Category: Government Benefits

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.

Federal policies block loans to small business owners with a record

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. An estimated 4% of small businesses in the United States have an owner with a conviction (1.5% have a felony conviction). Small businesses provide “a vital opportunity for those with a criminal record to contribute to society, to earn an honest profit, and to give back to others.” They also frequently employ people with a record and help reduce recidivism. A growing number of organizations and government programs are devoted to supporting individuals with a record in building their own businesses.

Yet many structural barriers remain, including 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).  A recent article illustrates the steep challenges faced by business owners with a record by telling the stories of several entrepreneurs who were either denied an SBA loan or were discouraged from even trying for one because of a dated felony conviction.  One of those entrepreneurs comments: “You might do five years, ten years, one year, but you pay for it until you’re in the grave.”

To illuminate and help reduce these barriers, our organization is working to develop 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.

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Second Chance Month: A Federal Reintegration Agenda

In 2017, Prison Fellowship declared April Second Chance Month for the first time. The designation has since gained support from Congress, the White House, state and local bodies, and nongovernmental organizations, as an opportunity to raise awareness about the collateral consequences of arrest or conviction along with the importance of providing second-chance opportunities for people with a record to reintegrate into society.

CCRC’s flagship resource, the Restoration of Rights Project provides 50-state resources detailing current law and practice for four types of second-chance remedies: (1) restoration of civil and firearms rights; (2) pardoning; (3) expungement, sealing, and other record relief; and (4) limits on consideration of criminal records in employment and occupational licensing. Our annual reports on new legislation document the astonishing pace of state reform action on these issue since 2013. We are proud to see these resources utilized by impacted individuals, attorneys, advocates, journalists, scholars, lawmakers, courts, and others to understand second-chance remedies, pursue relief, and bring about reforms.

President Biden’s Proclamation on Second Chance Month declares that the criminal justice system must offer “meaningful opportunities for redemption and rehabilitation”:

Every person leaving incarceration should have housing, the opportunity at a decent job, and health care. A person’s conviction history should not unfairly exclude them from employment, occupational licenses, access to credit, public benefits, or the right to vote. Certain criminal records should be expunged and sealed so people can overcome their past.

The President took an important step toward this goal when he directed federal agencies to facilitate voting for those in federal custody or under federal supervision.

During the wave of criminal record reform that began around 2013, every state legislature has taken steps to chip away at the negative effects of a record, thereby supporting opportunities to earn a living, access public benefits, education, and housing, regain voting rights, and otherwise reintegrate into society. Many states have entirely remade their record relief systems—authorizing or expanding expungement, sealing, set-aside, certificates of relief, and/or diversion—and limited the consideration of arrest and conviction records in employment and licensing. State reforms continue to accelerate in 2021.

Congress has belatedly become interested in the reintegration agenda, limiting background checks in federal employment and contracting in 2019, and removing some barriers to public benefits in 2020. However, many federal barriers remain, and individuals with federal records have no access to the kind of relief mechanisms now available in most states. Recent controversies over presidential pardoning offer an incentive to wean the federal justice system from its dependence upon presidential action for the sort of routine relief these mechanisms promise.

In honor of Second Chance Month, we recommend that the Biden Administration work with Congress to pursue an ambitious and bipartisan legislative approach to criminal record reforms in the following four areas:

  • Record relief: Authorize federal courts to expunge certain records, grant certificates of relief, and increase use to deferred adjudication; give effect to state relief in federal law; prohibit dissemination of certain records by background screeners and the FBI; and, provide relief from firearms dispossession.
  • Federal public benefits: End record-related restrictions in financial assistance to small businesses, SNAP and TANF benefits, and student aid.
  • Employment & licensing: Establish enforceable standards for consideration of criminal record in federal employment and contracting, and limit record-based restrictions in federally-regulated occupations.
  • Voting rights: Allow voting in federal elections regardless of a person’s criminal record unless currently incarcerated for a felony conviction.

Our full federal agenda details specific measures by which Congress can accomplish these goals.

Applying for SBA COVID-19 relief with a criminal record in 2021

Last Updated: September 9, 2021

In December 2020, Congress authorized additional COVID-19 financial relief for small businesses and nonprofits, available through the Small Business Administration (SBA). The SBA’s two primary programs for COVID-19 financial relief are the Paycheck Protection Program (PPP), which provides forgivable loans to small businesses and nonprofits to help keep their staff employed during the crisis; and the COVID-19 Economic Injury Disaster Loan (EIDL) program, which provides advances and loans to small businesses and nonprofits that experience a temporary loss of revenue due to COVID-19.

After the first COVID-19 relief bill, the CARES Act, funded these programs in March 2020, the SBA imposed broad criminal history restrictions on applicants. In the face of pressure, the administration relaxed those restrictions several times over the course of the following months.  In March 2021, the Biden Administration removed an additional restriction.  In this post, we review those developments and describe the SBA’s current criminal history policies, also available on the SBA’s website (PPP and EIDL).

To summarize, as a result of developments to date, the SBA now excludes from PPP relief only a narrow category of people with a criminal record: those 1) actually incarcerated or with pending felony charges; or 2) convicted, pleaded guilty or nolo contendere to, or commenced any form of parole or probation within the last 5 years for certain financial felonies. The category of those excluded from EIDL relief is broader: 1) anyone convicted of any felony within the past five years, and 2) anyone with any sort of pending criminal charges.

We conclude with a series of recommended changes to the laws governing SBA loans that affect people with a criminal record, and to related SBA regulations and policies.  These recommendations include consideration of how a loan applicant’s criminal record is treated in the rules and policies governing the SBA’s general lending programs under Section 7(a) and 7(b) of the Small Business Act, whose only mention of criminal record is to authorize the SBA to “verify the applicant’s criminal background, or lack thereof,” including through an FBI background check.

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After a haul of record relief reforms in 2020, more states launch clean slate campaigns

Yesterday, the Clean Slate Initiative, a bipartisan national effort to automate the clearing of criminal records, announced four new state campaigns in Texas, New York, Oregon, and Delaware, joining ongoing campaigns in Louisiana, Connecticut, and North Carolina to advocate for automatic record relief legislation.

This announcement follows a productive year for record relief reforms in 2020, when Michigan became the sixth state to enact automatic relief for a range of conviction records, the most expansive such authority enacted to date. In total, 20 states enacted 35 bills and two ballot measures creating or expanding record relief (i.e. expungement, sealing, set-aside) last year. Michigan, along with three other states, also enacted major legislation expanding eligibility for petition-based conviction relief. Kentucky and North Carolina authorized the automatic sealing of many non-conviction records (with simplified petitions for others), consistent with a 2019 model law on non-conviction records developed by a group of practitioners under CCRC’s leadership. Other reforms addressed marijuana offenses, victims of human trafficking, juvenile records, and more.

Below we summarize 2020’s record relief reforms, broken down into six categories: general conviction relief (9 states, 14 laws), automatic conviction relief (4 states, 5 laws), non-conviction records (4 states, 4 laws), marijuana offenses (6 states, 5 laws, 2 ballot measures), offenses by victims of human trafficking (3 states, 3 bills), and juvenile records (5 states, 6 laws). Seven bills that were vetoed are described at the end. (Our full report on 2020 legislation is available here. Further detail about a particular jurisdiction’s record relief laws can be found in the CCRC Restoration of Rights Project, which includes both individual state profiles and 50-state comparison charts for conviction and non-conviction records.)

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