When Due Process Fails: Debt Collection and Civil Contempt

Blog contributor 
Policy Fellow

In the late 1960s in upstate New York, Harry Vail, Jr. and his wife, Charlene, entered into a credit agreement with the Public Loan Company after falling on tough times. The Vails made occasional purchases using their line of credit from Public Loan, and each month they tried to pay twenty dollars to reduce their loan balance.

The arrangement worked well enough until January of 1974, when Harry Vail lost his job. The Vails tried to get by on $378 per month in public assistance, but this paltry sum left them unable to make any payments to Public Loan. By the end of that month, a default judgment of $534.36 was entered against the Vails in the City Court of Poughkeepsie. When three months passed and their debts still had not been paid, the still-unemployed Harry Vail was served with a subpoena compelling his attendance at a deposition. Vail attended neither the deposition nor a subsequent court hearing. Vail did contact Public Loan to work out a payment plan, but to no avail. On August 30, Joseph Juidice, a Justice of the Dutchess County Court, entered an order holding Harry Vail in contempt of court and fined him $250. Vail did not pay this fine. On October 1, Vail, with $1 to his name, was arrested and jailed.

Similar events were commonplace in many states in the 1970s. What distinguished Harry Vail’s story was his decision, upon his release from jail, to challenge New York’s civil contempt procedures. He asserted the inadequacy of New York’s notice, hearing, and right to counsel provisions. Vail had been served a subpoena, but he lacked the education and sophistication necessary to understand its implications. Vail had never appeared before a court before being jailed. Throughout this process, Vail had never been afforded legal counsel. In 1976, his case reached the Supreme Court. Harry Vail and Joseph Juidice came to personify not a typical interaction between a down-on-his-luck debtor and the law, but two sides of a battle over the content of procedural due process.

Originally enacted in 1871, Section 1983 of the Civil Rights Act provided a crucial means for litigants to bypass state courts, in which due process was often considered to be elusive, and go straight to the federal courts. During the 1970s, however, the Supreme Court had gradually restricted the circumstances in which this mechanism could be used. In deciding Harry Vail’s case, the Court held in Juidice v. Vail (1977) that civil contempt procedures could not be challenged under Section 1983. An opportunity to present due process claims in state court was opportunity enough, the Court said—no day in federal court would be necessary.

Debtors’ prisons are commonly thought to be a relic of the past. Although the specific laws Vail challenged were eventually changed in New York, civil contempt statutes are still used—frequently in the absence of appropriate procedural safeguards—to jail debtors. The Federal Trade Commission recently concluded that the “system for resolving consumer debts is broken.” The Commission specifically noted failures to “properly notify consumers of suits” and consumers’ lack of understanding of such suits. Inadequate notice and frequent misunderstanding of proceedings, especially among disadvantaged populations most exposed to debt collection, suggests that procedural due process requirements are not met by the status quo. The problem is compounded by defendants’ lack of access to counsel in civil contempt actions, as exemplified by the Supreme Court’s recent decision in Turner v. Rodgers (2011). The legacy of Juidice v. Vail only makes judicial resolution of this due process conundrum more difficult, as state procedures cannot be challenged in federal court.

Twenty-first century debtors are still jailed in America without the benefit of rigorous due process protections, and today’s Harry Vails are precluded from challenging these procedural inadequacies in federal court. In order to rehabilitate the use of civil contempt procedures for debt collection we must acknowledge the crucial importance of adequate notice, hearing, and counsel for debtors and advocate legislative enactment of these protections in each state. This, however, is not enough. The Court declared in Juidice v. Vail that Vail’s “opportunity” to present his claims in state court rendered federal adjudication unnecessary. This emphasis on protection of state laws from federal scrutiny, rather than protection of disadvantaged citizens from procedural unfairness, stands in contradiction to the meaningful legal opportunity Section 1983 was enacted to provide. For opportunity to acquire this meaningful, rather than a merely theoretical, import, its reevaluation is necessary. The legacy of Harry Vail’s case, and the knowledge that procedural inadequacies continue to face today’s debtors, obliges us to imbue opportunity with a fuller meaning.