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In modern-day debtors' prisons, courts team with private sector

For teenager Kevin Thompson, a traffic ticket ended up costing him not only his driver's license, but also his freedom.

In his account of the experience, Thompson says he was ordered to pay $810 in fines by Georgia's DeKalb Recorders Court, an amount that was out of reach for the low-income auto shop and tow truck worker. Instead of working with Thompson to find another way to pay, such as through community service, the court handed off Thompson to a for-profit probation company called Judicial Correction Services (JCS). JCS told Thompson he had 30 days to pay the fine, but also gave him erroneous legal information, such as overestimating the cost of a public defender.

Thompson notes that the court later took up a JCS officer's recommendation to incarcerate him, resulting in a five-day stint in jail for failing to pay the fine.

Thompson, whose case was represented by the American Civil Liberties Union, is just one of the poor Americans ending up in a modern-day version of the debtors' prison, an antiquated punishment that was eliminated by the U.S. in the 1830s. A rash of new cases are coming to light as municipal courts increasingly outsource probation to for-profit companies like JCS, which make their money by tacking on their own fees to traffic violations. They typically don't charge the courts or municipalities for their services.

"Since 2009, we have been hearing increasing reports that people are being jailed for a failure to pay fines and fees," Nusrat Choudhury, staff attorney in the ACLU Racial Justice Program, told CBS MoneyWatch. "We've observed that for-profit corrections companies are proliferating. They offer what appears to be a win-win to local governments because they offer to generate revenue from people who are too poor to pay on probation day."

Thirteen states rely on for-profit probation companies such as JCS, Choudhury said. It's difficult to get a sense if the municipalities that hire for-profit probation companies are poorer or in deeper financial straits because they are scattered across the country, she added. What's clear, however, is that Thompson's case isn't an anomaly.

More than 1,000 courts using private companies sentence hundreds of thousands of Americans to probation each year, according to a report published last year by the Human Rights Watch, which called the trend an "offender-funded" model of privatized probation. In Georgia alone, 30 probation companies are working in more than 600 courts throughout the state, allowing them to collect almost $100 million in fines, court costs and restitution for those courts, and collections in 2012, the report noted.

Although these companies often provide a needed service, there are a range of potential pitfalls, especially as more towns and counties turn to for-profit models. For one, jailing people for being unable to pay court fines violates a U.S. Supreme Court ruling from 1983 that prohibits imprisoning people who are too poor to pay their legal debts. Judges must first consider a person's ability to pay a fine, the efforts to acquire the money and alternatives to incarceration.

Because for-profit probation companies tack on their own fees to the original municipal fines, that adds to the hurdles that people must jump over to try to erase the debt.

That's landed JCS and other probation companies, as well as the municipalities that hire them, in legal hot water. The Southern Poverty Law Center earlier this month filed suit against JCS and Clanton, Alabama, on behalf of assembly-line worker Roxanne Reynolds, who wasn't able to pay her traffic ticket fines and ended up in the hands of JCS.

Because JCS added its own fees to the traffic fines, it compounded Reynolds' difficulties in paying down the fine. According to the lawsuit, the for-profit probation company charges $40 for each month of probation, which means that the initial amount of a person's traffic fine can end up snowballing into a much greater sum.

The lawsuit states that Reynolds skipped buying groceries and paying other bills to save up money to make the payments, while JCS allegedly never told her that she could have asked to have the company's fee waived because of her poverty. The lawsuit claims that JCS violated federal racketeering laws by allegedly extorting monthly payments and the company's fees from probationers.

"JCS operates within the boundaries of transparent, publicly accessed contracts, which have been executed by municipal leadership," the company said in a statement to CBS MoneyWatch. "For municipalities that are unable to fund the service we provide on their own, we see our contribution as a necessary component for enforcing fines that might otherwise be neglected."

In the ACLU's view, the relationship between municipalities and for-profit probation companies creates a financial incentive to generate profits at the expense of probationers' rights.

"The profit incentive pushes the private probation companies away from identifying indigent people," Choudhury said. "Because indigent people must by law have their fines waived, that cuts into company profit. The profit motive is distorting the proper functioning of the system."

In some cases, it may be the municipalities themselves that are seeking to drive up revenue collection from residents. The Justice Department issued a scathing report about Ferguson, Missouri, which was the focus of protests and civil unrest last year over the fatal shooting of teenager Michael Brown by a police officer. The DOJ uncovered a pattern of emphasizing revenue collection by its police officers and municipal court.

"The court primarily uses its judicial authority as the means to compel the payment of fines and fees that advance the city's financial interest," the report noted.

It's not only failure to pay traffic tickets that are landing Americans in jail. Across the country, there are at any moment 730,000 people who are locked up in a local jail because they're too poor to post bail, according to a report issued last month by the nonprofit Vera Institute of Justice. A 2010 report from the ACLU also found that municipalities in states from Washington to Ohio were jailing people too poor to pay their legal debts.

For-profit probation companies aren't responsible for deciding who goes to jail for paying a fine, it's worth noting. Said JCS: "That decision is made by the court. We are retained to serve the court and to report on activity of those individuals who have outstanding fines. We do not make the decision as to whether their offense or lack of payment warrants incarceration."

While a judge makes decisions about incarceration, Choudhury notes that the introduction of a for-profit company into the system can lead to "incomplete and incorrect information from probation officers who aren't trained about constitutional rights." The Human Rights Watch report noted that for-profit probation companies, while unable to send people to jail, "routinely threatened to have them jailed for failing to make payments or for falling into arrears." The companies end up with "a great deal of coercive power," it added.

In Thompson's case, the lawsuit was settled earlier this month, with JCS and DeKalb County denying unlawful conduct. The ACLU and Thompson also received a monetary settlement of $70,000. The DeKalb County Recorder's Court agreed to some changes as well, such as training personnel on probationers' rights to counsel in revocation proceedings and the right to an indigency hearing before jailing for failure to pay fines.

Of the settlement, Choudhury noted that Thompson "was emotional and grateful, both because of the monetary award and because he was able to secure change for other people."