Making Justice Real

The Official Blog of the Legal Aid Society of the District of Columbia

Debt Collection’s Disproportionate Impact on Black Communities

Yesterday, ProPublica published a groundbreaking story about the disparate impact that debt collection practices have on urban black communities. Entitled, “The Color of Debt: How Collection Suits Squeeze Black Neighborhoods,” the piece follows an investigation of debt collection lawsuits in three metropolitan areas—St. Louis, Chicago and Newark—finding that, between 2008 and 2012, the rate of court judgments in these cases was twice as high in predominately black neighborhoods as in predominately white ones. In Jennings, Missouri, for example, a suburb of St. Louis that is almost 90 percent black, nearly one-third of the residents had been sued to collect a debt—including the mayor and five of the eight sitting city council members.

Why was the disparity so great? The article concludes that “generations of discrimination have left black families with grossly fewer resources to draw on when they come under financial pressure.”

The debts that are the subject of collection cases may stem from unpaid utility bills, high-interest auto loans, or credit card bills, among other things. The defendants quoted in the ProPublica investigation, like many of those served by Legal Aid’s Consumer Law Unit, fell behind on their bills due to a job loss, a disability, a divorce, or other unforeseen life event that left them struggling to afford basic necessities. What happens next is a lawsuit. Because most people sued in debt collection cases don’t appear in court (and those who do rarely have counsel), they cannot assert the potential defenses they may have had, such as the statute of limitations or identity theft. Creditors then obtain easy judgments and garnish wages and attach bank accounts to collect the debt.

For some defendants, such as those sued for high-interest auto loans after repossession, the result can be especially catastrophic. ProPublica describes the experience of one Jennings resident who has already paid more than twice what she owed when her car was repossessed, whose wages have been garnished for over three years, and whose debt continues to grow at an annual interest rate of 30 percent.

As the “The Color of Debt” illustrates, black communities are affected by factors that are less pronounced in other communities: lower household incomes, less familial support, and a lack of resources—what is described as a “generational hole.” These circumstances, the higher incidence of debt collection suits in predominately black neighborhoods, and the fact that debtors have the burden of raising any exemptions to garnishments, make the repercussions of debt collection all the more detrimental to this community.

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