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and now available in paperback. now a discussion on how debt and bankruptcy affect consumers hosted by duke university law in durham, north carolina, it's an hour and a half. >> i'm creola johnson, and i'm a moderator from this panel. i want to thank duke and the con temporary panel for having us. i also want to thank students and everybody involved in this, especially to jim hawkins. our panel today is about the aftermath of being indebted. our copanelist is richard hynes, breno braga and michael sousa from sturm college, denver. right? we're going to go ahead with the

most extreme consequence of the aftermath of being indebted and that is the idea of criminal debt criminalization. i came across this topic after years of doing research and finding all sorts of stories about various consumers being arrested or threatened with arrest when they couldn't pay their debt. and so i have a paper coming out where i talk about two forms of consumer debt criminalization in the columbia journal of gender and the law. and those two forms of traditional krlization are terrorizing consumers with threats of arrest, accusing them of having committed a crime. the second form is exploitation of existing criminal laws to accuse consumers of crimes and have them arrested or threaten to have them arrested. and then lastly is the misuse of civil contempt and the criminal justice system to force consumers to pay to get out of jail or avoid going to jail. i'll start with the last form of consumer debt criminalization. first, under our example, wakita

shaw got a pay loan from a place called sunshine. an our sunshine turned into darkness after she got this payday loan, she defaulted. the creditor got a default judgment. the lawyer for the payday lender went through the paperwork to require her to appear for oral examination. after failing to appear, eventually this was used to get a civil contempt order against her and she was eventually arrested. this single mother of a toddler ended up spending three days in jail before her mother could borrow $1,250 necessary to get her out of jail. i call this a misuse of civil contempt process. and it's akin to the debtor's prison. this is a cartoon i found in the st. louis paper. on the left side the first rule of debtor's prison is not to call it a debtor's prison. and the other guy saying i violated a court summons. and the idea that this is a

misuse is because first of all, the business model of payday lending is to lend to people who don't have money, right. and then we've got years of data about the financial data and demographics of people who give payday loans. these are folks who are lower income, less educated, likely have less savings, don't own their home. and therefore the idea that an oral examination, the purpose of which is to discover nonexempt saerkts right. so the idea that there is nonexempt assets around that can be sold is just ridiculous given their business model and given the demographics of the people that give payday loans and other high cost credit such as rent to own and high cost loans. so the idea that this is actually extortion. my assertion in this paper is that the criminalizer needs to be charged with a crime, and that crime is called extortion, which is the making of a threat through the use of unlawful fear to induce that person to hand over money or other property. most states have identified

several threats that constitute extortion. it's not like what you think mafia with a gun. we have a whole host of things that constitute extortion. in california, for example, and in many state, one common threat in terms of extortion is to accuse a person or a relative or family member of the person of a crime in order to get money or the property from them. new york, again, to accuse a person of a crime or cause criminal charges to be instituted against that person. that's extortion. missouri, which is where wakita shaw lives has a statute calling it coercion. stealing by coercion is to accuse another person of a crime. and so i want to start with a case. i have a lot of case, but this case you may have actually seen. it got press. this is a guy who ran a revenge porn website called "you got posted." ex-lovers could post naked photos and other negative information about the person. and then if the person wanted to

get that content removed, they were directed to a website called "change my reputation" where they had to pay a fee to get the naked photos and other negative information removed from "you got posted." so he was charged with several crimes, including extortion and convicted. he appealed his extortion conviction on several grounds, including that he did not direct any contact, right. he only responded to e-mail messages of people wanting to know how to get the negative information removed. he never initiated any contact. an then his response was just perfunctory, pay this fee. your photos will get removed. he never made any threats. he argued he had not committed the crime of extortion. and so teasing this out further, if we unfold the argument in terms of his conviction, he had already taken way the victim's privacy. he had already at least invaded their privacy through these intimate photos. and so the unlawful threat that he is using here is he is

threatening to continue to subject the victims to shame, disgrace and humiliation, which is another grounds for extortion. so the court rejected his argument, basically saying there was no need for direct threat or explicit threat, that the nature of the websites he ran, that website constituted a threat to continue to subject the people to humiliation and disgrace, unless they paid the fee. and they could only get the naked photos removed if they paid the fee. so if we compare that to wakita shaw, the lender will say they didn't make any direct threat, but case law says we don't need to make direct threats. and in this context, just as in the other context, you have taken away a person's freedom. you have taken away someone's privacy, right? the threat is that you're going to continue to take that person's privacy -- freedom from them by keeping them in jail until they pay the fee.

and so what is common with these civil contempt procedures is that once you pay the fee, the money doesn't go to a clerk. the money doesn't go to the courthouse. the money goes to the creditor who started the civil contempt process in the first place. so my argument is that this is extortion because the only way she gets out of jail is if she pays this amount, which by the way is almost three times the amount of the original loan, right. so we knock out the argument that you're only getting what you're entitled to. no, through this process you have ratcheted up the fees so that this person is paying a lot of money to get out of jail, and that the crime that they're being accused of is something related to payday lending, right? and we know payday lenders are notoriously known for threatening people with bad check prosecution if they don't pay their payday loans off. all right. so now let's move to the second form of criminalization, right. this is where we've got lots of companies that only threaten

have a person incarcerated. rent to own companies do it. payday lender, debt collection companies, car title lenders. a litigation in the state of washington. several affidavits from consumers stated that they had been threatened with being charged with a crime if they didn't turn over the property or they didn't pay the past due balance. so let's focus now on car title lenders. i want to make sure that you understand that i'm not picking one creditor here and there. this is a pervasive problem of high cost creditors exploiting the criminal justice system to threaten people with arrest. so in this case a car title loan is basically where you put up your car that is already paid up as collateral to get a loan. virginia robinson defaulted on a car title loan. the car title, the repo man showed up with a document called certificate of service, bold caps. and these are the words that were there. failure to comply with this notice sun lawful and is a

third-degree felony conversion of collateralized property. that's the crime she is being accused of committing. should you fail to contact, your inaction will basically result in a complaint being lodged against you through the local magistrate. and then the last sentence, as you see, this may result in a felony warrant being issued for your arrest. surprise, surprise, after this, she turned over the vehicle. and again, my argument is that this is extortion. and this isn't like one of the cases i actually passed over where it looked at it being implied. this is explicit. if you don't turn over this car, right, you're going to get prosecuted if you don't turn over the car that is enough to constitute an explicit threat. and in virginia as well as other states, again, it's criminal extortion to accuse someone of an offense in order to get money or other property from them. and that would include turn over the vehicle.

and then ace cash express. i think it's important for us to go after the big guys for extortion because otherwise there is no incentive for the smaller businesses to do anything. and those of you who follow this, ace cash express a few years ago was sued by the cfpb for a host of violations of consumer protection laws. arab cash express is the second largest payday lender. they were charged with -- the main thing that came out of this case was a training manual. the training manual diagram which we can't get into the specifics of it, but the they allege that the training manual diagram was used to create a sense of urgency that the consumers had to get another payday loan, basically roll over the existing payday loan. and that ace's own in house employees as well as the third party debt collection companies threaten people with criminal prosecution if they didn't make these payments, if they didn't pay what was demanded of them.

and so my contention is that some higher up people in ace need to be charged with conspiracy to commit extortion, right? so we see all the media drama with wells fargo. you file all the low level employee, and we know they're following instructions from someone. so somewhere in the mid level management, a training manual like this doesn't get created by one person. it gets created. and in a big corporation like ace cash express, there are plenty of people who had to be involved in this training manual and instructions to tell the workers to do all these things to try to intimidate people into paying. and so my argument is that this should be conspiracy to commit extortion. and that crime focuses on not necessarily where the victim -- whether the victim paid, because you and i know that there will be some people, no matter how much you threaten them, they just don't have the money to pay, right. so conspiracy to commit extortion would focus on the behavior itself, that is the agreement to use the threat of

accusing someone of a crime in order to extort money out of them. the last form of criminalization that i'm going to talk about is actually having people arrested, filing police reports. jim hawkins, i had to do it because he is from the great state of texas, cash biz filed hundreds of criminal complaints against people in only certain jurisdictions in texas because he knew then the d.a. office would send out a letter basically saying if you don't pay, you're going to be charged with the crime of passing a bad check. the majority of the time the consumers paid just because they feared going to jail. and in a q&a, we can talk about how that this process is being used to add a whole bunch of fees. the folks are not just paying off loans. and again, this constitutes extortion. you're not just getting repaid a loan. now you're able to use the force of the criminal justice system to add on more fees to cause the consumer to pay to get out of

jail or to avoid going to jail. and so in my paper i argue that this is bad for a host of reason, including the fact that most state statutes actually ban -- most state constitutions ban the imprisonment of people for failure to pay civil debts. and that what we've got going on is we've got routinely various creditors are doing an end run around these constitutional prohibitions on incarceration over civil debts. in particular to payday lenders, it's even worse. because several state, including the state of texas have laws that limit even prosecution against payday loan borrowers. some statutes say payday loan borrows cannot be prosecuted for passing a bad check. texas statute right here, as you can see, there is a limitation. the creditor has to show forgery, fraud, theft, or some other specific overt act related to this. in other words, simply giving someone a postdated check that is later dishonored is not the

crime of passing a bad check that has been the law for several years. and yet you had cash biz filing criminal complaints, knowing that the state statute required something other than a dishonored bounced check as a basis for filing criminal complaint against individuals. i argue in the paper we should care about this because otherwise we're allowing state constitutions to be violated. we're allowing particular creditors who use civil contempt to basically use the subterfuge to do what they really can't do, which is many times get an exempt income sources. so you think about wakita shaw, for example. she is getting child support payments. they couldn't get a court order getting her child support payments. those are protected sources of income, social security. all sorts of sources of income are now being tapped in through coercion by making people fearful of arrest if they don't pay. and then lastly, we've got

various state and federal consumer protection laws that are being circumvented if we allow creditors to basically intimidate consumers through what i call extortion in order to get paid. so my time is up. and jim is making sure we're staying on time. so let's go to the next person, and his topic is about accuracy of credit reports? >> credit reports. >> that's right. >> no music items. did i close out? excuse me. all right. so i'm going to talk about credit reporting. and today credit reporting is obviously hugely important for consumers, all right. it's not just about credit. they're used for insurance, housing and employment as well. and they're frequently wrong. so the fdc a few years ago

completed a study and found about 20% of credit reports contain material errors. and these errors persist despite a federal statute that requires the industry use procedures to ensure maximum possible accuracy. this standard is enforced with a general liability rule, with suits, with what could be described as negligence liability. the credit bureau themselves are liable if they're negligent in trying to pursue this standard. the furnishers, the creditors that send them the credit information are largely protected from liability from the statute. that's not all the statute does. it also pursues other goals. one of the things it does it is limits the content or use of reports. and the limit i'm going to talk a little bit about also today is a provision that limits the reporting of old negative information. so for most negative information, failing to repay a debt, you can't report it after

seven years. all right? this is a hotly disputed topic. there have been many amendments since 1970 when it was enacted. there are many proposals for changes today to address most accuracy and limits on use. in terms of accuracy, there are proposals for greater liability. there are proposals for set of liability having the courts issue an injunctive relief or the cdf issue a rule to have reasonable procedures for maximal accuracy. shortening the period where you can report negative information, prohibiting the reporting of some negative information altogether, and just outright prohibiting the use of credit reports for employment. all right. rather than address all of those topics individually, i only have 15 minutes, i'm going to first instead ask a threshold question. or maybe not. which is why do we regulate at all? now this may reveal that my

priors are different from most of those in the room about regulation. but even if you're convinced that we need to regulate, even if the doctor is convinced that the patient is sick, the doctor still needs to try to figure out what is causing the illness in order to figure out an effective treatment. so even if you don't share the priors, at least adopt that approach. and you might think the answer is easy. after all, in first year torts, you're in the theory of strict liability, right. an we want to force the tort fee, or here this would be the industry to internalize the harms that they're causing to consumers. and that would cause them to internalize the full social costs of their actions and thereby adopt the right level of care. the problem with this story is the harm that is being inflicted on the consumer often comes with an invisible benefit to other consumers. in other words, there is offsetting benefits. that is the primary hare harm that the victims are suffering is that they're being forced to pool, to share terms with truly higher risk consumers. but their presence in the pool

should, according to theory anyway, improve the terms that are being offered to those consumers. and so that the private costs suffered by the victims are going to exceed the social costs. all right. so a simple example will maybe make this clearer. suppose we have 80 low-risk consumers who are going to repay with certainty. actually, they're no-risk consumers. and we have 20 high-risk consumers who are going to default 20% of the time. they're all applying for a one-year loan in a competitive market with no discounting to make the math easy. if we had perfect credit reporting system, what would happen is the low risk consumers would promise $100 payment. and they would pay $100. because they pay with certainty. the high risk consumers would have to promise $125 because they default 80% of the time. so they repay $100 on average. now let's assume we introduce mistakes in the credit reports. in particular, nine of the low risk consumers are going to be

misidentified as high risk. what is going to happen is that while those that still have the perfect credit report are still going to be paying $100. but the misidentified consumers are now going to have to pay $116. not $125. why? because the people who are marked high no longer default 25% of the time. they default somewhat less often because nine of these people are actually low risk. so the competition should drive the promised price down to $116. this is a very real $16 loss for the low-risk consumers there is nine of them. that's $144 loss. on the other hand, the 20 truly high-risk consumers see their price drop by $9. they repay 80% of the time. so they have a $144 gain. in other words, in this very simple example, there are significant private costs for

the misidentified consumers, but there are actually no social cost. it's all about wealth transfer for one group to the other. it's all about distribution. now, in the real world, errors can have social costs for a variety of reasons. have 15 minutes so i'm not going to go through all of them, other than to simply note that this idea of pooling and separating isn't unique to the credit markets. often this happens in insurance. and usually what we worry about is not that the business is going to spend too little effort to try to separate the high and the low risks, but that they're going to spend too much effort. this is one of the justifications for the affordable care act and laws that limit the ability to discriminate between high risk health insurance people, people with preexisting conditions, and low risk health insurance people. there are other arguments as well. but that's one of the arguments. so we need to explain why is it

here that lenders would have not enough incentive to spend money to get accurate credit reports, right? and the story that is often told in government reports is gee, the credit reports are overly negative because the loss they experience from when the debtor defaults, the loss principle is much larger than the loss profit they would get from a good loan. i've spoken to these people and they now realize their mistake in that they're equating a bad loan is a loan that defaults with certainty, where really a bad loan is the problem of default times the lost loan, the loss on default is less than the lost profit. and that the margin in competitive market, those are supposed to be the same. so that's not a justification for this law. for the accuracy requirements. you can tell stories based on competition. after all, depending on how you characterize the market, the cost of acquiring information can be a sunk cost. and so in a competitive market,

the lender won't recover those costs. and so may decide to invest too little from a social perspective in that information. similarly, we should realize that some of the information in credit reports comes from public records, right? bankruptcies, liens, et cetera. but most of the information comes from creditors themselves. and they have a strong incentive to not share that information, or at least share that information in a poor way. why? because if they share great information, their competitors will realize who their best customers are and try to poach them. so you can telemarket failure story, why the market won't reach a first best. but i argue in the paper that the stories don't really justify our current regulation because the current investigation is a general rule, holds the -- holds the industry liable for its misstatements, for the errors that something the consumer can point to, but not omissions. and that's sort of been the

nature of the process where the consumer is going to be coming into complaints, they're not going to come in and say -- they are going to come in and say look, you said something wrong about me and it's bad. they're not going to come in and say hey, you failed to include other information about other types of credits that don't get reported, or you failed to include bad information about me. that's just not going to happen. and as a consequence, excessive liability, if we didn't have sort of a negligence rule we had a strict liability rule, what that would cause would be a strong disincentive for the sharing of information, especially for types of credit like subprime credit where there is inherent inaccuracy in the system. so i argue, though, that doesn't mean we shouldn't have this law. maybe we can justify it on distributional grounds. here i borrowed a term from one of my colleagues, which may not be the most intuitive term, called differential inaccuracy. maybe an example would help.

suppose we are applying i guess for health insurance. let's just go with that. and there is some genetic disease that substantially increases the amount of health care that you're going to need. right. and let's assume it lets us -- and we're just worried about cost. let's not worry about trying to a perspective for now. we're just worried about the welfare of the truly healthy. sort of strange, but i'll justify that in a moment. if we had a system -- let's assume we now introduce a genetic test that can determine whether you have this disease. and let's assume it identifies everybody who actually does have the disease. but it also mistakenly has some false positives, identifies some people who are truly healthy and puts them in the sick pool. what is that going to do? it's going to cause a small number of healthy people to subsidize a large number of sick people. if we instead ban the use of this test, we would spread the cost of subsidizing the sick

people more broadly over society as a whole. that story is nice, but it doesn't really fit so well with credit reporting where we seem to be trying to encourage more and more accurate reports to better be able to separate the high and low risk. but i think in a numerical example suggests that we can, at least if we ignore the plight of the truly sick or the truly high risk. let's assume we have 950 low-risk people. and now they'll repay with certainty. and to make it simpler, the high risk people are going to default with certainty. everyone is going to apply for a one-year loan amount. to ensure that the high risk people are in the market, no one is going to pay more than $110 for the loan. if there is free but shoddy credit reports that identify all the high risks. well, the correctly identified low risk are going to pay $100. nobody else is going to take out a loan because the lend worry have to charge more than 100. a second test is available that would identify, that would

correct the mistake. that would identify the other 95 low risk people there is a potential $10 of social surplus. so if we're just trying to maximize well, we should be willing to spend $950 for the better test. but the consumer mace prefer a law that mandates a better loss even if the cost is a thousand, this would reduce their expected gain, but risk aversion may mean that they would prefer that system. i don't -- i truly don't have any time to go through the distributional -- oh, sorry. actually i do have time for a caveat here. note that this ignores the caveat of what we do about the truly high risk type. greater accuracy is going to generally make the high-risk groups worse off. because fewer and fewer low high fico people are going to

subsidize low fico people. i don't have time to talk about limitations on use. i'll just say a brief note about distributional consequences. a lot of -- at least one of the major arguments for limiting the use of credit reports in employment is that it causes disparate impact, reduces minority employment. but at least the two studies that have been completed so far that look at state laws that limit the use of these reports find exactly the opposite. that it turns out that if you states as they limit the use of credit reports in employment, minorities and particularly black employment goes down. why? well, it could be that they're shifting -- that that employers are shifting to other practices that have greater disparate impact. or it could be that they're using the race outright as a proxy for credit reports. so in conclusion, the -- i argue that the fair credit reporting act is best explained as

pursuing distributional and not efficiency goals. that is plausible market failures exist, but the market regulations are ill suited to address this failure. the distributional goals will explain why we place greater emphasis on mistakes in credit reports, misstatements than in omissions. but we should remind ourselves that the distributional effects of these limitations can sometimes be counterintuitive. it turns out that at least the initial evidence suggests, these are two working papers, that banning the use of employers credit reports seems to reduce black microclimate. and i'm under my 15 minutes. [ applause ] >> i'm sorry. >> yep. >> all right. thank you very much. i'm going to start first

technology caroline, brett, john and christopher. and i want to say that the six of us, we are data nerds. so this presentation today is going to be about this amazing data that we have access to. and we're going to -- i'm going to show a lot of interesting statistics on relations between local conditions and that in collections. before i start presenting interesting statistics to you guys, i'm going to want to make sure that we are on the same page. so probably everyone in this room knows what debt in collection is since pre-k. but i want to make sure that irene force the concept. so debt in collection is a debt account that has been previously more than 180 days past due and have been closed and turned off. basically you have a credit card account that you didn't pay, and then for the first 180 days or six months, that it is past due. and after 180 days, that goes to

collection. one thing that you guys might not know, as some of you know is one-third of americans with a credit file actually have some type of debt collection reported in that credit file. that's kind of an interesting statistics -- statistic. so why should we care about debt collections? first of all if you have a debt in collection in your credit history, that's going to affect your credit score. so as we know, if you have a bad credit score, that's going to affect your future access to credit. that might be used by employers when they are trying to hire you. that is going to increase insurance premiums. the second point is kind of related to pamela's presentation this morning that when you have debt in collection, that creates effects on your well-being. so you get more frustrated. you get more angry. but also another point is decreasing debt in collections is not just affecting those that have the debt in collections, but it increase the performance of the market in general, right?

if everybody has less debt in collections, probably there is more credit in the market and the interest rates are lower. so given this motivation so, what is the research questions we're going to try to answer in this paper? so first of all, we're going to do something very descriptive. we're going try to look in the country, which areas of the country have higher share of people with debt in collections. so just as a spoiler alert here for the results, we're going to show that the southern region and the west region of the country are the regions where there is more consumers with the higher share of debt in collections. and the next research question that we're going to try the answer is we're going to look at those regions. like we're going to go specifically to track level so it's a very small geographic area that is for about 4,000 people. so we're going to define that as neighborhoods. and we're going look at the characteristics of those neighbors and see which characteristics are related to the share of people with debt in collections there.

so we're going to examine a lot of different characteristics of this neighborhoods. but we're going to focus mostly in two. one is what we call health care conditions. so we're going to look at the share of people in those neighborhoods that are not insured -- don't have a health insurance. and we're also going to look at health costs in those areas. we are also going to look at housing conditions. so we're going to look at the share of people that are homeowners in those areas, housing values, rents, and under water mortgages. now i'm going to say a little bit something about this amazing data. but it's kind of hard for me to say that because we're using credit bureau data. and richard just said how bad that data is. but we still think it's amazing. so this is a snapshot of september 2013. and then we get a seven million people. the reason we got seven million, that's what we can hand well our computers. and this data has information on

the credit files of all the people and they're around the country. the good thing about this is that we have very good description of the credit history of these people. so we know the types of debts they have, if they have delinquent debt, if they have debt in collections. and we know the approximate residency of the people. we know your credit history and more or less where you live. we're going to use this data, and we're going to augment that with characteristics of that census track where you live, getting information from the acs, the atlas for housing costs. all right. so what is the outcome of interests here? so the outcome of interest for this presentation is just going toby an indicator if someone has debt in collections or not. we're just going to make one restriction. we're going to look at debt in collections that are higher than $100. and there is a good explanation for that, because if you have debt in collection that is lower than $100, that could be just like a parking fine or something. they're very small that happened

a long time ago and you don't even know about it. and we know for sure -- we know as a fact that this credit rating companies, they don't use debt in collections that are very small in like either calculating the credit scores. the definition of debt in collection i did for you already. so here is the most interesting part of it. so this is a map of the united states. and this shows the share of people in each census track. so think about census track unlike the place with 4,000 people that has debt in collection. and as i said before, if you look do this map, you see that particular regions of the u.s. have a higher concentration of people in debt in collection. and especially the southern region and the west region, including north carolina. the state that has the highest share of people in debt with debt in collection by 2013 was nevada. in nevada, 46% of people -- 46% of consumers with a credit file have debt in collections reported in their credit file.

on the other hand, the region of the u.s. with lowest sheriff of people with debt in collection is actually the upper midwest, north dakota, south dakota, minnesota. north dakota is the state in the u.s. with the lowest people with debt in collection. 17% of consumers in north dakota have debt in collections in their credit files. so the united states very big. it's very heterogenous. we're going to zoom in on two very different states. the first state is texas. so on the left-hand side, you can see the distribution of census tracks in texas by the share of debt in collections they have. and you see some variation there. and i want to point out that like especially in the southern part of texas, there is a lot of consumers with a high share of debt in collects. and in fact metropolitan area of u.s. with the highest share of debt in collection in texas. it's called mcallen, if i'm pronouncing correctly and is in the southern part of texas.

and interesting enough, if you compare the share of people with debt in collection with texas with the share of people that don't have health insurance, or people that have insurance, you can see kind of like an interesting pattern there. so the places where people have less coverage by health insurance is also the place where people have more debt in collections. and mcallen, texas is actually one of the metropolitan regions in the country with the highest -- with the lowest health insurance coverage. 36% of adults in mcallen, texas don't have health insurance. now we're going to look to a completely different state. so this is minnesota. minnesota, it's a state with low number of people with debt in collections. but you can see even within minnesota there is some interesting variation there. and you see some regions of the state with a higher share of debt in collections. if my minnesota geography is correct, the place like in the northwest, it's called -- and

there you can see more than 65% of consumers in the area have debt in collection. interestingly enough, if you compare to the parts of the state where people don't have health insurance, there is the actually some correlation. you can see it's an area with high shares of people without health insurance. so if you don't believe in maps, anything like maps could be misleading, what i'm going to do here is just to plot a graph showing the share of people in each census track. so like neighborhood, think about 4,000 people, plotting the share of people there that don't have health insurance in that census track compared to the share of people that don't have -- that have debt in collections there. and you can see a clear pattern here with this graph, right? so the correlation between the share of people without health insurance and the share of people with debt in collections is 0.6. but it's not everything about

health insurance. it's also about housing markets. so here we're going to do the same graph, but instead of plotting share of people without health insurance, we're going to plot the people with negative equity. so negative equity means that the mortgage value that you have in your house is higher than the home value. so this is kind of an indicator of how bad the housing market is in that particular census and also correlation. places with higher properties with negativity equity also have a higher share of people with debt in collections. and we do one more thing. because we have this amazing data, so we have to show different stuff. so we're going to plot the same graph and look at unemployment rates. so remember, this was in 2013. so it was still the end of -- the beginning of the recovery, end of the great recession. so we're showing here that that census tracks would have higher unemployment rates, also the

ones that face a higher share of individuals with debt in collections. well, the paper unfortunately we just have 15 minutes. i could go over and over. but i give you a summary. neighborhoods with lower health insurance coverage, lower housing values, more underwater mortgage, high unemployment rates, lower and median income, lower education attainment and high share of african americans and latinos are the places with higher share with debt in collections. so just what is the implication of this? this -- i would like to come here and tell you for sure that oh, give people health insurance and that's going to decrease the debt in collections or give people jobs and that's going to decrease debt in collections. i cannot say this because this is not a causal paper. we're showing descriptive statistics about things. i cannot make that statement that strongly. but one thing i can say is knowing things about neighborhoods can typical you a

lot about the likelihood that someone there have debt in collection. so if you think about like we're trying to find policies that can improve financial well-being and, you know, like make people less likely to have delinquent debt in collection, we can use this information somehow. and we can think about instead of creating a national financial coaching program or a national match and save programs we can do something more direct to places that we know this is a problem and make the policy less expensive and more effective. thank you very much. so if you want to know more about our research, you can send me an e-mail. you can find us on -- i don't have it here. you can go to our website. thank you. [ applause ]

>> which one is it? hit this one. is it working? >> good morning. thank you for having me. my name is michael sousa. i'm an associate professor at university of denver, college of law where i generally teach bankruptcy and commercial topics. before i begin, let me thank as many others have professor hawkins and his colleagueses for organizing this symposium, which i think is important and timely. duke law school for hosting, and law and contemporary problems journal for funding and organizing this symposium. this panel is about aftermath of consumer indebtedness. and in addition to the criminalization of debtors, one of the ramifications of over indebtedness is filing for bankruptcy. so that's what i study, particularly for consumers. and consumer bankruptcy.

so what i would like to do for my presentation start with a theoretical framework, my methodology, my reasons for the study, the research questions, and then get to the perhaps more fun stuff, so to speak, which is what are the preliminary data showing. because it's still a work in progress. i may be the odd duck for today because i'm one of the few that will talk about law directly. talking about law indirectly, most of this ask from a sociological framework. it's probably well taken that a lot of social and income stratification in the sociology literature comes from the macro perspective.

consumers that come into the office seeking legal assistance for bankruptcy. and i spent several hours a week there it's a convenient sample so anyone they have a date with,

or the day that i'm, there we offer them the opportunity to listen to the laur-client counseling session about their soon to be bankruptcy petition after the interview, if i feel comfortable, i will ask them if they will sit down with me at a later date for an indepth interview which usually lasts between a half hour to two hours to talk about their experiences. you see the goal is to understand what their processing and the term of the paper legal considerationness is just. that how are they appreciating this bankruptcy process? my findings are not supposed to be representative of every debtor in the country much it's a very small sampling. however, using the concepts that are coming forth through the people's narratives to me, hopefully the concepts form a theoretical framework of how

many consumers around the country think about their bankruptcy cases. so the research question is simple. how do people think about this bankruptcy process? many consumers hear the word bankruptcy and think it's this ominous thing to be tackled or positive be challenged or fearful of it. they don't know much about it which is probably understandable. second, how do they make the decision to file bankruptcy? and third, how do they gain access to the bankruptcy system? some of the people that i'm interviewing are aly bit biassed, obviously, because they already found a way to access the system and they've already enn. large part made a decision to file for bankruptcy but i do ask them questions of how they came about the decision to do so. some demographics again feeling compelled to give you

statistics, descriptive as they may be. at this point, i have spoken with 23 total people which doesn't sound like a lot equally take theively, it's right in the wheel house. it goes toinlt view between 40 to 50 people. and you can see the breakdown is pretty much a third, third is and third between single females, single males and some married couples. overwhelmingly, the population is caucasian. this is a small city in colorado made up of mainly a caucasian community. but there are a lot of latinos that use the service. african-american folks less frequently. the demographics may not be what you think. i thought more at this point would be unemployed. however, 70% or approximately 70% have been employed while they're thinking about going

through bankruptcy. but these are people are middle income to low income. they have, as you see, types of jobs like hairstylists or driving for a waste manage comment company or a waitress or doing those types of jobs. no one in my population higher income or what you'd think of white collar. and i should add that this legal aid office, there's been past studies on the cost of retaining an attorney for filing a bankruptcy petition. just a general average. it's probably over $1,000 to file what is called a very simple chapter 7 bankruptcy petition. this legal aid office charges people only $500 to do so. and they represent them from start to finish. so it's a low cost option for people to file bankruptcy which is one of the reasons -- one of the reasons why they're tracted to go there in the first place. the gross monthly income, this

is based upon the bankruptcy petition. i'm giving you the mean and median. i don't think that is significant really as the next slide which is the disparity in about these 23 people total assets versus total liabilities. the mean is less important because there's one or two outliars, one couple oenld a $500,000 home fully secured by a mortgage. but you can see that total assets, the median of this 23 people is just a little over $9,000 which may not be much to many people but their liabilities, the median are tremendously overwhelming compared to their assets. and they simply don't have the means to pay back the amount of debt they've incurred much of which i think you found is medical debt. medical debt related. so the preliminary findings, here's where maybe gets interesting. nothing this list is not in order of importance. just the way i typed up the

slide. the first concept, financial desperation and identity work. in the literature particularly with people in a stigmatized condition that and bankruptcy i've written about and pamela has written about before is a deviant or stigmatizing condition for many people and much of middle income america. but what is interesting that i found is the males that i spoken with in this population, particularly for fathers, are finding it very difficult to have to admit to themselves that they need to file bankruptcy for themselves and their families. they take it as a tremendous hit to their manhood, their sense of being the provider role, the sense of being a father to their children. they equate it to a great sense of failure to the point where one or two of the fathers i spoken with thought of suicide

or thought of self medication through alcohol because they were so despondent over having failed their families which perhaps is a significant finding. second, we heard a lot about credit this morning. onest things people tout about credit, the bankruptcy filers, every one of them invariably ask the attorney how do i build my credit back up? how do i build my credit back up? there's a practical reason for it. it is to get a car loan in the future or mortgage in the future. but when you listen more closely to the stories, a lot of them that i've interviewed equate good credit with self worth. for example, there is one woman i spoke with which i literally could have asked her what clort sky was and she used to say i used to have a 700 credit scored

and i want it back. it wasn't about using credit in the future. it is about herself worth. even though the number is not reported except to agencies but to other people, it was important to her and her identity to have a good credsco. it made her feel more worthy. second is class status and lawyers. i don't think that is anything endemic to bankruptcy at all. manufacture the people and again lower middle income or low income at the time they're filing are very his tanlt to seek the aid of an attorney. they come in in jeans and sneakers and t-shirts and shorts sometimes and what they're fearful of is the lawyer who is wearing a fancy suit and an expensive tie who has a lot of books in his or her office and what they're really concerned about is being judged by an attorney who has higher landfall of education, many have said to

me that i thought when i came here -- and this legal aid office is a hobble. it used to be a bait and tackle shop. nothing fancy at all. but, yet, they were concerned about hiring a private attorney or this legal aid office because they were concerned and expressed to me they thought literally an attorney would be shaking their finger, his or her finger in their face saying you really messed up by income financial trouble. why did you do it? how did you come to that situation? so they're holding back going to or seeking lawyers for assistance based upon this class and knowledge differential. in the deviance literature, people that find themselves in a defend yanlt condition do moral boundary work. and what the debtor are doing that i interviewed unprovoked by me are creating boundaries between themselves and other debtors. and their narrative is i am

essentially the deserving debtor because i'm here because of a medical debt, recent divorce, factors beyond my control. and they speak of this group of nondeserving debtors who went to vegas and gambled, who bout a lot of big screen tvs or abusing the entire credit process. research has shown that population really doesn't exist. there are always people that abuse the system. but they're making this moral boundary work between themselves and the other to give them or save face to themselves or to the interviewer. delaying needed self care, what i mainly mean by that is people with medical problems are intentionally not going to the doctor and seeking treatment at a fear of creating another medical bill. for example, a woman who i interviewed who had debilitating

lupus refused to go to the doctor and crying while she was saying this to me because she didn't want to create another bill for her and her husband. so what does she do? she deals with the pain. and others who have psychological issues or needing other things have delayed seeking treatment because of the bill. very quickly, one minute left, i thought i'd be able to -- didn't think i'd get through that quickly -- or that slowly. lawyer-client interaction. there is a large literature who have controls the lawyer-client interaction. i'm finding it's more of a negotiated conversation twenty lawyer and the client. one thing i'll note is that largely the lawyer that is controlling the chapter choice of bankruptcy particularly chapter 7. they all belong there. rightfully so based upon their income and as snets a chapter 7. but the choice is essentially made for them by the attorney by

steering them in. the word always happens in every communication that you obviously want to do a chapter 7. and then the client doesn't know really the difference. but they, you know, agree with the layer. the last two, post bankruptcy life, very interesting. i ask the people i interview about their post bankruptcy l e life. they haven't thought about it at all very much chchlt . which is scary. that needs to be addressed. and the last one, bankruptcy is a fresh start. most everyone thinks and i do, too, that bankruptcy is a fresh start from financial life. manufacture the people that i've expressed think about bankruptcy in a different way which is a new life in their physical relationships or romantic relationshi relationships, their health and even their income and employability that bankruptcy will let them move on in other

places in their life other than the financial. so that's it. thank you very much. >> okay. so i wanted to -- why don't we go ahead and open it up to questions. the last panel didn't get to have that many questions from the audience. so they say they want you to come to the front with the mike. so paige and lauren, if you don't mind that long walk down here. >> yes. >> thank you so much. i had a couple comments for the last two. so michael, first this is really interesting work. but with 23 observations i think we really can't make much of the summary statistics. so i would encourage you to think more about the other findings that you have, especially post bankruptcy life got me intrigued.

so when i teach bankruptcy, i take my students to the meeting of the creditors. the interaction there's are really in stark contrast to what you observed at the legal aid office. so most of the filers have never met their lawyer before. so there is a kind of role call before the meetings. so it is really interesting. many of the people also are trying to file chapter 13 for the second, third, or fourth time because their plan did not succeed. so i'm curious to the extent can you follow up with your sample if you'd see any differences and how people interacting at the legal aid office how successful -- it sounds like you have mostly chapter 7s but how successful the chapter 13 repayment plans are. and then for you on the debt collections, that was fascinating data. really compelling story coming out of the data. you were quite up front about how you can't tell a causal

story. i'm curious to what extent your story is about debt delinquents or debt collections. is there any reason to believe that collection agencies are more active in certain zip codes than others? i just don't know the answer to. that but is it the case that people are defaulting on debts more frequently or is it that creditors -- that collection agencies are more active in some areas than others? >> thank you for the questions. no. the descriptive statistics are not to be generalized. it's just to give you an idea who have i spoke. to i wouldn't put that in a paper other than a table to get a sense who have i'm speaking w i think the other points are well taken. this is only the first sliver of a larger series of papers that may address what your concerns are. first, what i'd like to do and i think i'm -- wli finish the rest

of these interviews, do the same thing but not in legal aid office setting but with private attorneys. at least in my state, to see if the interactions are any different. see if the client he will or consumers have any other different consciousness about the bankruptcy process. i have preliminary ideas. the other idea is when this is done is to do a study of some of the debtor that's i've spoken with, particularly at six month intervalz or a year intervals to see how they're managing post bankruptcy. most people don't have a plan. but it's to build their credit back up and that's it. if you don't increase income or decrease expenses, you may find yourself in the very same position four, five, years down the road. so those are my plans. >> thank you for your questions. it's very interesting. so when we started this paper, we had delinquent debt as an

outcome and we rolled the whole paper. then we realized that two things are very similar. so the same stories that we're seeing in the data for delinquent debt, this was the same story we saw in debt collection. so for this reason, we thought i think that debt collection is more like related to financial distress of consumers. we decide to focus on that collection. to answer your question, the patterns that you see in the data, the regions that have that are the same regions whether it's high delinquent debt and also like the associations with all the local donation that's we have shown. >> i just want to comment on the bankruptcy. did you notice, did religion come out in the interviews? i grew up in the bible belt. and a very popular man through the '90s, you know, basically said bankruptcy is a failure and christians shouldn't file

bankruptcy. and, you know, i cracked this law and my church members, helping my church members. one of the problems is trying to convince them that god is not going to be mad at them if they file bankruptcy. that bankruptcy is in the bible. right? you know, the jubilee. this is a way to get you to jubilee. >> yes but not in the way you think. >> okay. >> there is -- near this legal aid office is a church that has 10,000 members. and some of the people are members of the church and they go to the legal aid office and they bring up, i don't ask questions about religion, but they bring it up. i'm thinking they're going to say. that i'm a bad person. my religion tells me otherwise. two out of three of the 23, go seek the guidance of the pastor at that church or the clergy.

and the clergy actually looks at their balance sheet, financial statements and advices them that it is okay to file for bankruptcy. there's no shame involved with respect to the church and their need. but it is the church that gives them the sense that it's an okay thing to do which is what i would not have expected. >> the other question is the post bankruptcy plan. so when you're asking these -- what point you are interviewing these folks? whether i practice bankruptcy law, that was one of the things we discussed through doing the counseling session is, okay, so after this is all over, you got to find a way to get more income or decrease your -- really i always say both. you need to do both. decrease expenses and find more income so you don't find yourself needing to file bankruptcy again in the future.

>> so i'mibility viewing people with the first appointment with the lawyer which usually takes 45 plinz to an hour, sitting down, thinking about the finances, deciding which chapter, getting all the financial information down. so their on the verge of filing for bankruptcy. some of them don't come back. some decide not to do it. but this is before the process actually starts. but you're right. i don't think other than getting access to credit, this law firm and this legal aid office doesn't do much of a job of counseling them what to do. but it is interesting that many of them have not thought about i it. >> lauren? >> bruno, i want to ask about your proposed solutions. so why is it going to help to get financial coaching if the

problem is medical debt or unemployment? i can see why the match savings program makes sense. you want to create more cushions for people in that zip code. but the financial cushion doesn't make much sense to me. and then i had a few comments for rich. what is -- what did b. the value to low fico score consumers, high risk of consumers of not being overindebted given now that we have michael saying, you know, this over indebtedness and having to file for bankruptcy leads to suicide risk even? >> i also want you to address -- there is a parallel between this information about if you withhold credit information you're going to get more race discrimination with john donahue's work with employment and finding that when employment

description laws came knee infect people were less likely to hire african-americans, mostly because people are more likely to litigate when they're fired than when they're hired. and i think that we -- despite the fact that we know that that the anti-discrimination law still serve an expressive purpose and a long term purpose that is important. and maybe accuracy in credit reporting and then not using credit reports for employment or housing serves some expressive value.

>> i think the evidence we have now about how effective financial coaching and financial education is, it's not 100% clear. so there's a bunch of papers say they help a lot. a bunch of papers say we don't find any evidence. that was not your question. i should have made that point. there the way i see this is i think financial coaching could interact with things that happen to you. that's why we think these regions that have financial distress, you know, like financial coach kog help those. those that are suffering those bad outcomes. >> so you bring up some very good points. i agree that there's a cost,

social cost, what i would call misallocation in the sense that you allow the pooling, the high cost hypes are not paying a cost that reflects the true cost of providing the goods or services to them and therefore they may consume when it doesn't provide a benefit equal to the cost. and some cases like health insurance, we don't worry about. that we don't think that cancer patient is going to be overconsuming medical care. but in other cases we might. we don't want the high risk auto driver to continue driving. we want the insurance to price the person out of the market. i hope it's still in this draft of the paper. i cut thing for words. maybe i'll make sure it gets back in, but there is a real risk of allocation and credit markets. the consumer -- the interest rate tells them something. maybe they shouldn't be taking on the debt and excessive pulling can lead to overdebtedness. with regard to the

discrimination point, you know, the finding that withholding -- i'm sorry. refusing to use this information can harm minorities is not certainly not unique to credit reports. another one of my colleagues at virginia over in public policy department has a recent paper showing that the same thing seems to be happening with man the box and there are other papers that find if you have strict access to criminal records, black employment goes down. them are presuming it is coded with crime. and overestimate. the other paper, i can't remember the name off the top of my head. it shows that as you -- of laws

that restrict use of drug testing, minority employment goes down. if you encourage drug testing, minority employment goes up. >> that i didn'ten into say because we should allow all these uses. there may somebody expressive purposes. we should recognize that our expressive purposes has real costs that are going exactly what we -- opposed to what we think we're expressing or they could. these are all working papers. i have a study that i'm -- i should be drafting right now. when you put the laws into place, people that had trouble making their payments in past, it is our proxy for bad credit. employment goes up.

it shows harms to minority employment and shows employment in zip codes -- not zip codes but census tracks with bad credit that, seems to go up. so there is costs and benefits to this. and they're distributional questions. >> they did a study about debt collections and they said one in four black residents were being sued by debt collectors and it is disproportionate to those regions and across the country. i like the regional focus. one thing that struck me about that as i looked through their data is it seemed to correlate -- they were not finding discrimination. and they also weren't finding

sort of any variable that they could pinpoint on the debtor, the collectors part. but what struck me is there was the wealth differential. these are just low asset communities that is they have lower buffers on their homes. and so i wonder if you study that correlation. it seems to me that seems more intuitive and obvious as opposed to health care costs. those all seem bundles n you have less assets and more vulnerable to the factors. the other thing i wonder if nevada is a different issue because of the, you know, prevalence of gambling and what not or maybe just putting that aside if you can map asset with the other regions. >> i'll answer that first -- that last question first. about nevada, i think that's probably true. nevada also during the great recession was like one of the housing -- the states where the housing mark went badly. and then if you remember our

data is from december 13 and the data collection could have it happen, you know, before that. so i think it's part of this is the gambling industry. but also part of this is just the fact that housing market there went so badly. on your first question, i think this very interesting. i think like if we could get data on wealth by census in this country, i would love to do that study and show i want to explain this. this is the wealth difference in different parts of the region. and the racial wealth gap is like tremendous. and i'm pretty sure that explained a lot of the racial patterns. it's just like i don't think we have data on wealth by censorship. we could get data by states. that could be interesting. but not at a strike level. >> you eastbound have the moven. >> right.

>> we see places where the home value is high, there is lower share of people with debt and collection. yeah. so for the home part of the assets, yes. not for the rest. >> so they're not taking stock. >> homeownership is also lowering in four places. if you have a home, that's a lot of assets. a lot of people poor people don't have homes. they rent. yeah. >> so i have one for you and then responding to your question about pastors and then following up on michael's study. before i read your paper and before i saw you speak several months ago about this, i had read basically popular press articles about the effects of criminalization here and there

which you reference. but i wonder if you had seen anything about certain states trying to take action against this and in any way after they see people with essentially criminalized debt going through their court system and showing up kind of in the jail system. and then michael said to your point about the pastors, for one bit of an anecdote, but maryland is one of the highest pro se filing districts in the country. and the higher pro se rate is linked with pastors telling their per igsers that it's okay to file and i will help you. and in my talks with pastors from across the country, they both cover for their own church's bankruptcy and by saying i help my people with their own debts now and also i have always, you know, said it

is not a moral failing to file for bankruptcy. it's actually almost a business decision at some point and it's really kind of like decision about your business, your family's business. life that really needs to be made. that goes to my questions about michael and his study and i heard about it from the beginning. and now that you have data, i was woenderring if following up on deb's work about people in particular justifying their filing and also bankruptcy stigma which you heard about before. is what you're finding consistent with what she found in previous years about how people talk about their filings and why they file to try to get out from under kind of the stigma and shame of filing for bankruptcy? and also, how did they get to the legal aid office? what is the networking that gets people from hay lai i have a

financial problem to i'm filing for bankruptcy? >> the interesting part about the church thing, i actually think there's a racial difference. so this popular person that advised against filing bankruptcy was white. the audience were primarily white evangelicals. so i actually think that in that universe, when i'm talking about my practice of law, i'm talking about convincing white people that it's okay for them to file bankruptcy. when it comes to african-americans, you just eventually you just hit a wall. you just can't go on. so i think it's a good thing that i'm hearing that some churches are telling the folks this is okay because that's what i've been saying all along. this is a good thing. because now you're going to be

able to shed some debt, manage going forward and avoid getting to this problem in the future. and so what i wanted to ask also was have you met any people that harsing collection. that is part of what i'm talking b i'm talking about collection tactics that include threatening people with being arrested? you have seen any of that? >> a lot of questions. >> let me take them if reverse order, i guess. people are being hounded by their creditors. but i haven't heard a story of overt threats, criminalization or criminal punishment. the tactics that people use in the literature already, i don't answer my phone. i don't open my mail and a knock on the door, i duck under the covers. i haven't heard any stories of someone went to threaten me of a

criminalization. so your findings have reinteresting to me. it's one step more aggregated to an aggravated to collecting the debt. to panelist questions, how do they get to the legal aid office is interesting. this legal aid office doesn't advertise. they have a little sandwich board on the curb in front of the street of the main strip that people drive through and people tell me and it's in chalk. like a sandwich board at a shop to get food or soup and they tell me i've driven past this place 10 or 12 times and think about going in but i was too scared. and it's then another call comes and then stress and the psychology of it and the monkey on the back of not getting out of it finally pro tells them to say i feel better about it. i walked in. and one thing i didn't have time

to discuss is the legal aid office purposefully zinld itself not to look fancy. the attorneys sometimes wear shorts, flip-flops, jeans, golf shirts. they do it purposefully to create a welcoming nonjudgmental atmosphere. and the people that take that step in feel glad about that going back to my final feeling of being judged. they see the sandwich board or it's water cooler talk. they know a friend who filed or they know someone who has filed and that assuage sometimes concern about filing in the first place. as far as stigma goes, my paper and deb's past work, i think it's they're coherent in a sense that making moral boundaries between myself and someone else is a flip for saying making justificationors accounts of why people file for bankruptcy. so i think that stigma is still

there. the need for making accounts for saving face is still there. it's not a random sample. i can't generalize. it seems at least to me some people are getting more comfortable with filing because of the water cooler talk. it's not such a bad experience. >> no more questions? one last question, paige? >> it is more a suggestion than a question. i have in the back of my mind the peer effects going on here. and the stigma of filing for bankruptcy. i wonder is there any way to use the big trans union data to look and get a sense of michael's story of the water cooler

effects in lowering the stigma of bankruptcy? so is there some threshold for a certain population of people in financial distress in your community or a number of people filing bankruptcy that reduces the stigma? >> yeah, you can definitely see how given that behavior of your community condition on that and what's the likelihood to declare bankruptcy, something like that. yeah, i think that is interesting. >> yeah. and peer effects are almost impossible to discern because, of course, communities where lots of people are filing for bankruptcy have low incomes, high unemployment rates. so it's going to be hard to distinguish how much people are influenced by their peers rather than just general conditions. since you had such great dat yashgs sounds like michael's research is uncovering some of

the reasons people end up in the legal aid office. i was trying to -- >> they think the peer effects happen where you live or where you work? that's the different places, right? so the information we have is where you live and, you know, in your neighborhood. but it can also be where you live. >> and the other component is familiarly. one thing i would love to do is generations of family members or extended family, it's common that other people in their family have people that file bankruptcy in their immediate or not so extended family. >> i have a comment on. that i'll stay here. i have a data sest legal aid in north carolina all of their cases for the last 20 years and there's definite repeat family -- i mean they're called legal aid families. so that is a good thing. and legal aid knows. that it's like coming out at least in north carolina that

many family members but in terms of filing for bankruptcy, at least among very low income communities and work that i've done, they keep it a secret and not talking about it to family and there's no water cooler talk. so maybe it's an income level thing. but among very low income at least with the work that i've done, everyone's very concerned about how to keep it a secret and weather family members would find out. so i would think that that might make the networking in that community much less likely so it might be more of a neighborhood -- just where people are rather than networks. and there's a lot of sociology to show that now people in very low -- in public housing are not talking to their neighbors. >> okay. you have our last question. >> so my question is for professor johnson.

i looked at criminal threats of incarceration by debt collectors and some creditors as well. and oftentimes the pattern that has come across my desk or my various activities has especially i think in the past more recent years has been more of the lender getting a judgement from the creditor. sorry, the creditor suing the debtor, getting a judgement and then pursuing collection activities including trying to get maneuver the bar where it's needing to appear in court and then the borrower doesn't show up as they often don't. and then the judge holds them in contempt and that's what triggers their incarceration. it's not that they're being incarcerated for the debt. they're being held for being held in contempt. it's the creditor sort of manipulating that situation potentially and trying to get the consumer in that spot.

so i guess my question for you is to what extent have you read anything or do you have thoughts about educating the bench, the judges out there who are holding these borrowers in contempt and not really understanding that this was a strategy as a business strategy for some participants in the marketplace. >> so that's a good question. so the technicality is you're being arrested because you failed to appear at oral examination. so i argue that base ond case law and other settings that you -- we're going to elevate the substance over the form, right? the substance is that you know once you arrest somebody and they beg and cry and call mom and dad and aunt, uncle, relatives are going to try to help you because now you're in

jail. they may not have been inclined to help you before. the contention is since that's the real motive and since the money immediately goes from when you pay it it goes over to the creditor, that that's the real purpose for it. if it was really discovering assets, then why are we letting money go straight from the person who pays to the creditor? right? so now more to the point of educating the bar. i actually, you know, there might be -- my mindset is punitive because in my mind my solution was to punish the bar. that lawyers should be sanctioned and it goes back to my time. i know i sound like a bleeding heart, you know, consumer advocate and i am. but i actually represent eed devil -- i mean creditors for over three years when i practiced law. and there was just certain things i wouldn't do. i don't understand why there weren't more people like me.

and so, for example, what the rights, what i don't know what happened is what happened when her or her mother called up the lawyer to say how can we get her out of jail? and so in the paper and footnote i'm going to say this is a common thing when i practice law and i think it's common among the bar. if you represent creditors and a consumer is unrepresented, they will usually call you up. so if you're saying to that person anything other than what i would say which is that i don't represent you, you need to get your own attorney if, you're saying anything like well, you need to pay and then you'll get out of jail that you are being complicit, part of my argument that is conspiracy to commit extortion. the lawyer is part of that and we have lawyers charged with criminal extortion. that should be a basis for you to be brought up on ethics charges because you are not acting in good faith. that is to say you're not using

the civil contempt process because you really believe the debtor has assets that are nonexempt that they are concealing and refusing to pay this debt. you're instead using it to coerce that person to find a way to pay the debt. and you should be sanctioned for. that but i suppose -- so last night i was actually thinking about. this what is my minimum, you know, my least restricted way to deal with it? so now maybe that's part of it, educating the bar. so, for example, in ohio, when we found out 15 years ago that lendors were filing criminal complaints and having consumer prosecuted, that was the approach that legal aid did was to go and educate the bar and tell attorneys, tell prosecutors there is no crime being committed here. at the time the lepdor gets the check, the pay day lender knows there's no money in the account. so there is no intent to defraud.

they say check is evidence of a loan not evidence of intent to defraud. and i was happy with that until i came across the 2007 case and dark county, literally that is the county, dark county, ohio, where a woman was prosecuted for they didn't do bad check prosecution. instead, they prosecuted her with theft by deception. and again, the argument is there is no deception here. you know there is no money in the account. so they're argument was the prosecutor said well she stopped payment. yeah, she stopped payment several days after she got the loan. there has to be deception at the time you get the loan. not use something action five, six, ten days later as a basis for saying that there is deception on the front end. and so i'm saying all that to say i'm not happy with just educating the bar. because we seen prosecutors and

judge wl judges who wink, wink, nod, nod, want to pat pay day lenders. they're active in lobbying and in supporting the campaigns of people who are elected to office. so that we would have judges, prosecutors more inclined to not do anything when people are charged with a crime that arises from a pay day loan. i hope that answered your question. so our time up is. jen hawkins is giving me the -- so now we're about to do lunches. where are we supposed to go? [ inaudible ] so thank you all for coming.

>> a couple of live events to tell you about on tuesday. first a look at the da tota access pipeline project which sparked months of protest in north dakota. demonstrators argue the pipeline is an environmental risk and will directly affect the residence of a local indian reservation. that is live at noon eastern on c-span. later in the day, president obama presents 21 individuals with the presidential medal of freedom. the nation's highest civilian honor. this year's recipients including former nba stars michael jordan and kareem abdul-jabbar, tom hanks and robert de niro, diana ross and bruce spinning and bill and melinda gates. that is live from the white house also on c-span. >> well, if james madison is the architect of the constitution and he might be, then george

washington is the general contractor. if you ever built a house, the result looks a lot like wlat general contractor has in mind than what the architect has in mind. >> sunday night on qa & a, edward larsson talks about president george washington's role in unifying the country and in ratifying the first federal documents in his new book, george washington nationalist. >> what they wanted to do is recruit washington in as part of the coup d'etat. new hampshire talked to washington before about, you know, this democracy stuff is never going to work. you have to be our king. washington was a true republican. he believed in republican government. >> sunday night at 8:00 eastern on c-span's q&a. >> now a look at what the justice department is doing to investigate international corruption and fraud. you'll hear from an assistant attorney general whose unit is responsible for enforcing law that prohibits u.s. corporations from bribing for