Two Ways to Make Them Pay

A reader, who is also a lawyer, writes in with an interesting example of incentives in the courtroom. He tells us about a particular judge in New Hampshire, who developed a strategic approach to collecting fines:

I thought you might be interested in this little experiment in economics. People cannot be sent to jail, under the Constitution, for being poor — i.e., being unable to pay their fines.  They can be sent to jail if they “willfully refuse” to pay.  In order to find someone is doing that, the judge must hold a long and complex hearing.  As a result, people are rarely found to have willfully refused to pay.  Instead, the judges have come up with dozens of work-arounds — time payments, delayed pleas to gather the money, community service.  None of these work on a regular basis.  

One judge, however, has a great solution.  He offers them a fine “sale.”  Suppose the fine is $500. He will tell them “the fine is $1,000, but if you pay within the next two weeks, we will accept $500.”  In my thousands of cases and eight-plus years, no one has ever failed to pay under that scenario. And it requires no administrative costs like the others do, no extra hearing…nothing.  Perfect example of a study in incentives, right? Leave it to those old, smart, practical Yankee judges in small town NH to solve this intractable problem.

Meanwhile, the New York Post reports that in the court of child support, officials are also taking a new approach to collecting payments:

Officials reported collecting a record $731 million in child-support payments last year, up about 4.5 percent, and part of the reason was that the city adopted a customer-friendly approach toward some parents who haven’t been paying up. Some received counseling, others job preparation skills — a far cry from the usual threats of legal action and possibly jail time.


c

So all the judge has to do is lie about the amount of the fine and they can collect?

Steve O

The judge chooses the amount of the fine, and opts for a higher amount than he otherwise would have.

Hamed

This sort of thing is very common in the UK for fixed-penalty offences (e.g. speeding or parking tickets). The full penalty might be for £80, but will only be £40 if you pay within 14 days. This not only encourages people to pay quickly, but discourages them from appealing against the penalty.

RogerP

The same is being introduced in South Africa, but already codified in the statute: no input from a judge. Payment within 30 days gets you a 50% discount on the fine.

Nonpayment of fines is a huge problem in this country. They tried withholding vehicle licences on renewal if there were outstanding fines, but I know several people with substantial outstanding fines who renew every year with no trouble.

The incentive to appeal comes from the number of demerit points that also accompanies the offence.

Brian1625

I've noticed they started doing this for those that don't have insurance for medical expediences. They cut about 200 $ off my final price if I paid the full cost on the way out the door.

Stone

I see fine reduction (or future fine increase) frequently as an incentive to pay traffic tickets, etc.. But what's described here isn't fine reduction as an incentive, it's lying from the bench. I can't believe this is legal. It certainly isn't acceptable. When judges start lying routinely, we're all in serious trouble.

pawnman

I was curious about this as well...but is the judge lying, or does the judge have the authority to set the fine amount? I know for some fines, like many traffic tickets, it is a set scale. Surely there are other fines where the judges have the discretion to adjust the cost.

Eric M. Jones.

True story from California:

Man stands in front on judge for speeding ticket.

Man hands judge a long note from his mother.

Judge dismisses case if he is allowed to keep the note.

Man agrees. Case dismissed.

m.m.

OK, I'll ask the dumb question. Why is it "lying from the bench"? I assume there is a fine for the offense listed in the statute law. The judge orders the offender to pay that. The judge also may realize that the offender is not going to be able to pay that. So the judge also strikes a deal with the offender to pay a lesser amount, in the hopes that the offender will pay at least SOME of the fine.

Where is the lie? Deals are struck all the time in court. Unless there is some minimum sentencing law in place (i.e., law says judge CANNOT give less than the mandated sentence, be it fine or years in jail), I don't see the problem.

Unless you are all saying that the statutory fine in the books is actually only $500, but the judge lies to the offender and says it is really $1000, and he'll give the offender a "deal" by cutting it to $500. Yes, that would be wrong. But I see no evidence of that from the above story.

Read more...

Imad Qureshi

From the post:

Suppose the fine is $500. He will tell them “the fine is $1,000, but if you pay within the next two weeks, we will accept $500.”

How is this not an evidence that the judge is lying?

J

It's hard to say what sort of specific cases our lawyer friend is talking about, but in the state most of my speeding tickets came from, the fine is fixed only if you plead guilty or no contest. If you go to court (an insanely bad idea), for practical purposes judge can do whatever the hell he wants, including substantial fine increases and other conditions. It's unlikely the judge was lying; he almost certainly has the authority to impose a higher fine if the defendant takes too long to pay.

m.m.

Rats. Never mind. I missed that 2nd sentence, "Suppose the fine is $500." Yep. That's wrong.

Now, if he was ACTUALLY settling for less than the statutory fine, I have no problem with that. Settlements happen all the time in court (witness the recent Mortgage Fraud settlement). It's all a cost-benefit analysis.

frankenduf

doesn't the IRS do this as well?

Danny Dye

The ads on TV are very misleading. My experience working with clients and the IRS has taught that they seldom take a discounted amount. The only exception being a client who has no assets and very poor prospects of ever being able to pay. If you have a job or own any assets, a discount is not negotiable.

JoelP

It's not a lie; the judge is simply unilaterally deciding to increase the fine for people who are unable/unwilling to scrounge up the cash promptly.

Judges have quite a lot of power under the law as interpreted by judges.

Istivan

Not exactly the same, but related in the "lying" part. A true story from Malta:

Income tax & social security used to have a 6-year prescriptive period. Taking advantage of the fact that not everyone knew that, a few years ago the ministry sends an official letter to everyone who had an "outstanding" bill from the previous 20 years or so telling them that if they don't pay up within a short notice (I think it was 2 weeks), the matter will be taken to court. Thousands paid up!

Crash

What is the judge's name? I'd like to examine the records to get more details on this practice and corroborate your reader's summary.

Joe

That judges approach is a"higher sell" tactic. it's the same tactic car salesmen can use to sell you a car..

The car salesmen first show you a ridiculously expensive car that they have no intention of you actually buying. In your mind it has set a price expectation. They then show you a cheaper car that you realistically might buy. Whether you know it or not your mind will set an expectation that the second car is "cheaper" and may be a good buy. The car salesmen was aiming for you to buy the second car all along.

It's the tactic the Judge is using by saying that you'll get a discount on the condition that you pay early. When in actual fact the judge was aiming for the lower amount all along.

Then that raises the question of 'is what that judge is doing ethical?'

pawnman

Ah, yes..."Anchoring" was discussed in the Freakonomics podcast episode "There's a mouse in my salad".

I'd say it's plenty ethical...he's getting people to pay a legitimate fine within a legitimate window. It may not be ethical if he were increasing the fines or fining some people more than others for the same offense. I don't see how this is really any less ethical than the classic police bait-and-switch...send someone on your wanted list a mailing telling them they've won a new car or some amount of money, and arrest them when they show up to claim it.

Erik

Trail by fears