, 5. For example, private companies that contract with governments to run diversion programs sometimes make misleading claims about the legal consequences of not participating in diversion programs. They then use their relationship with prosecutors to threaten people with criminal prosecution for unpaid fees.

[12] Id. § 1, at 3–4. In 2019, Black adults were five times more likely to be incarcerated than whites. Hispanics were two and a half times as likely and American Indians and Alaskan Natives were twice as likely as whites to be incarcerated.

[13] Id. § 1, at 3.

[14] See id. at 2 (noting private bond companies may not provide agreement terms in a language a person understands).

[15] See id. § 3.1, at 14, § 1, at 4. JPay, Inc. is one of the main private entities state governments contract with to collect justice-related fees and fines. See Evan Weinberger, Inmate Families Face Cash-Transfer Fees ‘Just to Stay Connected’, Bloomberg L. (Jan. 11, 2022), https://news.bloomberglaw.com/banking-law/inmate-families-face-cash-transfer-fees-just-to-stay-connected.

[16] Id. § 1, at 4.

[17] Id. § 4.5, at 35 (“Imprisonment leads to a gap in a prospective borrower’s employment history and income that could pose problems when a lender examines an application’s creditworthiness and ability to repay the loan.”).

[18] Incarceration & Reentry, Off. of the Assistant Sec’y for Plan. & Evaluation, https://aspe.hhs.gov/topics/human-services/incarceration-reentry-0 (last visited Nov. 6     , 2023).

[19] Consumer Fin. Prot. Bureau, supra note 2, § 1, at 4.

[20] Id.

[21] Fair Debt Collection Practices Act of 1977, 15 U.S.C. § 1692e(4) (2018); H.R. Rep. No. 95-131, at 144 (1977).

[22] H.R. Rep. No. 95-131, at 144 (1977).

[23] Wide Area Telephone Service (WATS) was a long-distance phone service that allowed customers to make calls across state lines, and it was the first toll-call system. WATS – Wide Area Telephone Service, pulsar360, https://www.pulsar360.com/resources/glossary/wats-wide-area-telephone-service (last visited Nov. 6     , 2023).

[24] H.R. Rep. No. 95-131, at 145 (1977). At the time, there were 5,000 debt collectors across all states—37 states and the District of Columbia had laws that regulated debt collectors. Id. Only a small number of these laws prohibited abusive practices and provided consumers with remedies.

[25] 15 U.S.C. § 1692k(a) (2018) (noting a consumer may collect actual damages, punitive damages up to $1,000 for each individual, and up to $500,000 or one percent of the debt collector’s net worth, whichever is less).

[26] Id.

[27]²⁴ 15 U.S.C. § 1692(e).

[28] See Franklin v. Parking Revenue Recovery Servs., Inc., 832 F.3d 741 (7th Cir. 2016).

[29] Between 1940 and 1970, the most prevalent forms of debt were “farm loans, home mortgage loans, and corporate debt” and “consumer loans.” See Robert A. Kagan, The Routinization of Debt Collection: An Essay on Social Change and Conflict in the Courts, 18 L. & Soc’y Rev. 323, 329 (1984) (footnote omitted).

[30] Dressler v. Equifax, Inc., 805 F. App’x 968, 973 (11th Circ. 2020).

[31] 15 U.S.C. § 1692a(5) (emphasis added).

[32] See St. Pierre v. Retrieval-Masters Creditors Bureau, Inc., 898 F.3d 351, 364 (3d Cir. 2018); see also, e.g., Mabe v. G.C. Servs. Ltd. P’ship, 32 F.3d 86, 88 (4th Cir.1994) (holding child support payments are not “debt” because they are “not incurred to receive consumer goods or services”); Hawthorne v. Mac Adjustment Inc., 140 F.3d 1367, 1371 (11th Cir.1998) (holding obligation to pay damages arising from tort was not a “transaction” under the FDCPA); Sheriff v. Gillie, 578 U.S. 317, 321 (2016) (defining debts owed to state agencies such as “past-due tuition owed to public universities and unpaid medical bills from state-run hospitals” as “debts” under the FDCPA).

[33] See Dressler, 805 F. App’x at 973 (reasoning taxes cover a public benefit rather than a private benefit).

[34] St. Pierre, 898 F.3d at 361 (3d Cir. 2018).

[35] See Piper v. Portnoff L. Assocs., 274 F. Supp. 2d 681, 687–88 (E.D. Pa. 2003), aff’d, 396 F.3d 227 (3d Cir. 2005) (reasoning money owed for water and sewer service were “debts” because they originated as part of a contractual obligation with the government for a household service).

[36] Franklin v. Parking Revenue Recovery Servs., Inc., 832 F.3d 741, 744 (7th Cir. 2016).

[37] Briana Hammons, Tip of the Iceberg: How Much Criminal Justice Debt Does the U.S. Really Have?, Fines & Fees Just. Ctr. 4 (2021), https://finesandfeesjusticecenter.org/content/uploads/2021/04/Tip-of-the-Iceberg_Criminal_Justice_Debt_BH1.pdf. This number reflects court debt in the following states: Alabama, Alaska, Arkansas, California, Colorado, Delaware, Florida, Hawaii, Iowa, Kentucky, Minnesota, Missouri, New Hampshire, New York (NYC only), North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont, Virginia, and Washington.

[38] Consumer Fin. Prot. Bureau, supra note 2, § 1, at 34.