(Extensions of Remarks - January 11, 2016)

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[Extensions of Remarks]
[Pages E29-E30]
From the Congressional Record Online through the Government Publishing Office []



                           HON. MAXINE WATERS

                             of california

                    in the house of representatives

                        Monday, January 11, 2016

       Ms. MAXINE WATERS of California. Mr. Speaker, I would like 
     to submit the following:

              [From the New York Times, December 31, 2015]

                     Debt and the Racial Wealth Gap

                             (By Paul Kiel)

       IF you are black, you're far more likely to see your 
     electricity cut, more likely to be sued over a debt, and more 
     likely to land in jail because of a parking ticket.
       It is not unreasonable to attribute these perils to 
     discrimination. But there's no question that the main reason 
     small financial problems can have such a disproportionate 
     effect on black families is that, for largely historical 
     reasons rooted in racism, they have far smaller financial 
     reserves to fall back on than white families.
       The most recent federal survey in 2013 put the difference 
     in net worth between the typical white and black family at 
     $131,000. That's a big number, but here's an even more 
     troubling statistic: About one-quarter of African-American 
     families had less than $5 in reserve. Low-income whites had 
     about $375.
       Any setback, from a medical emergency to the unexpected 
     loss of hours at work, can be devastating. It means that 
     harsh punishments for the failure to pay small debts harm 
     black families inordinately. Sometimes, the consequence is 
     jail. Other times, electricity is cut, or wages garnished.
       The modern roots of the racial wealth gap can be traced 
     back to the post-World War II housing boom, when federal 
     agencies blocked loans to black Americans, locking them out 
     of the greatest wealth accumulation this country has ever 
     experienced. More recently, the bursting of the housing 
     bubble and subsequent recession slammed minorities. In 2013, 
     the median wealth of white households was 13 times the median 
     wealth of black households, the widest gap since 1989.
       Earlier this year, my colleague Annie Waldman and I took a 
     close look at debt-collection lawsuits in three major 
     American cities. We expected to see a pattern driven by 
     income, with collectors and credit card lenders suing people 
     most often in lower-income areas.
       But income was just half the story. Even accounting for 
     income, the rate of court judgments from these lawsuits was 
     twice as high in mostly black communities as it was in mostly 
     white ones. In some neighborhoods in Newark and St. Louis, we 
     found more than one judgment for every four residents over a 
     five-year period. Many were families who, knocked off their 
     feet by medical bills or job loss or other problems, had 
     simply been unable to recover.
       When debts turn into court judgments, plaintiffs gain the 
     power to collect by cleaning out bank accounts and seizing 
     wages. Federal and state laws generally don't protect anyone 
     but the poorest debtors, and because judgments are valid for 
     a decade or more, the threat of garnishment can linger for 
     years. The paycheck from that new job may suddenly be slashed 
     and savings may disappear.
       Sometimes the consequence of not having the money to pay a 
     bill is immediate: The power goes out. In a 2009 national 
     survey of lower-income households by the federal Energy 
     Information Administration, 9 percent

[[Page E30]]

     of blacks reported having their electricity disconnected in 
     the previous year because they had been unable to pay. For 
     whites, the number was less than 4 percent, according to an 
     analysis of the survey by the National Consumer Law Center.
       And sometimes the consequence of unmanageable debt is to 
     fall further into debt. In a 2013 Federal Reserve survey, 
     about three times as many blacks reported taking out a high-
     interest payday loan in the previous year as did whites at 
     the same income level. Desperate consumers turn to these 
     loans as a way to catch up on bills, but often get tripped up 
     by unaffordable interest payments.
       When combined with discriminatory policing practices, the 
     effect of the asset gap is to magnify the racial disparity. 
     In its report on the Ferguson, Mo., Police Department, the 
     Justice Department found that officers disproportionately 
     stopped and ticketed black citizens. For a ``manner of 
     walking'' violation, it was $302; for ``high grass and 
     weeds,'' $531.
       Blacks accounted for about 67 percent of Ferguson's 
     population and around 85 percent of the municipal court 
     cases. But the numbers were even more lopsided when it came 
     to the harshest consequences. Blacks accounted for 92 percent 
     of the cases where an arrest warrant had been issued to 
     compel payment.
       And this wasn't a problem only in Ferguson. Earlier this 
     year, the American Civil Liberties Union sued DeKalb County, 
     Ga., which includes part of Atlanta, for jailing citizens 
     over unpaid court fines and unpaid fees charged by a for-
     profit company that runs probation services for the 
     government. About 55 percent of DeKalb County's population is 
     black, but the A.C.L.U. found that nearly all probationers 
     jailed for failure to pay those fines and fees were black.
       The racial wealth gap ``creates this cyclical effect,'' 
     said Nusrat Choudhury, an A.C.L.U. attorney. An unpaid 
     speeding ticket may result in a suspended driver's license, 
     which may lead to a more severe violation. Unable to pay 
     their fines, black defendants become more crushingly 
     entangled in debt.
       Cori Winfield, a single mother in St. Louis, got caught up 
     in this cycle.
       After she was unable to keep up the payments on a subprime 
     auto loan she took out in 2009, the car was repossessed the 
     next year, but the consequences didn't stop there. Because 
     the debt continued to be bloated by interest charges, the 
     lender began garnishing her wages in 2012. The garnishment 
     continues today. Because she was unable to repay, she will 
     end up paying far more than she owed in the first place.
       Making matters worse for Ms. Winfield, while her wages were 
     being garnished, she was arrested for driving with a license 
     that had been suspended because she had failed to pay a 
     speeding ticket. She ended up spending a weekend in jail and 
     having to pay the cost of bail.
       Ms. Winfield has a decent clerical job, earning about 
     $30,000 a year. But she lives month to month. When hit with 
     an unexpected expense, she is left reeling.
       Her vulnerability is typical. In a recent survey by the Pew 
     Charitable Trusts, the typical black household earning 
     between $25,000 and $50,000 reported having emergency savings 
     of $400. The typical white household in that range had 
       Black families were much more likely to report difficulty 
     in recovering from a financial setback or to have fallen 
     behind on a bill in the past year. This financial insecurity 
     extended up the income scale. Of black households with income 
     between $50,000 and $85,000, 30 percent said they had been 
     unable to pay a bill. By contrast, only white households with 
     incomes below $25,000 reported similar trouble paying bills; 
     31 percent said they had fallen behind.
       What can be done? The best place to start is by identifying 
     practices that are particularly damaging to black 
     communities, and then fixing them.
       In Missouri, for example, the attorney general recently 
     proposed a series of reforms for debt-collection lawsuits to 
     ensure that the underlying debt was valid and that lawyers' 
     fees were not excessive. Collection-industry trade groups 
     supported the proposal.
       Lawmakers in Missouri and other states could go further and 
     reduce the amount of income subject to garnishment. In most 
     states (New York and New Jersey are exceptions), defendants 
     can lose a quarter of their post-tax income, a big hit for 
     even middle-income families.
       Bank accounts are afforded even less protection, allowing 
     collectors to seize funds without limit. It's a nonsensical 
     system that restricts how much of a worker's paycheck a 
     collector can seize, but allows collectors to take the entire 
     amount once that check is deposited. Setting even a small 
     dollar amount as automatically off limits to collectors would 
     be a substantial improvement.
       Changes like that benefit everyone, but they particularly 
     help black families. Policy makers should pay attention. 
     Making it easier to recover from small setbacks can make a 
     big difference in people's lives.
       Paul Kiel is a consumer finance reporter for ProPublica. 
     This is part of its series on debt collection.