The Color of Debt: How Collection Suits Squeeze Black Neighborhoods

October 21, 2015 1:07 PM

The Color of Debt: How Collection Suits Squeeze Black Neighborhoods — a ProPublica investigation into racial disparities in debt collection lawsuits

In fact, when ProPublica attempted to measure, for the first time, the prevalence of judgments stemming from these suits, a clear pattern emerged: they were massed in black neighborhoods.

The disparity was not merely because black families earn less than white families. Our analysis of five years of court judgments from three metropolitan areas - St. Louis, Chicago and Newark - showed that even accounting for income, the rate of judgments was twice as high in mostly black neighborhoods as it was in mostly white ones.

These findings could suggest racial bias by lenders or collectors. But we found that there is another explanation: That generations of discrimination have left black families with grossly fewer resources to draw on when they come under financial pressure.

Over the past year, ProPublica has investigated a little-known but pervasive shift in the way debt is collected in America: Companies now routinely use the courts to pursue millions of people over even small consumer debts. With the power granted by a court judgment, collectors can seize a chunk of a debtor's pay. The highest rates of garnishment are among workers who earn between $25,000 and $40,000, but the numbers are nearly as high for those who earn even less.

[...]

A garnishment hits this kind of household budget like a bomb. Federal law and most state laws protect only the poorest of the poor from having their wages seized, otherwise allowing plaintiffs to seize up to a quarter of a worker's after-tax pay. If that paycheck is deposited in a bank, that and other money in the account can be seized to pay down the debt. When garnishment protections do exist, the burden is usually on debtors to figure out if and how the laws protect their assets.

[...]

The clients at Beyond Housing, a St. Louis nonprofit that provides assistance to low-income families, are roughly half white and half black. But the staff has noticed a dispiriting difference: white clients are far more likely to have some kind of support to draw on, whether it's their own assets or help from a family member.

For black clients, "so much of that kind of help has been already tapped out," said Linda Ingram, the manager of the foreclosure intervention department. The lack of resources makes it harder for black clients to extricate themselves from debt. It also means the most stable members of a family can easily get overstretched.

The authors offer six recommendations for reforming debt collection practices:

1. Lower how much can be taken from debtors' wages
2. Restrict how much can be taken from debtors' bank accounts
3. Provide clear notice to debtors about laws that protect them
4. Limit attorney's fees to reflect actual work on a suit
5. Cut interest on judgments to reasonable level
6. Improve enrollment in programs to help low-income debtors

posted by tonycpsu (16 comments total)

7) As soon as the amount repaid towards loan reaches 200% of the original loan amount the debt is considered paid no matter what the interest rate and term.
posted by Talez at 2:16 PM on October 21, 2015 [19 favorites]

As soon as the amount repaid towards loan reaches 200% of the original loan amount the debt is considered paid no matter what the interest rate and term.

I believe this has some historical precedence, if I'm remembering right from Graeber.
posted by Steely-eyed Missile Man at 2:28 PM on October 21, 2015 [1 favorite]

Sometimes these fees and fines are like trying to get blood from a stone.
posted by the man of twists and turns at 2:46 PM on October 21, 2015

I read this and was astonished. That we allow this sort of usury is beyond abhorrent.
posted by SecretAgentSockpuppet at 3:04 PM on October 21, 2015 [2 favorites]

0) Reparations.
posted by You Can't Tip a Buick at 3:34 PM on October 21, 2015 [7 favorites]

Jubilee, anyone? That'd be one hell of an executive order to watch unfold.
posted by aydeejones at 3:54 PM on October 21, 2015 [7 favorites]

The 10th amendment awards us all the right to be free from life-crushing exploitative indentured servitude, I mean, debt. So liek, jubilee plz, I think that's what "bankruptcy" was supposed to represent but it needs to happen on a larger scale and with zero consequences on the debtor within certain boundaries of reason, at least
posted by aydeejones at 3:55 PM on October 21, 2015 [1 favorite]

Pay up or go to jail: how a Mississippi town resurrected the debtors' prison

Previously in St. Louis: How St. Louis County, Missouri profits from poverty.
posted by T.D. Strange at 6:21 PM on October 21, 2015 [2 favorites]

Pay up or go to jail: how a Mississippi town resurrected the debtors' prison

The worst thing is you know some cretin out there actually greased palms to get their hands on the contract to be a probation service that the government wouldn't have otherwise put out to tender.

Like profiting off human misery is a growth fucking industry.
posted by Talez at 6:35 PM on October 21, 2015

The big difference is that a true debtor's prison would allow for flouting of private debts to result in imprisonment - as of now, it's just public (state and local) debt, court costs, fees, etc, that get you in trouble. I expect this to change in the next ten years or so, especially in the states where poverty is already a crime in one sense or another.
posted by eclectist at 9:10 AM on October 22, 2015

if they try to put you in a fucking debtor's prison you have every right to run to the hills and live under an assumed identity. No one should feel obligated to a system that's trying to kill or enslave them.

todo: set up a new underground railroad to get people safely away from the monsters who criminalize debt.
posted by You Can't Tip a Buick at 12:12 PM on October 22, 2015 [1 favorite]

The big difference is that a true debtor's prison would allow for flouting of private debts to result in imprisonment...

Except that there are cases where private debt leads to public debt, and thus leads to prison. A creditor sues you, and you don't show up, then the court holds you in contempt, then they jail you.
posted by postel's law at 1:25 PM on October 22, 2015

A creditor sues you, and you don't show up, then the court holds you in contempt, then they jail you.

I'm not disagreeing that it's (too) easy to "get into trouble," but I don't think that particular scenario can happen. You don't have to show up in court if you are sued and cannot be held in contempt for not showing up.
posted by Juffo-Wup at 4:03 PM on October 22, 2015

(A default judgement will likely be entered against you, and the creditor/plaintiff will probably pursue wage garnishment or other collection activities. But I don't think it can be converted into criminal or contempt-of-court sanctions.)
posted by Juffo-Wup at 4:04 PM on October 22, 2015

Texas has alot of problems but at least this is something they get right in that your wages cannot be garnished except for non-payment of taxes, child support, alimony, or student loans. Sadly, only 3 other states (NC, SC, and PA) have these same protections for citizens.
posted by LizBoBiz at 4:56 PM on October 22, 2015 [1 favorite]

Here in maryland (and we're not alone ), you can be. http://www.clarkhoward.com/how-you-can-be-jailed-over-unpaid-debt-some-states
posted by postel's law at 6:54 PM on October 22, 2015