Applying for a USDA loan with a criminal record

This post is a part of CCRC’s Fair Chance Lending Project (FCLP), and was prepared by students from Yale Law School’s Community Economic Development Clinic, which is working with CCRC on the project. The FCLP promotes greater access to government-sponsored loans to justice-impacted small business owners and managers, particularly within the Small Business Administration loan guarantee programs. The post builds on briefing materials originally prepared by CCRC staff, including its former intern Jack Keating.

Applying for a USDA Loan with a Criminal Record

The United States Department of Agriculture offers a selection of guaranteed loan programs for farms and other small businesses in rural communities. While these USDA loan programs are broadly analogous to the Small Business Administration’s business loan guarantee programs, their eligibility requirements differ in at least one significant way: the USDA imposes no general criminal record restrictions on loan eligibility for justice-impacted individuals who own or manage small businesses. Instead, USDA imposes only narrow record-based restrictions that are specifically required by statute, and that are likely to apply to very few loan applicants. Because applicants for SBA loans are more likely to be racial or ethnic minorities than applicants for the USDA’s financial products, the disparate impact of the SBA’s uniquely stringent criminal background requirements is amplified

In this post, we describe the restrictions on lending to justice-impacted individuals within programs administered by the USDA, focusing mainly on the agency’s flagship Business & Industry Loan Guarantees Program. CCRC’s Fair Chance Lending Project is focused on advocating for changes to SBA lending policies, and we believe that other agencies’ practices may provide instructive alternative models that can guide the SBA as it modernizes its rules.  Thus, in a final section we discuss the implications of USDA loan policies for those of the SBA.

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Oklahoma enacts automatic record clearing law

On May 2, 2022, Oklahoma Governor Stitt signed into law a comprehensive process making expungement automatic for all otherwise eligible misdemeanors and a range of non-conviction records.  See HB 3316, enacting 22 Okla. Stat. Ann. § 18(C).  Oklahoma thus becomes the tenth state to join the bipartisan trend toward broadening the availability of record clearing to people with convictions, without requiring them to file a petition and go to court for relief.  In addition to these states, another 10 states now make expungement automatic for non-conviction records. 

The Oklahoman reported that the “clean slate” bill passed the House and Senate with strong bipartisan support, with a combined five votes against, and it was promptly signed into law by Oklahoma’s Republican governor.  The bill’s primary sponsor Rep. Nicole Miller, R-Edmond, said that “There was certainly a general consensus that, you know, this this isn’t anything that’s partisan related; what it’s about is it’s about humans. So this is really a measure to help people.” 

Under Oklahoma law expunged records are sealed, but remain available to law enforcement and may be used in subsequent prosecutions.  Any record that has been sealed may be ordered “obliterated or destroyed” after an additional 10 years.  § 19(K).  Oklahoma also authorizes its courts to expunge up to two non-violent felonies, andn also pardoned felonies, but these were not included in the new law (styled “clean slate”).  The law is effective November 1, 2022, and the process for automatic expungement is to commence three years after that date.   

The Oklahoma process for expunging records without a petition is spelled out in a new § 19(B): the Oklahoma Bureau of Criminal Investigation must provide a list of eligible cases to the prosecutor on a monthly basis for a 45-day review.  The prosecutor mayh object only for specified reasons:  the case does not meet the definition of a clean slate eligible case; the individual has not paid court-ordered restitution to the victim; or “the agency has a reasonable belief, grounded in supporting facts, that an individual with a clean slate eligible case is continuing to engage in criminal activity, whether charged or not charged, within or outside the state.”  A list of cases as to which there has been no objection is then sent to the court for expungement.  The court must expunge all cases on the list sent to it, and notify all agencies holding records directing them to expunge as well.  The law does not provide for notifying individuals in case of prosecutor objection, or after their record has been expunged, al though the state supreme court and the BCI are authorized to make rules governing the process.  The BCI is required to provide to the legislature a list of individuals whose records have been expunged on an annual basis.  Read more

“The Many Roads From Reentry to Reintegration”

We are pleased to publish the March 2022 revision of our national survey of laws restoring rights and opportunities after arrest or conviction, “The Many Roads from Reentry to Reintegration.“ Like the earlier report, this report contains a series of essays on various relief mechanisms operating in the states, including legislative restoration of voting and firearms rights, various types of criminal record relief (expungement and sealing, pardon, judicial certificates), and laws limiting consideration of criminal record in fair employment and occupational licensing.

Drawing on material from CCRC’s flagship resource the Restoration of Rights Project, the report grades each state for the scope and efficacy of its laws in nine different relief categories. Based on these grades, it compiles an overall ranking of the states. As described below, most of the states identified as reform leaders in our 2020 report still rank highly, but several new states have joined them. Half a dozen other states made substantial improvements in their ranking by virtue of progressive legislation enacted in 2020 and 2021, in two cases (D.C. and Virginia) rising from the bottom ten to the top 20.

The legal landscape has been changing rapidly in the 18 months since the first edition of this report was published in September 2020. Substantial progress has been made in a number of states, and in the Nation as a whole, toward devising and implementing an effective and functional system for relieving collateral consequences. The bipartisan public commitment to a reintegration agenda seems more than ever grounded in economic imperatives, as pandemic dislocations have brought home the need to support, train, and recruit workers, who are essential to rebuilding the small businesses that are the lifeblood of healthy communities.

The greatest headway has been made in restoring the vote and broadening workplace opportunities controlled by the state, both areas where there are national models and best practices. The area where there is least consensus, and that remains most challenging to reform advocates, is managing dissemination of criminal record information. Time will tell how the goal of a workable and effective criminal record relief system is achieved in our laboratories of democracy.

One area of record relief on which there does appear to be an emerging bipartisan consensus is that non-conviction records should be automatically sealed or expunged on case disposition. We are particularly pleased to see how many states have enacted laws limiting access to the record of cases disposed in favor of the defendant just since publication of our Model Law on Non-Conviction Records in 2019.

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Judicial Diversion and Deferred Adjudication: A National Survey

*Update (3/3/22): the full national report, “The Many Roads from Reentry to  Reintegration,” is now available.

Last week we announced the forthcoming publication of a national report surveying various legal mechanisms for restoring rights and opportunities following arrest or conviction, a revision and updating of our 2020 report “The Many Roads to Reintegration.” The first post in the series (“Expungement, Sealing & Set-Aside of Convictions“), published on February 25, gives some additional background about the report. The second post in this “preview” series (“Fair Chance Employment & Occupational Licensure“) was published on February 26.  The third part (“Executive Pardon“) was published on February 28.

Today’s post concerns the role that court-managed diversionary dispositions play in reducing convictions and avoiding collateral consequences.  Since our first national report was published in 2018, many states have expanded the availability of these non-conviction dispositions, including for any defendant potentially eligible for a probationary sentence, and made record clearing more generally available.

We expect to publish the whole national report, plus our Reintegration Report Card for 2022, later this week.

Judicial Diversion and Deferred Adjudication: A National Survey

An increasingly desirable strategy for facilitating reintegration through avoiding collateral consequences is to divert individuals away from a conviction at the front end of a criminal case. Diversion in its various forms offers a less adversarial means of resolving an investigation or prosecution through compliance with agreed-upon community-based conditions leading to dismissal of charges and termination of the matter without conviction. Diversionary dispositions are described in the Model Penal Code: Sentencing as a way to “hold the individual accountable for criminal conduct when justice and public safety do not require that the individual be subjected to the stigma and collateral consequences associated with conviction.”[1] In this understanding, diversion functions as a mechanism for ensuring accountability and facilitating rehabilitation, rather than as retribution for its own sake.[2] The effectiveness of diversionary dispositions in furthering these goals has not been studied in depth, and they are not without their controversial aspects, but existing research suggests their promise.[3] Diversion may allow for a mutually-acceptable outcome for the prosecutor and defendant in cases where the extent of culpability is not clear, where a treatment intervention seems appropriate, or where the defendant otherwise fits within some category considered deserving of leniency (e.g., human trafficking victims, veterans, “youthful offenders”).

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Executive Pardon: A National Survey

Last week we announced the forthcoming publication of a national report surveying various legal mechanisms for restoring rights and opportunities following arrest or conviction, a revision and updating of our 2020 report “The Many Roads to Reintegration.” The first post in the series (“Expungement, Sealing & Set-Aside of Convictions“), published on February 25, gives some additional background about the report. The second post in this “preview” series (“Fair Chance Employment & Occupational Licensure“) was published on February 26.

Today’s post concerns the role that executive pardon plays in supplementing and in some cases providing the only record relief following conviction. We expect to publish the whole national report, plus our Reintegration Report Card for 2022, later this week.

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Executive Pardon: A National Survey

Pardon has been described as the patriarch of restoration mechanisms, whose roots in America are directly traceable to the power of the English crown. Just as a power to pardon was assigned to the president in Article II of the U.S. Constitution, the constitution of every state save two provides for an executive pardoning power.[1]  Both in theory and practice, pardon is the ultimate expression of forgiveness and reconciliation from the sovereign that secured the conviction.

For almost two centuries, executive pardon played a routine operational role in criminal justice systems throughout the United States, dispensing with or mitigating court-imposed punishments and, after a sentence had been served, restoring rights and status after conviction.

Nowadays, in many U.S. jurisdictions pardon is a shadow of its once-robust self, particularly in those where it is exercised without institutional restraint or encouragement. Since the 1980s, governors and presidents alike have been wary of exposing themselves to public criticism from an ill-advised grant.  In many jurisdictions pardoning has stopped being thought of as part of the chief executive’s job — though being labeled “soft on crime” seems thankfully no longer a political kiss of death. Still, it is not surprising that reformers tend to regard pardon with suspicion, dubious about its legitimate operational role in the modern justice system.

Yet pardon fills significant gaps in record relief schemes across the country, supplementing judicial record relief mechanisms like sealing and expungement. For example, in 20 states pardon offers the only way to regain firearms rights lost because of conviction, including California, Colorado, Florida, Georgia, Nebraska, Oklahoma, and Wyoming. In 11 states ineligibility for jury service is permanent without a pardon, including Arkansas, Delaware, Oklahoma, Pennsylvania, South Carolina, and Texas. (By comparison, expungement restores firearms rights in only five states, and jury rights in only two.[2]) A pardon may be necessary to enable a person to stand for elected office, or to demonstrate the requisite good character to secure a professional or business license.

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