Year: 2021

VIDEO: Governmental Barriers to Small Business Financing for People with a Criminal History

On November 18, the Georgetown Center for Business & Public Policy hosted an informative and provocative forum on “Understanding Governmental Barriers to Small Business Financing for People With a Criminal History.”

A video recording of the program is now available on YouTube.

This event marks the first public discussion of our organization’s new initiative aimed at illuminating and reducing barriers to small business financing based on criminal history. The panelists were Sekwan Merritt, owner of an electrical contracting business in Baltimore, David Schlussel of CCRC, Awesta Sarkash of the Small Business Majority, and Chris Pilkerton, a former SBA general counsel and acting SBA administrator.

Sekwan Merritt, who has built a thriving business and employs several people who also have a record, illuminated the challenges he faces as a justice-affected entrepreneur in gaining access to business capital. Merritt, a graduate of the Georgetown Pivot Program, was one of the plaintiffs in the litigation that led to the SBA’s rollback of its PPP restrictions after he was denied this emergency COVID-19 federal relief. He explained that because he is still on parole he is ineligible for the SBA’s general loan programs and that the kinds of questions asked on SBA application forms frequently deter people from even applying. Merritt also described the need for a holistic assessment as part of an overall credit evaluation, recognizing achievements such as educational attainment, rather than a frequently-disqualifying early inquiry into criminal record.

CCRC’s David Schlussel described how the SBA’s “broad and blunt” record-related restrictions first came to the public’s attention in the early months of the pandemic, when hundreds of thousands of small businesses—a substantial percentage of which were Black-owned—were disqualified from government-supported relief. Schlussel traced the history of the SBA’s restrictive loan policies to the 1950’s, noting that they are neither required nor specifically authorized by statute. He quoted from a 1978 SBA statement justifying these policies based on its belief that the SBA “should not be involved in rehabilitation processes,” that “good character is essential in any creditworth transaction,” and that the possibility of reincarceration creates a risk of absentee management. Schlussel described the conclusion of a 2005 law review article by Taja-Nia Henderson that the SBA restrictions appear to violate civil rights laws in their heavy impact on Black business owners, and he noted that there has been no empirical study linking criminal record with creditworthiness. In any case, the SBA has apparently not attempted to justify its policies since 1978, even as they have become increasingly restrictive in recent years. He noted that the other major federal lending agency, the USDA, has nothing comparable for its rural small business and agricultural lending programs.

Awesta Sarkash of the Small Business Majority was effective in describing the difficulties minority- and women-owned small businesses generally have in accessing capital, noting that these difficulties are exacerbated when a business owner or manager has a criminal record. Sarkash also emphasized the importance of resources to support early-stage entrepreneurs, such as her organization’s Venturize.org educational portal, and community development financial institutions (like Baltimore Community Lending that helped Sekwan Merritt manage a large contract). Chris Pilkerton, a former SBA general counsel and acting SBA administrator, made a number of very cogent suggestions about how to address this important public policy question through coalition building, message coordination, bipartisanship, and education.

Several of the panelists noted that the SBA is by far the country’s most influential player in facilitating small business access to capital, and that its policies necessarily influence both private lenders and state legislatures considering analogous state loan programs.

The panel was moderated by Dr. Crystal Francis, assistant director of program management of the Georgetown Pivot Program, who engaged with the panelists in a wide-ranging discussion and facilitated audience questions.

The video of the event is available here.

As CCRC continues to develop our “Fair Chance Lending” project, we are finding that agencies and organizations involved in small business and community financing are eager to extend their agendas to address barriers based on a criminal record. Regular visitors to our website can expect to hear about this issue frequently in the months to come.

Forum on governmental barriers to small business financing for people with a criminal history

We are delighted to announce a program where a panel of experts will discuss the barriers faced by small business owners and managers with a criminal history in obtaining government-sponsored loans.

This virtual program will take place on November 18 from 12:00-1:15pm (EST), and is sponsored by the Georgetown Center for Business and Public Policy as part of its Georgetown on the Hill series. Register for the event here.

The program–which we helped organize along with Georgetown’s PIVOT Program–will focus on the broad criminal history restrictions in rules and policies of the U.S. Small Business Administration. These policies came to the public’s attention in the early days of the pandemic, when thousands of small businesses were denied PPP and other relief authorized by the CARES Act. While many of these restrictions were eventually rolled back in response to widespread criticism, similar restrictions in the SBA’s general lending programs remain, restrictions that influence state and private lending as well. The program on November 18 will explore the origins, scope, and justification for these restrictions.

Panelists include a former high-ranking SBA official, a small business owner who successfully challenged the PPP restrictions in court, a scholar who has argued that the SBA restrictions contravene civil rights law, and the CCRC’s Deputy Director David Schlussel, who contributed to the bipartisan campaign in the spring of 2020 that led the SBA to abandon many of its exclusionary policies.

We hope that everyone interested in collateral consequences, notably those related to access to business capital, will register for the program. The Georgetown announcement describing the program is reproduced below.

 

Understanding Governmental Barriers to Small Business Financing for People with a Criminal Record

Date: Thursday, November 18, 2021 – 12:00pm to 1:15pm
Location: Zoom Seminar (register for link)

New businesses are a key driver to economic growth, but individuals seeking to start these businesses face a number of challenges. For individuals with a criminal history these challenges of establishing and growing a new business increase dramatically. Indeed, a particularly stifling series of federal regulations and policies are currently in place that impose broad criminal history restrictions on access to government-sponsored business loans.

Last year, the U.S. Small Business Administration (SBA) imposed broad criminal history restrictions on COVID-19 relief, leading to criticism from the public and members of Congress. Successive decisions by the Trump and Biden Administrations rolled back of most of these restrictions on emergency relief, but similar policies remain in the SBA’s general lending programs. Given that about one third of adult Americans have an arrest or conviction record, of whom a disproportionate percentage are people of color, it is important to reconcile this population’s limited access to government-sponsored business capital with the emerging public policy of encouraging reintegration and second chances.

At this Georgetown on the Hill event, a panel of experts moderated by Crystal Francis, Program Manager, Georgetown University Pivot Program, will discuss the economic and social impact of these restrictive policies in a forum with Q&A. Panelists will consider the issues that arose when the policies were applied to pandemic relief funds; the possible correlation between criminal history and creditworthiness; and the elements of a “fair chance” approach to business lending.

Panelists include:

  • Taja-Nia Henderson, Professor of Law, Rutgers University Law School
  • Sekwan Merritt, Entrepreneur and Owner, Lightning Electric, a Baltimore-Based Electrical Contractor
  • Chris Pilkerton, Chief Legal and Regulatory Strategy Officer for the Accion Opportunity Fund, and former Cabinet member and head of the U.S. Small Business Administration
  • David Schlussel, Deputy Director, Collateral Consequences Resource Center

This forum is part of the Georgetown Center for Business and Public Policy’s Georgetown on the Hill series at which we convene policymakers, academics, and industry experts to discuss important economic policy issues of the day.

Delaware governor signs automatic record-clearing law

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Delaware lawmakers passed two bills this year that overhaul access to second chances, making it easier for more than 290,000 people to move beyond the collateral consequences of a criminal record.  The two pieces of legislation – Senate Bill 111 and Senate Bill 112 – expand access to Delaware’s mandatory expungement process effective January 1, 2022, and make mandatory expungement automatic (or “Clean Slate”) by August 2024.

State Senators passed the bills unanimously in April and the House of Representatives followed suit — approving the bills by an overwhelming majority during the late stages of the legislative session in June. Both bills were signed into law by Governor John Carney on Monday, November 8, 2021 — making Clean Slate a reality in Delaware. (The specific records that will be subject to mandatory expungement starting in 2022 are described later in this post.)

Delaware is most recent addition to the growing number of states in the nation to make record clearing automatic for at least some convictions, so that eligible individuals will no longer be required to complete a burdensome and expensive petition-based process to get their record expunged. (Several other states have automated expungement exclusively for marijuana convictions.)

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Tony Evers revives pardoning in Wisconsin

In October 2021, Wisconsin Governor Tony Evers issued 15 pardons, adding to the 71 grants he made over the summer, bringing the total number of pardons since he took office in 2019 to an impressive 278.

To contextualize this number, the Wisconsin Pardon Database, which extends back to 1977, contains a total of 986 pardons. In just 30 months, Governor Evers has accounted for more than a quarter of all pardons granted in Wisconsin over the last half century.  This is particularly significant because pardon is the only way that a person with an adult Wisconsin conviction can regain rights and status lost as a result of conviction.

Equally notably, Governor Evers has reinvigorated a dormant pardon process after years of neglect. Scott Walker, who served two terms as governor before Evers, did not grant a single pardon. But the Pardon Advisory Board (PAB) is appointed by the governor to oversee applications and hearings, and to make recommendations for or against pardon. Perhaps the board simply neglected its job?

The truth is unfortunately far more disappointing. Walker not only never granted a single pardon, but he also never even appointed the PAB during his nine years in office. Instead, he announced a principled opposition to pardoning anyone, declaring that “these decisions are best left up to the courts.”  But, as noted, Wisconsin has no general statutory mechanism for obtaining criminal record relief in the courts, and Governor Scott appears never to have sought one. It seems he did not consider the use of the pardon power other than to reduce a prison sentence.

The recent neglect of Wisconsin’s pardon system makes Governor Evers’s commitment to executive clemency more impressive. Upon entering office, Governor Evers immediately reinstated the PAB and started the upward trend of grants.

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National maps on expungement, pardoning, and voting rights restoration

The Collateral Consequences Resource Center is pleased to unveil six new maps that visualize the Center’s research on national laws and policies for restoring rights and opportunities to people with a record. These maps are now available below and on the 50-state comparison pages (expungement, sealing & other record relief; civil rights; and pardoning). Each state can be clicked for a detailed summary of state law and policy.

The Center will keep these maps updated, along with the rest of the Restoration of Rights Project, with future changes to the law.

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CCRC’s First Newsletter

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Dear Subscribers,

We write with an update on our continued work to promote public discussion of restoration of rights and opportunities for people with a record. Highlights from this year’s work are summarized below, including roundups of new legislation, case studies on barriers to expungement, policy recommendations, and a new “fair chance lending” project to reduce criminal history barriers to government-supported loans to small businesses. We thank you for your interest and invite your comments as our work progresses.

Fair Chance Lending

Starting a small business is increasingly recognized as a pathway to opportunity for individuals with an arrest or conviction history—particularly given the disadvantages they face in the labor market. Yet many structural barriers remain to these individuals, including from a series of little-known federal regulations and policies that impose broad criminal history restrictions on access to government-sponsored business loans, notably by the U.S. Small Business Administration (SBA). To illuminate and help reduce these barriers, our organization recently launched a new “Fair Chance Lending” project. We hope to show that—rather than broadly exclude individuals with a criminal history—officials should draw record-based restrictions as narrowly as feasible, facilitate access to resources, and celebrate entrepreneurial efforts, consistent with growing national support for reintegration and fair chances in civil society.

The SBA’s record-related lending policies came into focus in the spring of 2020 when the agency imposed remarkably broad criminal history restrictions on hundreds of billions in financial relief for small businesses and nonprofits authorized through the CARES Act in response to COVID-19. We researched the issues in detail and joined a large bipartisan group of organizations calling on the SBA to revise its restrictions. This project is a continuation of that work, with an expanded look at small business loan programs more generally.

Reintegration Reform Returns to Pre-Pandemic Levels in First Half of 2021

CCRC staff in July completed a roundup of record relief legislation in the first half of 2021. Thirty states enacted 101 pieces of legislation to mitigate collateral consequences. The legislation includes work in restoring access to voting rights, record relief, limiting the influence of criminal records in issues of employment and licensure, housing, and many other areas. Much of this new legislation was quite significant. For example, Alabama, Arizona, and Virginia joined the 38 other states that now allow sealing or expungement of at least some misdemeanor and felony convictions. Arizona also became the thirteenth state to authorize its courts to issue judicial certificates of relief. Connecticut enacted an automatic record clearing law and limited ineligibility for voting and jury service to the period of actual incarceration for a felony. New Jersey enacted the most comprehensive fair chance housing legislation to date. Arnold Ventures highlighted our roundup of new state legislation in this article.

While much of the action came from state governments, the Biden Administration took some steps to mitigate collateral consequences. However, Congress has continued a decade long trend of little activity in this area. Given the health and economic harms of the pandemic, there is a particular need for state and federal lawmakers to adopt the policies recommended by CCRC to support opportunities for people with a record (see Reintegration Agenda below).

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CCRC files congressional testimony on fair chance lending

The Collateral Consequences Resources Center submitted a statement for the record ahead of tomorrow’s hearing before the Subcommittee on Diversity & Inclusion of the House Committee on Financial Services: “Access Denied: Eliminating Barriers and Increasing Economic Opportunity for Justice-Involved Individuals.” The CCRC statement recommends that Congress conduct oversight on criminal history restrictions in federally sponsored small business lending policies, and facilitate access to these resources for small businesses owned by justice-impacted individuals.

CCRC’s statement describes some of its research about the the U.S. Small Business Association’s (SBA) criminal history policies and identifies the following concerns:

  • The SBA’s extensive criminal history restrictions are not provided by statute.
  • Many of the SBA’s criminal history restrictions are also not included in its published regulations.
  • The SBA’s criminal history restrictions are overbroad and lack specific justification.
  • The SBA’s criminal history restrictions have racially disparate impacts.

You can read the statement here.

“The Future of the President’s Pardon Power”

A blue textured circle overlaps a red circle with white and red text overlay that reads The Future of the President's Pardon Power, 2021 Clemency Panel Series

The Collateral Consequences Resource Center is pleased to announce a series of online panels on successive Tuesdays in September, starting on September 14, that will explore in depth the use of the pardon power by President Donald Trump, and how it both reflects recent trends in pardoning and is likely to influence pardoning in the future.

The first panel, on September 14, will discuss Trump’s abandonment of the bureaucratic tradition in pardoning and what this reveals both about his concept of office and about the nature of the constitutional power.  The second panel, on September 21, will consider whether Trump’s pardons may prompt much-needed reforms in sentencing law and practice.  The third panel, on September 28, will consider possible changes in how the pardon power is administered resulting from its idiosyncratic use by President Trump, and whether the Justice Department should remain responsible for advising the president in pardon matters.

This series is jointly organized by CCRC, the Drug Enforcement and Policy Center at The Ohio State University Moritz College of Law, the Federal Sentencing Reporter, and the David F. and Constance B. Girard-diCarlo Center for Ethics, Integrity and Compliance at Villanova University Charles Widger School of Law.

The panels are based on the essays in Volume 33, Issue 5 of the Federal Sentencing Reporter. Margaret Love, executive director of CCRC, curated and introduced the FSR essays, and recruited participants for the panels.

Register for each panel here.

 

PANEL 1: Donald Trump’s Theatre of Pardoning: What Did We Learn?

September 14, 2021 | 12:30 – 2:00 p.m. EDT | Zoom

Panelists:

  • Frank Bowman, Floyd R. Gibson Missouri Endowed Professor of Law, University of Missouri School of Law
  • Bernadette Meyler, Carl and Sheila Spaeth Professor of Law, Stanford Law School
  • Amy Povah, founder, CAN-DO Justice through Clemency
  • Kenneth Vogel, The New York Times 

Moderator:  Margaret Love, executive director, Collateral Consequences Resource Center, former U.S. Pardon Attorney

 

PANEL 2: Supplementing the Pardon Power: Second Looks and Second Chances

Tuesday, September 21, 2021 | 12:30 – 2:00 p.m. EDT | Zoom

Panelists:

  • Jack Chin, Edward L. Barrett Jr. Chair of Law, Martin Luther King, Jr. Professor of Law, and Director of Clinical Legal Education, University of California, Davis, Law School
  • John Gleeson, attorney and former United States District Judge of the United States District Court for the Eastern District of New York
  • Judge Beverly Martin, U.S. Court of Appeals for the Eleventh Circuit
  • JaneAnne Murray, professor of practice, University of Minnesota Law School

Moderator:  Carter Stewart, executive vice president, Andrew W. Mellon Foundation, and former U.S. Attorney for the Southern District of Ohio

 

PANEL 3: Managing the Pardon Power: Should the Justice Department Remain the Gatekeeper?

Tuesday, September 28, 2021 | 12:30 – 2:00 p.m. EDT | Zoom

Panelists:

  • Rachel Barkow, Vice Dean and Charles Seligson Professor of Law, New York University School of Law
  • Jeffrey Crouch, assistant professor of American politics, School of Public Affairs, American University
  • Paul J. Larkin, Jr., Rumpel Senior Legal Research Fellow, The Heritage Foundation
  • Margaret Love, executive director, Collateral Consequences Resource Center, former U.S. Pardon Attorney

Moderator:  Douglas Berman, Newton D. Baker-Baker & Hostetler Chair in Law and executive director, Drug Enforcement and Policy Center

 

CCRC’s collection of scholarship on collateral consequences updated

Scholars, practitioners, and those affected by the criminal system can now more easily access relevant and timely scholarship related to collateral consequences. CCRC has updated the Books and Academic Articles page of its resources section to facilitate quicker retrieval of relevant content. Specifically, CCRC has organized the relevant books and academic articles by category. These categories offer a wide array of academic perspectives on collateral consequences, restoration of rights, and record relief.

CCRC has similarly updated the books and academic articles section with new and potent scholarship, and expanded the coverage of restoration of voting rights. New scholarship since 2020 runs the gamut of collateral consequences, and includes work on expungement and record relief, executive clemency, drug related issues, and issues of inequity. The page has also been updated to include the most recent edition of the Federal Sentencing Reporter on the past, present, and future of the Federal pardon power, guest-edited by our Executive Director Margaret Love and featuring our Board Chair Gabriel J. Chin and our Deputy Director David Schlussel.

CCRC hopes that the resource section will continue to offer an array of insightful academic pieces for scholars, practitioners, and those seeking to restore their own rights.

Arizona enacts its very first sealing law – and it’s impressive!

In July 2021, in an unheralded action in the final days of its legislative session, Arizona enacted a law that authorized its courts for the first time to seal conviction records. See SB1294, enacting Ariz. Rev. Stat. § 13-911. The same law authorized sealing of uncharged arrests and dismissed and acquitted charges, also for the first time. Prior to this enactment, Arizona was one of a handful of states whose legislature had made no provision for limiting public access to conviction records, and was literally the only state in the country whose courts and records repository had no authority to seal non-conviction records. Now the state will have one of the broadest sealing laws in the country when it becomes effective on January 1, 2023.

(In the November 2020 election, Arizona voters approved a proposition to legalize marijuana, which included a provision for expungement of certain marijuana-related records.  But until now now general sealing authority had been enacted by the Arizona legislature.)

As described below, the law makes all but the most serious offenses eligible for sealing after completion of sentence (including payment of court debt) and a graduated waiting period.  It also appears that 1) multiple eligible convictions may be sealed, in a single proceeding or sequentially; 2) the prior conviction of a felony (even if ineligible) does not disqualify an eligible offense from relief but simply extends the applicable waiting period; 3) a conviction during the waiting period restarts the waiting period; and 4) there is no limit on the number of occasions on which sealing may be sought.

The applicable procedures are fairly straightforward, with no hearing necessary unless the prosecutor requests it, and the court required to grant relief if it determines that “granting the petition is in the best interests of the petitioner and the public’s safety.” Many of the obligations to acquire and serve documents that burden petitioners in other jurisdictions and act as barriers to access are assigned by law to the court.  Hopefully, in preparing to implement the law over the next 18 months until it becomes effective, Arizona practitioners can develop educational resources and training programs to facilitate applications by pro se petitioners, and Arizona courts can develop standardized forms and an efficient e-filing system to further enhance the new system’s efficiency. Inaugurating a brand new system at a time when other jurisdictions are recognizing the access-to-justice flaws in existing ones may give Arizona certain advantages.

The law is described in greater detail below.

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