by Frank Knaack, Executive Director
The staggering racial disparities in Alabama’s criminal justice system mean people of color are more likely to incur criminal justice debt and face counterproductive hurdles to reentry. People of color are also far more likely to encounter predatory lenders, whose loan products can legally reach 456% APR. Together, these systems help drive Alabama’s racial wealth divide.
With support from the Annie E. Casey Foundation, Alabama Appleseed has launched a collaborative project with Greater Birmingham Ministries, Legal Services Alabama, and the University of Alabama at Birmingham’s Treatment Alternatives for Safer Communities (TASC) to:
- Document how court-imposed debt and collateral consequences push individuals to seek high interest loans from payday and title loan lenders.
- Reduce the burden of these debts by educating Alabamians about alternative loan products that would minimize debt burdens.
- Develop and execute a long-range plan to remedy these three drivers of Alabama’s racial wealth divide.
How will we do this?
Focusing on people of color in Birmingham, Dothan, Huntsville, Mobile, Montgomery, Tuscaloosa, Lowndes County, Bessemer, and Tarrant, we will:
- Survey Alabamians impacted by court-imposed debt and/or collateral consequences to understand their role in pushing people to predatory lenders.
- Seek insight from individuals who know this system, including social workers, law enforcement, indigent defense and civil legal aid attorneys, bank and credit union workers, predatory lenders, academics, social service providers, state and local government workers, and faith and community leaders.
- Partner with credit unions and other non-predatory loan providers to host public educational forums about reasonable alternative loan products.
- Develop a broad, ideologically diverse coalition of advocates to address these drivers of Alabama’s racial wealth divide.
Here’s what we know so far:
Court fees are no longer just about funding the operations of the judiciary – they have become funding stream for basic government services. Of the over $165 million in fees collected by Alabama’s courts in 2011, more than 40 percent went to supplement government budgets outside of the judiciary, including county general funds, employee pay raises, and museums. And, fees collected by Alabama’s criminal courts made up over 66% of the total collected. These fees further ensnare low-income people of color in a hard-to-escape cycles of debt.
Alabama continues to erect counterproductive barriers in front of former offenders returning to their communities, such as arbitrary limitations on employment and housing – two key factors to reducing recidivism. According to The Council of State Governments, Alabama maintains 842 collateral consequences to a criminal conviction.
In addition to those statutorily created hurdles, because of the criminal history checkbox on many employers’ initial employment applications, individuals with criminal records often have their job application tossed out before they ever have an opportunity to present their qualifications or rehabilitation.
Alabama has more predatory lenders than McDonalds restaurants. In 2015, 246,824 unique Alabama borrowers took out more than two million payday loans. The average predatory loan rate is 300% APR and can legally reach 456% APR. Despite being sold to lawmakers as a way for individuals to obtain emergency credit, the average borrower took out eight loans in 2015. In reality, these predatory loan products are used to pay for basic needs and, as a 2014 survey conducted by TASC found, to cover court costs, fines, and fees.
By reducing criminal fees, removing unnecessary hurdles to reentry, and reining in predatory lenders, this project will help remove three drivers of household debt in Alabama’s communities of color.