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Video: Generational Wealth: Credit Barriers for People with a Criminal History

Online Event Archive Recorded November 10, 2022

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.

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.

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
Anneliese Lederer, Director of Fair Lending and Consumer Protection, NCRC

Files:

BCL Reentry Entrepreneurship –Bonnie Crockett
Justice-Involved Individuals and the Consumer Financial Marketplace – CFPB
Advancing Wealth & Financial Security for System-Impacted People – Lettisha Boyd

Transcript:

Lederer  0:00

Hi, and welcome everyone to our virtual panel. We are excited to have you join us. This panel is titled generational wealth credit barriers for people with a criminal history. My name is Annalise letterer. And I’m the director of Fair Lending at NCIC. And I’ll be the moderator for this panel. NCIC first got interested in the issue of barriers to credit for people with a criminal history. Specifically in small business arena over 18 months ago, one of my responsibilities as director has been the creation and running of our small business testing program, which reveals discrimination in the small business arena. In December 2020. We conducted Small Business match pair tests in this in the DC area. From this round of testing, our testers received small business loan applications from seven different financial institutions. Upon review of these applications, we found that three of the seven applications had a declaration of a criminal history that the applicant must answer. The declaration is overbroad, because it asks that the applicant or any owner principal guarantor have been charged with place under indictment put on probation, including adjudication withheld pending probation, pretrial diversion, or parole in connection with or convicted of any criminal offense other than a minor vehicle violation. A declaration like this, an application has a disparate impact based upon race and national origin. Because this declaration discourages potential applicants applying which is a violation of the Equal Credit Opportunity Act, otherwise known as the co op. This type of declarations affects the P0C more because they have more interactions with the criminal justice system than white people. I’m excited to discuss this issue of barriers to credit with our exciting panelists. Today, we are joined by two advocates a CDFI, who’s also a member of NCRC and makes loans of people with a criminal history and the Consumer Financial Protection Bureau CFPB the federal agency with a congressional mandate to enforce the ECOA. Our first speaker is Margaret love. She co founded the collateral consequences Resource Center in 2014, and has directed his work since that time. A former US pardon attorney, Margaret is a national authority on the President’s constitutional part in power, and she has published numerous academic articles on an executive clemency and criminal records issues. Our second advocate is Lettisha Boyd, who is a financial health counselor certified by the National Association of Certified credit counselors, members of the Association for Financial Counseling and Planning education, and a certified evidence based practitioner for the joy fields Institute, a strong advocate for criminal and social justice. Lettisha has worked in the nonprofit industry for over a decade, helping to create design and develop programs. Her role as the Associate Director of Technical Assistance at the college and community fellowships Thrive program helped to develop national footprint. She has provided training on specific evidence based practices for support stronger service delivery for justice impacted people within colleges, correctional departments and private organizations nationwide. She has also trained human resource managers on the importance and added value of hiring justice impacted people. The teacher is also one of the owners and principal consultants of a century visions consulting, LLC. Our third speaker is Bonnie Crockett VP and director of the Small Business Lending at Baltimore community lending which is a CDFI and a member of NCRC. Bonnie began her professional career as an attorney serving as general counsel of Loyola, federal savings banks. But after volunteering with her local Baltimore neighborhood and business associations, Bonnie discovered her passion and in 2000, embarked on adventure and Community and Economic Development. Since then, she has been a director, counselor, mentor, speaker, Professor and lender and a wide range of small business settings from an award winning Economic Development Corporation to grind visual CDFIs to a master’s level Entrepreneurial Development program now is director of small business lending, Bonnie is changing the conversation around ethical and impactful small business lending in the city of Baltimore. Our final speaker is Susan Grutza, who is a Policy Counsel at the Consumer Financial Protection Bureau’s Office of Fair Lending and Equal Opportunity. She joined the community the CFPB in 2020, when she works to support the Bureau’s efforts to fulfill its responsibilities to ensure fair, equitable and non discriminatory access to credit for consumers or communities. Formally, Susan served as a consumer law attorney at the Legal Aid Society of northeastern New York, and more recently as an attorney with the US Air Force jag corpse. Susan graduated from Stony Brook University School of Social Welfare and received her JD from Syracuse University College of Law. Margaret, would you like to start?

 4:52

She’s on mute.

Love  5:19

Hi, I’m very sorry, can you hear me? Yes, I have to get this, this zoom to behave itself. I think somebody else ought to go first because I’ve got to log out and then log back in. Sorry, I have a double zoom. So let me let someone else go first while I straighten this out.

Lederer  5:50

Sure. Lettisha, would you go speak first?

Boyd  6:10

Good afternoon, everyone. Thank you so much for joining us. It is a pleasure to be here for this very, extremely important discussion. Again, my name is Tish Boyd. I am the owner and Principal Consultant of beyond savvy consumers, where we work to change the narrative. What I’m going to do for you this afternoon is sort of paint a picture, paint a picture about not just what happens not just about the lack of generational wealth, but sort of how people inherited generational wealth, particularly African Americans based on their experience in this particular country. So our mission is to bridge the economic wealth divide by providing financial education to underserved people, including system impacted people with an asset building focus. So again, teaching financial education is one thing but teaching people how to own assets is a completely different thing. It’s in my work as a national trainer, that I started to notice a gap in service delivery, relating to system impacted people. So many programs offered reentry counseling or different types of services, but financial education is often missing from those particular conversations. So we’re talking about 70 to 100 million people that have some form of criminal record that are impacted, that could potentially be impacted by a lack of generational wealth. So our goals is to decrease financial insecurity for marginalized groups like system impacted people, increased financial capacity to reduce the economic wealth, suicide, and foster increased asset ownership and create positive outcomes for individuals, families, compute communities, and the overall economic economy I’m sorry. So again, beyond savvy works, to sort of identify the true root causes of a lack of wealth and asset poverty by providing financial education from a two part perspective, looking at external contributors of asset poverty, and then looking at how individual behaviors can sort of be changed in order to support better outcomes. There’s a huge misconception that a lack of wealth, wealth and asset poverty is based solely on individual behaviors. That is the largest misconception that anyone could actually believe. We’re talking about beyond money management, there are people who sort of inherited poverty.

Some of the services is to provide asset focused financial education seminars, nationally set participants of particular agencies and provide financial education curriculum integration for staff looking to integrate this particular training into the service delivery. And for individuals again, financial education trainings for currently and formerly incarcerated individuals. And we participate in civic engagement to raise awareness and support systemic change to reduce the racial economic wealth divide. But first, let’s talk about what is an asset? What is wealth? Before you can really understand the importance of the type of financial education you have to understand exactly what wealth and asset poverty is. So wealth is one’s assets minus debts. And asset poverty is something completely different. It’s a multi dimensional social, Ill rooted in systemic equities. Someone is considered asset poor if they do not have three months of living expenses saved. So if you do not have enough Finance, Financial resources to cover three months of living expenses, you are considered asset poor. So again, let’s look at the African American experience. contributing factors to asset poverty, lack of wealth and marginalization for people of color. We cannot talk about mass incarceration without highlighting race. Just like we cannot talk about barriers to generational wealth for directly impacted people without talking about the connection to the African American experience in the US. So things like post Civil War laws, and post civil wars laws that were created to sort of keep the black market going keep black labor going vagrancy laws and black codes were created specifically in the south, and then practices that were created in the Midwest and then north to sort of keep the carceral to keep a new form of slavery, which which became the carceral system. Some of those same practices exists, although the actual laws have gone away. There are specific practices and new modern day efforts to keep more black people in the carceral system for that particular labor. This is why when you look at research and you look at who’s more impacted by the carceral system, you will see African Americans and Latin X communities are the people most targeted for the carceral system, as early as the stages of the earliest stages of the criminal justice system, which includes arrest throughout convictions and prosecutorial bias. And then we can talk about judicial bias. There’s a whole host of things that happen. But first let’s let’s take a look at these historic policies.

Post civil war times offered the opportunity for economic growth through land ownership and business ownership, starting with the period of western expansion in America as outlined by the land ordinance act of 1785. Within this act, African Americans who did not have rights and were enslaved at a time earned the right to have land and solder and build on that particular land. But instead, due to the social and political climate at the time, all these laws that you see here, turned into government sanctioned discrimination for African Americans, continuing a race and class divide that would span generations.

Then we had laws like redlining, another contributor to asset poverty. And it started during the period of suburbanization between the period of 1930 and 1960, in which the federal government supported and land development and business growth. Outside of the inner cities and into the suburbs. red zones were created in neighborhoods close to factories in areas and communities that were predominantly African American residents had resided bank loans were either denied or offered with high interest rates, and in the mirror racial demographic, reduced property values and increased interest rates. This causes deterioration of African American communities. Since black people were defined denied refinance loans for the upkeep of those homes and buildings. The up cap areas start to be called ghettos. In 1948, the Supreme Court ruled redlining and race based appraisals illegal. Unfortunately, there have been very many recent incidents where redlining has resurfaced. Then you have asset restricting government policies. So the Housing and Community Development Act of 1974 President Reagan’s omnibus reconciliation Reconciliation Act of 1981. So these particular laws were supposed to be created to provide housing opportunities for marginalized communities. But in order to receive short term economic relief, this turned out to be a major contributor to long term asset poverty because of things called asset restriction clauses. The asset clauses within these particular supports, restricts asset ownership to a certain amount for people that have things like section eight. So now people have to choose to forego asset ownership, including savings accounts, and set minimums in order to maintain a roof over their heads. The Reagan administration took the housing and development community back in 1974 a step further by adding that asset clause and capping it at $1,000. So meaning a person who was receiving any type of government support could not have assets in excess of $1,000. But it was in the 90s that the Clinton Clinton administration allowed states to set the caps

So if you fast forward to more modern day times, recent recent research speaks to the fact that people of color are still struggling with asset attainment. Homeownership is one of the most crucial assets that a person could obtain. But according to Redfin, asset ownership for African Americans particularly, and Latin X people, they are sort of the lowest compared to their white counterparts. This has been contributed to African Americans inability to have long standing access to offer a down payment, higher unemployment rates, or the wage disparity between African Americans and white people, particular criteria. So to be clear, even with higher education and increase income, the racial wealth divide is still significant due to the standing pay gap and general lack of generational wealth that people have to sort of pass on in order to continue to grow assets. How does this connect to the carceral system? While the many communities that people who are incarcerated often come from have high rates of child poverty, and are in predominantly African American, and American Indian neighborhoods, we cannot overstate the point. Because incarceration is often the end results of a culmination of actions that are that were inspired by poverty, a lack of resources, trauma and poor coping skills. Beyond just coming from poverty stricken areas, research shows many incarcerated people come from poverty stricken regions that are also socially isolated and segregated, and cars and high a high higher incarceration rates can be found in places like the South that once had these particular laws targeting African Americans post Civil War and in the West.

Here’s a staggering fact. By the age of 48, the typical formerly incarcerated person will have earned 100 and net $79,000 less than if they have never been incarcerated. So think about it. Research shows people who face the horror part of the carceral system often come from high rates of areas with high rates of poverty, you add incarceration on top of that, and then you’re increasing their economic power by this much.

So pre release and reentry programs, prison programming and reentry conversations, often center on short term financial solutions like employment instead of career attainment. Career Planning involves identifying and discussing long term employment prospects that often offer things like retirement savings benefits, health insurance, even stocks and companies, short term, short term and low and low. income housing is often one of the things that are highlighted within programming transitional housing, Section eight programs. Instead of homeownership and an overall lack of formalized financial education programming exists within facilities. Employment alone cannot quell the many layers of poverty, short term solutions like jobs within insecure jobs that do not have security causes job hopping and does not support asset attainment and financial sustainability.

So if you look at a person’s income prior to incarceration, you’ll see more often than not, it was low wage.

This image image demonstrates the median annual income for incarcerated people prior to incarceration and non incarcerated people, ages 27 to 42. As you can see in both categories, whether you are impacted by incarceration or not, women earn less. And while there’s been a push for Second Chance initiatives in a few states system impacts people, employers or agencies that support support employment initiatives aren’t aware of potential protections. Therefore, that sort of cycle of ignorance contributes to unemployment for people with criminal histories.

In the US, we have these dual labor markets. Now the Coronavirus has causes to look at yet another economic downturn. and are forced to grapple with the repercussions of that. The these two sort of tiers of employment are tier one where they’re secure, well paying jobs. So these are your jobs that come with benefits. And then you have tier two. These are the low paying insecure jobs. These are the jobs that most people will be grappling with when they are released. The economic downturn has impacted Black, Latino, and Asian communities the most particularly at the onset of the Coronavirus. And while there are employment opportunities out there, for many people, it’s usually the tier two jobs. So now, people will have access to more employment, including system impacted people but again, jobs that offer little sustainability. Then, for those who do take it a step further and are able to start their own businesses, they face disparities on a whole different other level or even just someone with a record who is trying to start a business. The sum impact the people trying to build wealth, are are AR are often locked out of things like loans sponsored by the Small Business Administration, which he wrecks barriers to access by screening applicants out with with that criminal conviction question. And current system impacted business owners face discrimination even during the pandemic. So the paycheck, the paycheck to paycheck protection program managed by the Small Business Administration offered 1% loans for businesses that employ fewer than 500 workers. loans were forgiven as long as workers kept people on payrolls and analysis by the Center for Responsible Lending found that 95% of black owned businesses were shut out of the paycheck protection program. And business owners with evictions were also being denied SBA packed back PPP loans as well. So these particular barriers disenfranchises African Americans and Latin x, because they’re the ones most often over represented in the carceral system. This disparate impact on people of color, that largely make up the criminal justice system is a reason why in which again, generational poverty gets perpetuated. Then if we take a look at lending this population of people are often locked out of mainstream products and institutions, and are even faced with barriers for necessities such as life insurance. So due to a lack of credit imprint, people with criminal histories are often locked up of these products. And then, underwriting practices often require sound credit histories and other additional things such as the ability to have that particular downpayment. Some banks will not even open allow people that have criminal histories to open savings accounts. This keeps people relying on predatory services like check cashing places, payday loans or rent to own products. The scrutiny that is placed on people for life insurance, many life insurance companies have policies that exclude people with criminal histories altogether, or either exclusionary practices dependent on the type of crime leaving people and families vulnerable.

There was a 20 year study that was conducted that looks at all asset ownership post incarceration, and it was conducted by the Fragile Families and wellbeing. Researchers compared the financial circumstances of fathers who were formerly incarcerated without fathers who never experienced carcere raishin. They found all of this recent incarceration reduced the likelihood of owning a bank account and a vehicle. Incarceration impacted joint assets like vehicles and homes and barriers to acquiring new assets. So again, the ways in which incarceration perpetuates generational poverty it’s more important for persons coming home or persons with criminal histories to have asset focused financial education in order to be on the same economic playing field. So again, you can see from the slide education and parental income are strong indicators of a child’s future of economic mobility. Usually 42%, according to research of children who started at the bottom of the income distribution remain stuck there throughout their adulthood. This is especially true for 54% of African American children who remain in the bottom of the income distribution as adults. So again, that cycle that cycles that started from the African American experience in this the US. A 10 year study conducted by Iowa State University Institute for social and behavior research shows, children who experienced socio economic adversity at an early age are also at risk for more increased mental health challenges during their teen years. So just to sum up, sort of the picture that has been painted. Initially, African Americans were considered property. post Civil War faced barriers to land ownership, were excluded from low interest government loans redlined out of homeownership by banks, impacted by asset rules, face disparate treatment within the full criminal justice system, face post release collateral consequences that enhance poverty and the increased likelihood of inheriting poverty as a result of parents living having a criminal history or being incarcerated. Thank you so much. I’ll turn it back over to my colleagues.

Lederer  26:40

Thank you so much, Tish. Now we’re going to have Margaret speak.

Love  26:45

Yes. Thank you very much, Ali. I’m sorry about the the Zoom glitch, but hopefully we are. Okay. Now. I’d like to pick up on a couple of themes that Tish raised, particularly focusing on this issue of access to business credit, I think we can all agree that business success is one of the most familiar ways of producing generational wealth. We can also agree that access to credit is essential to getting started in growing a business. Finally, successful small businesses are not only a path to generational wealth, but they’re also a vital part of any healthy and successful community. But there’s probably less consensus, at least among the sources of business capital, about what makes an entrepreneur a good or a bad credit risk, especially entrepreneurs operating in an urban environment. And that’s what I want to pick up on here. We should want small business people operating in an urban environment, who most frequently or at least a good part of the time will have a criminal history, we should want them to succeed. A recent report of the CFPB cited a RAND study showing that over 1.1 million small business owners have a criminal history, representing 3.8% of all businesses with less than 500 employees. So this is a fairly substantial population that we should want to succeed. There are many reasons and Tisch has raised a lot of them, why people with a criminal history may face special disadvantages in obtaining the capital necessary to start and grow a business. There are real and important barriers to credit. But I want to talk about something that, for me at least is harder to explain and justify in terms of conventional measures of credit worthiness. And these are the formal legal and policy restrictions that many public and private banking institutions impose on loans of business capital based on a borrower’s criminal history. I’d like to propose as my hypothetical borrower, a business owner who satisfies all of the conventional criteria for credit worthiness. She has a good credit rating, she has collateral she has business experience. The only thing that distinguishes my hypothetical borrower is her past involvement in the justice system. If you think this borrower will be rare, you will be wrong. And the experience of business owners during the pandemic in the early weeks of the pandemic that tissue referred to with the rollout of the paycheck Protection Program, showed that 1000s of business owners were rejected by the SBA, based on rules that that rendered NL eligible people who are on supervision in the community, or who had any criminal record by virtue of something they call good character. Now, those laws and restrictions in the PPP were rolled back fairly quickly in response to a good deal of public outcry. What was not rolled back were the same restrictions that have remained in the SBA general loan programs, they remain there today. So to anyone with a record considering applying for an SBA loan to a bank, the problem is evident right away from the application form. Anyone who is currently serving a sentence even probation is outright ineligible. They need not apply. But the form goes on to ask if the prospective borrower or anyone managing the borrower’s business has ever been convicted or pleaded guilty at any time in the past. Most borrowers who would answer yes to these questions will probably be deterred from applying. But if they do apply, unless their record is only a misdemeanor, they will be subjected to a full FBI background check, and an SBA determination of whether they have good character. This drawn out process with an uncertain endpoint will likely cool any interest the bank may have in making the loan. It is also not clear what standards the SBA is applying in determining whether an application has this good character that they deem essential to making a loan. And it’s also not clear what percentage of those with a record who do apply are approved. And a FOIA request to the SBA has revealed very little about the agency’s good character decision making process or its outcome, and still less about why the SBA regards a criminal record as a per se criminal, per se credit risk. Good character inquiries are a common feature of other SBA programs, including disaster loans contracts set aside, and they present broad opportunities for the exercise of discretion, with little or no accountability. Now, the SBA is lending policies are important for two reasons. First, they account for a fairly large percentage of all bank loans to small businesses. According to the CFPB statistics, banks are the source of more than 40% of small business loans. And SBA loans constitute 16% of those bank loans 7% of the total capital available to small businesses. So more important, even then the percentage of the SBAS that that the SBA has in the loan market is the fact that SBA policies influence undoubtedly, how banks and other private lenders approach criminal history as an independent per se credit risk. Yet there is no empirical research that would justify treating criminal history as a per se credit risk, and no support for this in the law. It seems worth noting that the other major source of federally guaranteed business loans, the Department of Agriculture, does not even ask about criminal history in the application process. So we at CCRC believe that this is a very, very important issue to begin talking about. We want we believe that the SBA wants to be a part of the solution in making credit more accessible to urban entrepreneurs who have a criminal history. Though the agency step to this end, over the past two years have been fairly modest. lending policies excluding people with a criminal history operate at cross purposes, with the national agenda favoring rehabilitation and reintegration. They also act as a brake on economic development in urban communities, where because of well documented racial disparities in the criminal justice system, people with a record of arrest or conviction tend to be more concentrated. Such policies result in a form of red line that frustrates efforts to close the racial wealth gap through minority entrepreneurship and adversely affects family welfare and Community Development generally. So we are hopeful that if a conversation about real credit risks presented by a criminal history can be adequately explored with all interested parties at the table and documented with with empirical research, new opportunities will be presented to urban entrepreneurs and their communities to all of our benefit. So I think I will stop there and let my next panelist, colleague, go ahead.

Lederer  35:29

Thank you. Okay. Bonnie, will you please talk talking? You’re on mute, Bonnie.

Crockett 35:48

Okay, I thought Susan was next. So I wasn’t quite prepared. But I’m ready. Can you up? Wait a minute? See, I’ve not don’t think I’m sharing the right screen. Let me try again. Can you see my screen now? Okay. Hello, everyone. I’m Bonnie Crockett. I’m the director of small business lending at Baltimore community lending. Baltimore community lending was actually formed in 1989, as an agency of Baltimore City to help finance affordable housing. In the early 2000s, they became a standalone 501 C three nonprofit and then a CDFI community development financial institution, which is a US Treasury designation that basically says you are mission driven and not profit driven. And that you your goal was to make loans and underserved communities. So they’ve been making real estate development and construction loans for 33 years. And about four years ago, they decided or realized that if you’re really going to change neighborhoods, you can’t just do it with buildings, you have to have businesses, you have to have, you know, life going on on the busy streets. So they decided to add a small business loan program. So they brought me on board to develop this program and run it. We’ve been doing it for four years now. Before we started lending, we decided to to find out why people in Baltimore City could not get small business loans. We had the advantage of a study done by a nonprofit called Calvert impact capital, Johns Hopkins had a program called called 21st century cities that did a massive study on business lending in Baltimore. And then we also held about for public meetings with banks and other lenders and other CDFIs and community advocates and small businesses, primarily asking the question, why are you turned down? What’s the number one reason people are turned down for small business loans? And it really was not a mystery. Everybody came back with the same answer. Clearly, there’s issues of race, there’s issues of gender, zip code, where you live, there’s a lot of things that work against folks in traditional lending. But the number one reason people are turned down for a small business loan is that pretty much from $5,000, and up, collateral is required 100% collateral. So you could want to borrow a $50,000 micro loan. And that essentially means you need to own a home with some equity in it. How often are you going to have that kind of collateral and in the entire state of Maryland, the people least likely to have collateral were African American and women business owners in Baltimore City. So we built our program around that barrier. around all of the barriers that we learned about, we make loans to entrepreneurs who have reasonable credit, but they don’t have the collateral or the equity or they face other barriers to credit from traditional bank. For example, most people that don’t have collateral, they will use their personal credit cards to start their business and tank their own personal credit, or worse yet, they go online and get a predatory loan from a FinTech lender. We have actually refinanced small business loans where people were paying 52% interest. You never get out from under that. But our challenge was in order to make small business loans and design this program around the barriers, we had to convince our lenders that we were making taking steps to protect their interest. So instead of requiring collateral, we require that all of our small business owners go through a small business training program. It is free. It’s one on one, we provide it It’s one on one. And it’s result oriented. So if you have a lot of expertise in writing a business plan and putting together financials, it may take you a couple of days. Most people take a month or six weeks, and there’s a few people that take up to a year because it’s pretty much at their own pace. So we require small business training, everybody that submits an application has to have a well written business plan. And they have to have financials that make sense and that they understand and can speak to, we don’t have a cut off number for a credit score, we listen to your whole story, and consider everything. I will say right now that we make loans in Baltimore City, and they immediately surrounding counties, so Baltimore City, Baltimore County, and a Rundle County, Carroll County, Howard and Harford when the notice when out for this meeting, we got about 150 phone calls, from all 50 states. So I know a lot of folks out there are really interested in this program. I wish we were national and could help all of you we’ve had a few people even said they were going to move to Baltimore so they could start their own business. And we would love to have you on our program, we have basically two loans and merging loans. It’s a 10 to $50,000. And those are for startups, anyone who is less than two years old, you have to have a good business idea, you have to have reasonable credit. And again, some folks have poor credit, but they’ve got a good reason for it. They had a bankruptcy, or an illness. You know, frankly, illnesses are the number one reason health bills are the number one reason people declare bankruptcy in this country, you have to have reasonable credit or a good story. And we make loans to folks who face barriers to credit, the growth loan goes up to 150,000. And that’s for borrowers who are two to five years old or older. We’ve had many successful businesses. For example, one woman who had a hair salon, she had two chairs, she was turning away more people than she could cut because she had a line down the street. But she only had two chairs. But she could not expand or grow because she didn’t own a home. So she didn’t have the collateral to expand her business, even though she was doing a wonderful job. So those are the folks that we typically help and and you don’t have to be in an underserved neighborhood. But that’s who needs our help. You must be a for profit small business located in our area, you might have to complete our training requirements on your own time. The other things we look at pretty much every one who owns 20% or more of the business has to sign a personal guarantee. So we do look at your personal credit rating and financial statement. You can’t have a bankruptcy that was resolved less than two years ago. If you have an outstanding debt to the IRS, we will not make a loan to you unless you have also a repayment agreement you’ve signed with the IRS. But we put a lot of focus on the owner, their experience, you know what they know about their business, their management team, especially for startups. But don’t even let that discourage you, I we made a loan to someone, for example, who wanted to start a cooking class. And his only experience was he had been a waiter for years. He didn’t know anything about cooking. It’s our initial, our initial reaction was you really need to learn a little bit more about this before you can start your business. So he went out and because he’d been a waiter for so many years, he knew some of the most well known chefs in Baltimore. And he got four of the most well known chefs in Baltimore to agree to be on his advisory board and meet with him every three months, and review his programming. That was enough expertise that he brought to the table that we made him his loan and he started his business, clearly when we look at your ability to repay so if you have another part time job that you’re keeping, that’s a good thing, not a bad thing. And we require that you open to checking a business checking account, we will put you together with a small business banker to get that started. Because our goal is to see you graduate from needing our help to being bankable with a with a traditional bank. Most traditional bank 70% of traditional bank loans are a million dollars and up and our borrowers are looking for it 50,000 And you go to a bank for that even if you have good credit. They’re like likely to just give you a credit card. So we have made loans to people with criminal histories in the past, because we don’t even ask the question. We look at the whole person and the whole story. But we were approached by a nonprofit called Mission launch that Set up a scoring system to enhance credit reporting. Because the number one issue with returning citizens is that they don’t have a good credit score because they haven’t been out making payments. And you know, to get a good credit score, you actually have to borrow money and pay it back. And someone with a criminal history has not necessarily had that kind of time to put in to building up a credit score. So the earth rescore enhances this and gives the loan committee something to sort of hang their hat on, so they feel like they’re making a good credit decision. We have made several loans to people with criminal histories. And I have to say they’ve been stellar borrowers, some of our best borrowers, some have paid off their loan early in their entirety, and others have come back for more because their businesses are just doing so remarkably well. We also like to see the fact that most of the folks with criminal histories hire people with criminal histories. So the benefits are exponential. So that’s basically our story. I’m kind of speed talking, because I know we’re we’re coming up on time now. But at Baltimore community lending, we just don’t look at asset ownership at personal wealth as the only indicator of being a good business person and repaying your loan. We look at your whole story. We believe in Baltimore entrepreneurs. In four years, we have made 98 loans to small businesses in the Baltimore area for about totaling about seven and a half million dollars. And to date, we have not charged off a single lump, every single one of our borrowers is paying and paying on time. So eventually, we hope that the success of our program will convince other lenders that their traditional forms of deciding on credit worthiness are are not necessarily true. And that if you provide the kind of support and training and counseling and mentoring that we provide to everyone, you’re in the end, going to have a lot of really excellent business owners out there. If we have 30 seconds, I will quickly show you one little commercial that we put together. And I think it’ll play on here. Here we go.

Commercial  47:25

Mission at life of Early Learning Center is to basically provide a physically and emotionally sound and safe environment for our children’s to thrive. dcl was very instrumental in allowing even the doors of life prep to open door and COVID.

I started my company in 2017, shortly after my release from prison a follow up community lending, allow me the opportunity to operate and have capital, I have that room and effort to pay my payroll to materials and things of that nature.

 

Crockett 47:58

So that’s, that is my presentation.

I don’t know if we’ll have any time for questions, but feel free to reach out to me, I will put my contact information in the chat. And if you are in our lending area, we would love to talk to you, we’d be happy to talk to you even if you’re not but we could not make you a loan.

 

Lederer  48:18

And the lending area, again is Baltimore City,

 

Crockett  48:21

Baltimore City, Baltimore County, we were in the city only for 33 years in the last year we’ve expanded to the surrounding counties. So it’s Baltimore City, Baltimore County and Arundel County, Carroll County, Harford County and Howard County. If you are it’s kind of the surrounding counties to the city. If you’re a Marylander, you will know where that is.

 

Lederer  48:45

Okay, thank you so much, Bonnie. And now we’re going to have Susan speak from the CFPB.

 

Grutza  48:49

Hi, everybody. So while Chloe helps me out by pulling up the slides, um, we will go over time. So I guess hang on if you can. Um, otherwise, I’m going to talk real fast to try and get through everything and also be respectful of everybody’s time. So as Ali mentioned, my name is Susan Grutza, and I’m a policy counsel on the Office of Fair Lending and Equal Opportunity at the Consumer Financial Protection Bureau, where the CFPB so before we get started, first I have to give a disclaimer. So this presentation is being made by a CFPB representative on behalf of the Bureau. And this presentation does not constitute legal interpretation, guidance or advice of the CFPB any opinions or views I state are my own and may not represent the Bureau’s views. So with that out of the way, I do want to say thank you so much to ally Kaylee and Chloe at NCRC for putting this really important conversation together today. And also thank you to my fellow panelists who have such phenomenal expertise in this area. Thank you for having me. I am so honored and grateful that the CFPB has a seat at this table today. And so for those of you who have partnered with us before, let me say thank you to you all and I hope for continued partnership on this issue as well as our other consumer protection issues. For those of you who aren’t as familiar with us, I would just like to very briefly talk about who we are I saw a lot of diversity in the comments as to where people are coming from. So just to make sure we’re all starting from the same place, we’re a federal agency. Oh, I’m sorry, Chloe, would you mind hitting the slides for me? And we can go to the next one, thank you. And we’re dedicated making sure that people are treated fairly by banks, lenders and other financial institutions were created in the wake of the 2008 financial crisis to help prevent unfair, deceptive and abusive practices. Importantly, the CFPB we have the ability to act. And since our creation, we’ve returned over $14 billion to consumers. So how do we take action, we have a number of tools, regulations, supervision, enforcement to hold the financial institutions accountable. We take consumer complaints, issue research and data. And we also produce materials to arm consumers with information to navigate financial system. So we identified work around individuals who’ve been involved in the justice system and their families as a key priority for us in our annual fair lending report to Congress earlier this year. And today, I just want to take a quick step back and talk a little bit about a report that we had issued that was specific to the experiences of people involved with the criminal justice system, some related enforcement actions, and also some resources for individuals and their families that might help out and also how you all can help us get to know this landscape a little better through consumer complaints in the tell your story function that we have. So Chloe, could you hit the slide for me? Okay, thank you. So, earlier this year, we issued a report and the link is should be on the slide. The bottom line of this report is that many of who who have many people who have repaid their debts to society are trapped in a vicious cycle of debt, consumer debt, as well as criminal justice debt, and they face other systemic challenges that stymie their ability to move on and dive. And, uh, no on the terminology that I’m going to be using, I’m going to be saying justice involved, but you can just as easily say systems impacted people, those having contact with the criminal justice system, those reentering society from incarceration. And as mentioned before, this group is just disproportionately people of color. And we also feel like it’s very important to recognize that families and support systems are greatly impacted by their loved ones incarceration. This is something that Tish was talking about. And it’s just so important to emphasize that these financial burdens tend to fall on these folks as well. And these folks tend to disproportionately be women of color. So our report raised serious questions about transparency, fairness, and the availability of consumer choice in markets that are associated with the justice system, as well as demonstrating the pervasive reach of predatory practices that are targeted at justice involved individuals. So Chloe could hit the slide for me. Thank you. So we identified several key themes that kept recurring in this marketplace. First, that private entities, including for profit companies, are just embedded throughout the system, a small number of entities tend to dominate each product or service area. And in some cases, these entities have monetized and shifted costs for essential goods and services to incarcerated individuals that institutions had historically provided for free to them. Also, people often have little or no choice over which service providers that they use, justice involved, individuals may be left with this impossible choice between paying a private company that has a single source contract with a jail or prison, or just foregoing access to criminal critical goods or services. Now, their theme was that the consequences of failing to pay fines and fees can be severe, forcing another impossible choice and making a payment you can afford and a severe consequence that you don’t want to have to pay, including arrest, prosecution, detention or re incarceration depending on the depth. And lastly, as has been said, here today, and I will say again, just as evolvement creates significant barriers to access within the broader marketplace upon reentry, these things don’t happen in a vacuum. These effects go beyond finances to impact personal lives and legal issues. And these impacts fall disproportionately on people of color. By please. Thank you. So, um, we get into a lot more detail in the report and I’m not going to go through this entirely. Please read our report if you’re interested. But what we did is we outline his challenges at each stage of the criminal justice system, pretrial during incarceration and upon reentry. We also spoke about criminal justice debt. Something I do want to just highlight is it’s expensive to be incarcerated. And people in jail in prison often incur a variety of costs and their families have little choice over which money transfer service they use to receive money. And people who are incarcerated have limited ability to manage their own finances, and that can result in a variety of consequences. For instance, the inability to maintain a healthy credit score or even attempt to sit stay on track with your bills your finances upon reentry. People have difficulties resolving errors and criminal background checks that are used for employment and housing, affordable banking credit products can be more expensive or out of reach. And as Margaret and Tisha spoken to having a criminal history may also limit access to small business loans and capital for those who are interested in entrepreneurship. And the one thing I will mention about criminal justice debt is we noted that in some states, third party debt collectors are increasingly getting involved in the collection of criminal justice debt as well. So the CFPB has taken action against bad actors preying and profiteering on these folks and their families. So I please. And I just like to briefly mention two of them. So first, is an action pending against a company called libre by Nexus. And this is where we accused and state a few states joining us accused libre of luring non English speaking immigrants into abusive English only contracts. So it’s alleged that libre preys on immigrants, primarily Hispanics, who speak little or no English and are being held in federal detention centers, as I’m sure you can imagine, desperate to return to their families. And then another action is a recent settlement against the company JP. And in that action, they were charging consumers, too. I just saw that in the chat, I am happy to share links to everything today. To the report at all. They were charging consumers fees to access their own money on prepaid debit cards that they were forced to use. Additionally, we found that we evaluated the Electronic Fund Transfer Act for requiring consumers to sign up for a JP credit card, excuse me debit card as a condition for receiving government benefits. So the bureau required JP to stop charging fees on these debit release cards with the exception of like a reasonable act, inactivity fee, pay $4 million to compensate consumers and pay 2 million in a civil penalty slide please. So this is the part where I’m going to tell you all about our resources, and encourage you to poke around our website, look at the links that we provide. Because we do have a few things out there for justice involved folks and their families, one being the reentry guide. So these are materials that we’ve designed for incarcerated individuals. As we understand it has been used extensively by re entry organizations across the country. It’s part of a series known as the Your Money, Your Goals, which is helpful across a range of topics. And this is a companion guide that is specific to the experience of justice involved individuals. So for example, it includes tips on what somebody can do to prepare their finances, partner incarceration, as well as guides to reentry, by please.

Because I’m from the Office of Fair Lending, I have to tell you about our fair lending resources. So we have some brochures on lending discrimination, and that highlights the protections afforded by the Equal Credit Opportunity Act. So they’re user friendly guides, one for consumers, and one for those who work with consumers. I’m currently available in nine languages free of charge, by please. And no, I don’t expect you to be able to read any of this. It’s just more so a demonstrative of what we have available. We’ve compiled resources for those who are interested in starting a small business available at the link at the top of this slide. We know that people with criminal histories might be more interested in entrepreneurship. So hopefully, there’s some links that they would find helpful in that slide, please. And to close out, um, I just really want to emphasize the importance of consumer complaints to our work. As you counsel your clients. Please know that consumers who have a problem with a financial product or service can submit a complaint to us online or by calling us toll free 855411 CFPB. For more information about consumer complaints, we have a video on the process. If you want to file a complaint that link up there consumer finance gov slash complaint is where you would go. And you’ll see in the report that I spoke about earlier, we included numerous complaints from folks, these complaints are just an invaluable resource to us to get insight into the marketplace, facilitate our supervision and enforcement and consumer products and services as well. We read them signed, please. Lastly, I just want to mention our tell your story portal. So this, we want to know more and hear more generally about positive and negative experiences folks are having out there with different financial products and services, the more we hear the better we can identify trends and try and head off problems. We are particularly interested in hearing stories of entrepreneurs who are trying to get a small business loan, or in the process of getting a small business loan. So if you’re out there working with clients, and they are struggling or succeeding, or have a good story to tell, please, please please direct them to this. And let us know as well. Um, slide and with that, um, for those of you who have stuck around, thank you very much. And I will pass it back to Ali.

 

Lederer  1:01:13

Um, I just want to say thank you so much to all the panelists, we have gone over by 10 minutes. I’m not so sure we’re going to answer any questions. We will be providing this as a video recording to everyone who signed up as well as we will be. It looks like all of our panelists are okay with giving out their slides, they’ll be included with the link to the video recording. And you can be able to email any of the panelists with other questions that you may have. I think everybody for their interest in our time today to come hear us and especially to our great panelists for really highlighting the issues that people with criminal history are facing and trying to, you know, to get over the barriers that are present for them currently in our system. So thank you again to everybody and good day.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

Complete the form to download the full report: