“My pen has just struck a warrant for your arrest.” Monty stood dumbstruck before the Magistrate. “Court starts at six.” Monty stared straight ahead, his hands clasped behind his back in a pose that suggested a broken military recruit. He looked not unlike a child ambivalently awaiting his father’s lecture. His feet beyond shoulder-width – further decreasing his below average stature – Monty stood his ground as the severity of his financial situation crystallised.
The 32-year-old man, who asked to be identified only as Monty, had come strolling into the Magistrate’s Court 45 minutes late, dressed in Ralph Lauren jeans and a crisp Polo shirt with a polished watch and tan suede boots. His fashionable apparel impressed neither the court nor his creditor.
Faced with the prospect of court-mandated repayment and the ensuing humiliation, misery undoubtedly despises company. Monty said he plans to escape both. He is preparing to flee the Bahamas for Atlanta over a $3,000 debt.
There are others. The warrants division of the Royal Bahamas Police Force assisted the Guardian by conducting a search of outstanding warrants, pertinent to bank matters and issued from the beginning of 2003 through September 19, 2006, the most recent date for which arrest warrants were available. The research team found 1,169 outstanding bank-related warrants through that period of time. But, Insp. Derrick Burrows, the head of the research team, estimated that there “could be more than twice that many” outstanding, as not all arrest warrants come directly through his office. Countless more have been served and executed.
For those Bahamians who face oppressive levels of debt and sit by wondering when the police will knock on their door to hand deliver the warrant for their arrest, borrowers are finding themselves unsure of what to do next. Debtors are at the mercy of the bank and their lawyers.
Bankruptcy protections do not protect bankrupt citizens. Debtors must pay legal fees and court costs, plus the value of credit they already owe. The Debtors Act of 1870, which eliminated the criminality of debt, still makes plenty of provisions for prison.
Law provides few ways out
Branville McCartney, a lawyer who frequently represents banks at court hearings, commented, “In the States, bankruptcy is a shield. In the Bahamas, it’s a sword.” Under its current codification, bankruptcy and financial law permits creditors to “chase you into the grave,” he said.
“That pretty much sums it up,” said Alfred Poitier, CEO of National Workers Cooperative Credit Union, agreeing with Mr. McCartney’s assessment. Most debtors do not file for bankruptcy, Mr. Poitier said. Rather, bankruptcy is primarily a tool used “to seek the demise of an individual.”
Faced with mounting debt and uncertain of how they might pay, Mr. McCartney said, “The customer leaves it (the debt) as if it would be swept away.” He estimated that only about one in four persons respond to a demand letter from a lawyer or bank. The other 75 percent result in protracted and often-expensive court proceedings.
A line from the Debtors Act reads: “Any court may commit to prison for a term of six weeks, or until payment of the sum due, any person who makes default in payment of any debt or installment of any debt due from him in pursuance of any order or judgment of that or any other competent court.”
The long and short of that legal parlance: Owing money is not a crime; disobeying a court’s order to pay that money back is. Other than a slight technicality, the two are effectively the same.
When it comes time for creditors to play hardball, however, hard time often constitutes little more than a scare tactic, a threat lenders can dangle over the heads of their clients until they manage to scrounge up the money from friends and family. Once debtors begin to visualize themselves behind heavy steel bars, Mr. McCartney said, “they somehow manage to find the money.”
Under current laws, both the creditor and the debtor can come up short. At Roberts Furniture, a loan officer lamented that their financing department had to abandon credit extensions recently, moving entirely to the cheque deduction system. “People weren’t coming in with payments,” she said. “We tried to give people the benefit of the doubt, but it just wasn’t working.”
Few car dealerships, too, offer any in-house financing, and those that do choose to either partner with a bank or set-up cheque deductions because the risk of non-compliance is too great and the default rate too high.
n Arrears on the rise
The Central Bank reported that the percentage of arrears, loans that have been inactive for at least 90 days, has been on a steady decline over the past three years, an apparent indicator of improved lending policies at commercial banks. The numbers show a decrease from 10.1 percent of all loans in arrears at the end of 2003, down to 8.0 percent in 2005.
However, a global look at the long-term trends in past-due Bahamian bank accounts shows that debt continues to pile onto those who have allowed themselves to become overextended. At the end of 1995, the total dollar value of past-due debts was more than $20 million. That value has increased more than threefold, to nearly $75 million at the end of 2005.
So while the number of loans resulting in collections and court proceedings has been on a slow and steady decline, the overall value of those loans has shot up, meaning current arrears represent increasingly large sums of money.
A calculation of the mean shows that the average value of an account in arrears in 1995 was approximately $3,000 – the same debt Monty currently faces. At the end of 2005, many were far worse off than him: Average arrears had reached more than $5,800. Adjusted for inflation over the past ten years, the value of today’s arrears still overshadows those of a decade ago by more than $2,000 each.
Not all outstanding debts result in the threat of prison if unpaid. Many consumers simply avoid it for as long as they can. At court that particular Wednesday evening – commercial banks, department stores and landlords all represented – the tidy, well-shaved court policeman thundered name after name down the outdoor corridor. No one stood. He thundered again, more out of procedural habit than courtesy. Women clutched their handbags tighter. Men shuffled self-consciously on the wooden benches. And, name after name, “Not present, your honor,” was the policeman’s report to the court.
Dodging debt is something that Ms. Gretal Hanna considers herself intimately familiar with, not because she has ever attempted to skip town, herself, but because she makes a living following those who try it. Ms. Hanna’s company, Ben-Bo Collections, has been assisting creditors for just over 10 years.
Working in one of the more easily vilified enterprises, Ms. Hanna sees her industry not as a band of mercenaries but a coalition of peacemakers. “We’re not out to hurt anyone financially, we just want to see the debt paid.” Ms. Hanna said. “We’re not going the whole nine yards like the banks have. … We want to sit down with you and work something out.” Business has been good for Ms. Hanna, but that doesn’t mean she enjoys it. Her work, she said, often pains her. “It’s terrible. It really don’t have to get to that point,” she said disparagingly. “It just don’t make sense for clients to allow their case to go to court.”
Others intimately involved with domestic finance and personal lending have volunteered strong opinions about the development of Bankruptcy laws. Graham Mickleborough came to the Bahamas on contract with the Canadian Co-Operative Association in 2002 to help develop member-owned credit unions.
Mr. Mickleborough’s observations as a temporary resident of Nassau tell an interesting story. “Too many people are too far extended, and they might have a nice car, but they don’t have any money for groceries,” he said in a telephone interview. “You’re not allowed to declare bankruptcy, and these credit agencies can pursue you to the end of the earth.” He sees nuances in the current the current system that are “not good for the lender or the borrower.”
So how best for strung out borrowers to avoid the extra expense and heartache of court and arrest warrants and dodging creditors? On this, Mr. McCartney and Ms. Hanna agree.
They say the easiest way around jail and court fees and the embarrassment of being served a warrant in your own home is communication.
“Banks don’t want to take you to court, but sometimes they have to,” Mr. McCartney said. “All that can be avoided if the customer contacts the banker.”
By: Sam Smith, The Nassau Guardian
