Webinar: Credit barriers for entrepreneurs with a criminal history

Webinar November 10 at 1 EST

Generational Wealth: Credit Barriers for People with a Criminal History

Tune on Thursday Nov. 10 at 1 EST for a webinar hosted by the National Community Reinvestment Coalition on barriers to credit for small business owners with a criminal record.  Panelists, including CCRC’s Margaret Love, will describe the many formal and informal restrictions on access to credit that make it difficult for an entrepreneur with a criminal record to build a business, including those imposed by the U.S. Small Business Administration on access to federally-guaranteed bank loans. These are issues that CCRC has been exploring since the early days of the pandemic when the SBA’s restrictions on the Paycheck Protection Program came to light.

Panelists:

  • Margaret Love, Executive Director, Collateral Consequences Resource Center
  • Lettisha Boyd, Owner and Principal Consultant, Beyond Savvy Consumers
  • Bonnie Crockett, Director of Small Business Lending at Baltimore Community Lending Inc.
  • Susan Grutza, Policy Counsel of the Office of Fair Lending & Equal Opportunity, Consumer Financial Protection Bureau

Register for the webinar here:

https://www.eventbrite.com/e/generational-wealth-credit-barriers-for-people-with-a-criminal-history-tickets-453347894757

The NCRC’s announcement is here:

Nearly 1 in 3 Americans have a criminal record. Each year over 600,000 Americans are released from state or federal prisons and re-enter society. Re-entry into society poses barriers to everyone but disproportionately affects African Americans and other minorities as African Americans and Hispanics make up 56% of the incarcerated population. This disproportionate representation within the criminal justice system impacts these communities and their ability to build generational wealth due to the barriers that exist upon re-entry.

Join us on November 10th as we speak with advocates, a CDFI, and the CFPB about the barriers that exist for people with a criminal record to build wealth and what can be done to overcome these barriers.

 

Applying for federal disaster assistance with a criminal record

In addition to its lending and other programs in support of small businesses, the U.S. Small Business Administration provides long-term low-interest loans under Section 7(b) of the Small Business Act directly to individuals, businesses, and nonprofits in declared disaster areas. The current devastation wrought by Hurricane Ian in Florida — the subject of a dedicated new page on the SBA’s website — reminded us of some research we published two years ago, at the height of the pandemic, about how people with a criminal record were faring under the SBA’s COVID-related disaster relief program.  The answer initially was “not well.”

Our research indicates that neither FEMA (emergency aid) nor the USDA (farm loans) impose criminal record restrictions on disaster assistance.  But the SBA does.  What’s more, the SBA’s restrictions are not formalized in a regulation but buried in operating procedures.

The criminal history restrictions on SBA economic injury disaster loans (EIDL) under the CARES Act were initially even more restrictive than those that applied to its PPP relief, and they too were never formalized in a rule. The PPP restrictions were rolled back in response to public outcry and lawsuits, and the following year the COVID-related EIDL policy was also rolled back to disqualify the same limited population as the PPP itself (people in prison or on probation or parole, with pending felony charges, or with recent financial fraud and related convictions).  However, criminal record restrictions in the SBA’s general non-COVID lending programs, including its general disaster assistance programs, were not affected.

Now that the SBA’s disaster assistance programs are no longer administered under the exceptional and well-publicized approach of the pandemic-related authorities, we thought it would be timely to take another look at how those programs — presumably including the one that specifically applies to Hurricane Ian relief — are available to people with a criminal record.    

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Fair Chance Employment and Occupational Licensure: A National Survey

Yesterday 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“) gives some additional background about the report. This second post in this “preview” series deals with how the law regulates consideration of criminal history in employment and occupational licensing. We expect to publish the whole report, plus our Reintegration Report Card for 2022, early next week.

Fair Chance Employment & Occupational Licensing
Introduction

There is perhaps no more critical aspect of a reintegration agenda than removing the many unjustified and unjustifiable barriers faced by people with a criminal record in the workplace.[1] In an era of near-universal background checking and search engines, the “Mark of Cain” these individuals bear will sooner or later be known to potential employers and licensing boards even if criminal record information is not requested on an initial application.

Some barriers take the form of laws formally disqualifying people with certain types of convictions from certain types of jobs or licenses. More frequently, barriers result from informal discrimination grounded in an aversion to risk and, too frequently, racial stereotypes. Whether it is securing an entry level job, moving up to management responsibilities, or being certified in a skilled occupation, people with a criminal record are at a competitive disadvantage, if they are even allowed to compete. As between two individuals with hypothetically equal qualifications, it is easy for a risk-averse prospective employer or licensing agency to justify breaking the tie in favor of the person who has never been arrested.

Individualized record relief mechanisms like expungement or pardon are intended to improve employment opportunities, and they can be helpful on a case-by-case basis to those who are eligible and able to access them.[2] But equally important are fair employment and licensing laws that impose general standards limiting consideration of criminal record and provide for their enforcement, offering class-wide relief to all similarly situated individuals. States have enacted an impressive number of this sort of systemic “clean slate” law[3] just since 2015, some building on laws enacted in an earlier period of reform half a century ago in the 1960s and 1970s,[4] and others breaking new ground in regulating how employers and licensing agencies consider an applicant’s criminal record.

In employment, one of the most striking legislative trends in the past decade is the embrace of limits on inquiry into criminal history in the early stages of the hiring process, particularly for public employment. The so-called “ban-the-box” campaign that began modestly more than 20 years ago in Hawaii and took off nationwide after it was adopted in California, has now produced new laws or executive orders in more than two-thirds of the states and in over one hundred cities and counties. More efficient and broadly effective than after-the-fact lawsuits, ban-the-box laws now represent the primary tool for eliminating unwarranted record-based employment discrimination on a system-wide basis. They are premised on an expectation that getting to know applicants before learning about adverse information in their background is likely to lead to a fairer and more defensible hiring decision. This should be particularly true when a records check is permitted only after a conditional offer of employment has been made, so there is little doubt about the reason in the event of a later withdrawal.[5] A few states (though still too few) have coupled ban-the-box strategies with standards for considering a person’s record after inquiry is permitted.

Occupational licensing has also seen an acceleration of legislative efforts to limit the arbitrary rejection of qualified workers. Significant procedural and substantive reforms have been enacted in more than two thirds of the states in the last five years, in some cases building on reforms originally adopted in the 1970s, and in others following models recently proposed by policy advocacy organizations from across the political spectrum whose model laws aim to make licensing authorities newly accountable for their actions and individuals newly able to obtain and practice a skill with enhanced career prospects. Following these models, states have

  • substituted objective standards related to the specific occupation for vague “good moral character” criteria;
  • afforded individuals a preliminary decision about whether their record will be disqualifying before they invest in education or training;
  • prohibited consideration of certain records considered unrelated to job performance, including based on their minor or dated nature;
  • required licensing agencies to justify negative decisions, frequently in terms of public safety, and to afford disappointed applicants an opportunity to appeal;
  • imposed legislative oversight requirements to hold licensing agencies accountable for their performance.

As shown in the following discussion and in the “Report Card” maps that follow the section, almost every state now has at least some law aimed at limiting record-based discrimination in employment or licensure, and most have both. Enforcement of these new laws may in many cases depend on education and persuasion rather than on lawsuits and executive orders, but this may make systemic change come sooner and have a more lasting effect. The very exercise of repeatedly having to decide the relevance of an individual’s past conduct through a transparent and accountable process is likely to result in more reliable decision-making, and a better understanding of those relatively few instances when denial of opportunity is justifiable. We discuss the state of the law in greater detail in the following sections.

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“The High Cost of a Fresh Start”

The High Cost of a Fresh Start: New Report Examines Court Debt as a Barrier to Clearing a Conviction Record

Download the report: https://ccresourcecenter.org/wp-content/uploads/2022/06/Report-High-Cost-of-Fresh-Start.pdf

BOSTON – A new report from the National Consumer Law Center and the Collateral Consequences Resource Center explores the extent to which court debt—such as criminal fines, fees, costs, and restitution—is a barrier to record clearing that prevents poor and low-income people from getting a second chance. For the nearly one-third of adults in the U.S. with a record of arrest or conviction, their record is not simply part of their past but a continuing condition that impacts nearly every aspect of their life. Their record makes it hard to get a job and support a family, secure a place to live, contribute to the community, and participate fully in civic affairs.

“Criminal record clearing must not be reserved only for those who can easily pay for it,” said Margaret Love, executive director of CCRC. “States should ensure people are not being priced out of a chance at a fresh start.”

The High Cost of a Fresh Start: A State-by-State Analysis of Court Debt as a Bar to Record Clearing analyzes whether outstanding court debt bars record clearing under the laws of each of the 50 states, the District of Columbia, and the federal system. The report finds that in almost every jurisdiction, outstanding court debt is a barrier to record clearing, either rendering a person entirely ineligible or making it more difficult for them to qualify.

In recent years, most states have passed laws aimed at restoring economic opportunity, personal freedoms, and human dignity to millions of people by providing a path to clear their record. But for too many, this relief remains out of reach because of monetary barriers, including not only the cost of applying for record clearing but also requirements in many jurisdictions that applicants pay off debt incurred as part of the underlying criminal case before they can have their record cleared. This debt can include fees imposed for every month someone spends on probation or on GPS monitoring, and for their representation by a public defender—a fee that is levied only on people whom the court has deemed too poor to pay for their own defense. Interest and payment penalties can add to this court debt over time.

“The total amount of court debt can run to thousands of dollars for even minor infractions, which presents a high bar to clear,” said Ariel Nelson, staff attorney at NCLC. “Perversely, because a record makes it much harder to get a job, having an open record makes it harder to pay off court debt and therefore harder to qualify for record clearing.”

This burden falls especially heavily on Black and Brown communities, which are more likely to have high concentrations of both criminal records and poverty because of long-standing structural racism in criminal law enforcement and in the economy.

Based on their research, the authors offer the following recommendations:

  • Court debt should never be a barrier to record clearing.Qualification for record clearing should not be conditioned on payment of court debt, and outstanding court debt should not be a basis for denying relief, regardless of whether record clearing is petition-based or automatic.
  • Costs to apply for record clearing, including filing fees, should never be a barrier to record clearing. States should adopt automatic record-clearing processes that do not require individuals to incur costs to have their records cleared.
  • Jurisdictions should collect and report data on monetary barriers to record clearing.Jurisdictions where record clearing may be denied on the basis of outstanding court debt should collect and report data reflecting the impact of these barriers on record clearing.

Download the full report for report findings, recommendations, maps, graphics, and state-by-state analysis: https://bit.ly/lp-high-cost-of-a-fresh-start-22

The report’s appendix cointains a state-by-state analysis of the role played by outstanding court debt in qualifying for record clearing.  It may be separately downloaded at this link:  https://www.nclc.org/images/pdf/criminal-justice/High-Cost-of-Fresh-Start-Appendix.pdf 

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The nonprofit National Consumer Law Center® (NCLC®) works for economic justice for low-income and other disadvantaged people in the U.S. through policy analysis and advocacy, publications, litigation, and training.

The Collateral Consequences Resource Center (CCRC) works to restore rights and opportunities to people with a history of arrest or conviction through research and policy advocacy.

 

CFPB documents the financial burdens imposed on justice-involved individuals

The Consumer Financial Protection Bureau has just issued an extraordinary new report on the financial challenges faced by justice-involved individuals in navigating each stage of the criminal justice system. The report, which describes itself as “the first of its kind done by the CFPB,” paints a devastating picture of how the criminal law enforcement system conspires at every step to exacerbate the financially precarious situation in which many entering the justice system already find themselves.

“Justice-Involved Individuals and the Consumer Financial Marketplace” documents in clear and compelling prose how the financial products and services marketed to individuals and families entangled in the criminal justice system “too often contain exploitative terms and features, offer little or no consumer choice, and can have long-term negative consequences for the individuals and families affected.” What the CFPB researchers found “raises serious questions about the transparency, fairness, and availability of consumer choice in markets associated with the justice system, as well as demonstrating the pervasive reach of predatory practices targeted at justice-involved individuals.”

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When banks ask loan applicants about their arrest record

The National Community Reinvestment Coalition reports that its evaluation of small business loan applications from a sample of seven banks in Washington, DC revealed that “some lenders discriminate against applicants who have been charged at any time in their lives with a criminal offense.”  A comment on the NCRC website proposes that these banks consider applicants to be “a lending risk for having been ‘ever charged’ with any crime, other than a minor vehicle violation, no matter when it occurred.”  It goes on to argue that “[t]his practice is not only factually suspect, it is discriminatory.”  The comment, written by Anneliese Lederer, the NCRC’s Director of Fair Lending, was subsequently republished in The American Banker. 

The NCRC findings demonstrate that even interactions with the criminal justice system that do not result in a conviction record can have “lasting implications:”

It is known that having a criminal record is a barrier to both housing and employment. There are few protections for people with a criminal record.

But what about for people who have been charged and found not guilty, or their charges were dropped? What barriers do they face? Unfortunately, they face similar barriers as people who have a criminal record, especially in the small business lending arena.

Citing CCRC’s analyses of lending policies of the Small Business Administration, the NCRC comment highlights how these policies have given banks cover for their discriminatory practices:

Small business loans administered by the Small Business Administration (SBA) have broad criminal history restrictions. Analysis conducted by the Collateral Consequences Resource Center (CCRC) found that no statute requires criminal history to be used as a factor in determining creditworthiness. Instead, the Small Business Act uses the words “may verify the applicant’s criminal background.” Furthermore, many restrictions that the US Small Business Administration (SBA) implements on interactions with the justice system are not codified. These restrictions are “either unannounced or only disclosed through FAQs published on the agency’s website…..[or] through policy statements and application forms.”

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“From Reentry to Reintegration: Criminal Record Reforms in 2021”

At the beginning of each year since 2017, CCRC has issued a report on legislation enacted in the past year that is aimed at reducing the barriers faced by people with a criminal record in the workplace, at the ballot box, and in many other areas of daily life. These reports have documented the steady progress of what last year’s report characterized as “a full-fledged law reform movement” aimed at restoring rights and status to individuals who have successfully navigated the criminal law system. The legislative momentum, which slowed a bit during the first year of the pandemic, picked up again in 2021.

The title of this post introduces our annual report on new laws enacted during the past year, and emphasizes the continuum from reentry (for those who go to jail or prison) to the full restoration of rights and status represented by reintegration. Recent research indicates that most people with a conviction never have a second one, and that the likelihood of another conviction declines rapidly as more time passes. The goal of full reintegration is thus both an economic and moral imperative.

In the past year the bipartisan commitment to a reintegration agenda has seemed 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 businesses that are the lifeblood of the economy. If there is any one thing that will end unwarranted discrimination against people with a criminal history, it is a recognition that it does not pay.

Our 2021 report highlights key developments in reintegration reforms from the past year. It documents that 40 states, the District of Columbia, and the federal government enacted 151 legislative bills and took a number of additional executive actions to restore rights and opportunities to people with an arrest or conviction history. As in past years, a majority of these new laws involved individual record clearing: All told, an astonishing 36 states enacted 92 separate laws that revise, supplement or limit public access to individual criminal records to reduce or eliminate barriers to opportunity. Most of these laws established or expanded laws authorizing expungement, sealing, or set-aside of convictions or arrest records. Several states enacted judicial record clearing laws for the very first time, and a number of states authorized “clean slate” automatic clearing. Executive pardoning was revived in several states where it had been dormant for years.

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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.

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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.

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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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