You'll find the words in Utah's constitution: "No imprisonment for debt."
And yet more than 3,000 people in the state were served arrest warrants arising from an unpaid loan between September 2017 and September 2018, according to a new report on payday loans by the Consumer Federation of America.
"People are definitely going to jail," said Christopher Peterson, director of financial services at the CFA.
Each year, 12 million Americans use short-term, high-interest rate "payday" loans. Nearly three-quarters of the borrowers have a household income below $40,000, and almost 10% are retired.
Interest rates on storefront payday loans are, on average, almost 400%. Many people find themselves in "debt-traps," borrowing payday loan after payday loan, and forced to skip basic living expenses such as rent or health care to keep up with the payments.
Often, they fall behind and the lender sues them in small-claims court.
According to CFA researchers' analysis of the Utah data, almost 70% of all small-claims court hearings in the state involved high-cost lenders. The average lawsuit the researchers reviewed dragged on for 14 months.
"A lot of these people have multiple jobs and childcare obligations," Peterson said. "They cannot afford to show up in court again and again and again."
If a borrower misses a hearing date, he or she can be found in contempt of court. And often, the lenders "aggressively petition" the judges to issue bench warrants for borrowers' arrest, Peterson said. Indeed, nearly 3 in 10 cases reviewed by the CFA resulted in a borrower being issued a warrant.
A spokesman for The Community Financial Services Association of America, a trade group that represents payday lenders, said its members "do not engage in unscrupulous business practices such as those described in the report, and we forcefully condemn them."
The spokesman added that its member companies, who have a presence in Utah, support legislation that would establish additional consumer safeguards.
These arrest warrants over debts are likely being issued in other states, too, Peterson said.
"The laws that allow this to happen in Utah are not limited to Utah," he said. "Contempt of court rules are widespread across the country."
Borrowers are frequently sued for small amounts. The median high-cost lender sued their customer in Utah for a $994 debt, the researchers found.
One man who fell behind on a payday loan was issued five or more arrest warrants by the small-claims court in West Valley City, Utah. The debt in question was $160.50.
Ironically, the researchers point out, small-claims court took off in the early 20th century as an alternative to expensive, lengthy proceedings for middle-class people. Today, those efforts have been perverted, Peterson said.
"Utah – and likely other states, as well – has allowed these courts to become low-cost, publicly subsidized, quasi-criminal debt collection agencies for predatory lenders," the researchers conclude.