The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform

Every day, someone’s child, best friend, neighbor, beloved relative, or sole caretaker is being sentenced to a prison term to hold them accountable for breaking the law. Upon release from prison, they are expected to contribute to society and resume providing the necessary emotional and financial support for their children, family, loved ones, and friends.

This outcome, however, assumes that people who complete their given sentence have paid their debt to society and will no longer be punished for their mistake. Several studies have proven that assumption wrong.

The fact is that, even after an individual has paid their debt to society, society, without the authority granted by a gavel, functionally imposes a life sentence of economic hardship on those who have been incarcerated.

This phenomenon is statistically borne out by a report recently released by Pew Charitable Trusts. The report shows that individuals who have been incarcerated are significantly more likely to be unemployed, underemployed, and underpaid than they were prior to their incarceration (termed ”collateral costs”).

If society is responsible for imposing the life sentence of economic hardship, then employers are the ones who dutifully ensure that individuals who have been incarcerated serve out their sentence. Studies conclusively show that individuals with criminal records are far more likely to be subject to systemic employment discrimination. A study performed by the National Institute of Justice (NIJ) found that 65% of employers surveyed refuse to hire individuals with criminal records--regardless of the offense on the individual’s record. That percentage is extraordinarily significant given that a survey conducted by the Society for Human Resource Management  found that only 7% of employers do not conduct criminal background checks for any of their applicants. These practices have a direct impact on the likelihood that an individual who has been incarcerated will be able to get any job at all. In fact, another NIJ study  found that, as many as 60% of individuals who were incarcerated are not able to find any job, at any point, a full year after their release.

Even when persons who have been incarcerated are able to find jobs, they are significantly more likely to be underemployed and underpaid than they were before their incarceration. As a result, people who have been incarcerated earn 40% less per year than they would have earned prior to their incarceration, according to the Pew Report.

The Pew Report also revealed that people who have been incarcerated are permitted to work an average of 9 fewer weeks (more than two months fewer) than people who have not been incarcerated.   Even though they are employed, they are less likely to have the stability, respect of their loved ones and peers, and peace of mind that comes with continuous employment. They are also less likely to be in a position to move up the ladder at a given job and earn more money to improve their situation.

Moreover, even when people who have been incarcerated are working, they get paid less for the same jobs than they would have received prior to their conviction. The Pew Report found that they earn 11% less per hour.

Given these statistics, it is clear that individuals who have been incarcerated are systematically forced to endure economic hardship. The Pew Report precisely quantifies the extent of that economic hardship by considering how the collateral costs (systematically being underpaid, unemployed and underemployed) impaired the economic mobility of an individual who had been incarcerated in 1986 versus the affect the collateral costs had on that same group 2006.

In 1986, a person in the bottom fifth of the income distribution was making less than $7,800 per year. The vast majority of the formerly incarcerated men making less than $7,800 in 1986 were still in the bottom fifth of the income distribution 20 years later (67%). The study determined that people who had been incarcerated and were in the bottom fifth of the income distribution in 1986 only had a 2% chance of moving into the top fifth of income distribution 20 years later. Therefore, it is clearly more difficult for people who have been incarcerated to “pull themselves up by their bootstraps” than it is for individuals who have not been incarcerated.

Significantly, the Report also finds that these collateral costs adversely affect not only the financial and social prospects of the individuals who were incarcerated, but they also profoundly impact the likelihood that the individual will pay any restitution owed victims and the financial and social prospects of the individual with the criminal record’s children and family. Numerous studies show that children whose parents either are or were incarcerated are more likely to suffer from physical or verbal abuse, get suspended or expelled from school, drop out of school, or become pregnant as a minor. With few educational and financial prospects, these children are more likely to become incarcerated themselves--thereby perpetuating the cycle. Consequently, these collateral costs cripple not only the individual with the criminal record, they too often end up crippling entire families for generations.

These collateral costs, perpetuated by societal stigma which is often manifested in systematic employment discrimination, unnecessarily put our friends, children, families, relatives and neighbors at risk of being victimized, resorting to criminal activity, or being mired in the lowest economic wrung for generations. Given that unacceptable risk, more must be done to address this issue.

• Print
• Comments
• Trackbacks
• Share Link

As if debt collectors preying on desperate consumers’ fears and financial troubles were not enough, debt collection companies have begun to actually take the law into their own hands. 

Unicredit, a debt collection company in Erie, Pennsylvania, used fake court proceedings to deceive, mislead or frighten consumers into making payments or surrendering valuables without following the lawful procedures for debt collection. Although there have been cases in which debt collectors threatened arrests if debtors fail to pay their debt, this might be the first time a debt collection company has been accused of setting up a phony court.

First, Unicredit filed legal judgments against debtors in improper venues. Although Pennsylvania rules require judgments to be filed in the debtor’s district court or where the debt was incurred, Unicredit filed many of its cases at District Judge DiPaolo’s Office, located in the same office complex as Unicredit.

Next, according to Pennsylvania’s Attorney General, consumers received letters that were often hand-delivered by individuals dressed like sheriff deputies, implying that consumers would be taken into custody if they failed to appear at the fake court. Specifically, these subpoenas summoned consumers to an office in Erie, which included a room referred by Unicredit employees as “the courtroom.” 

The “court room” was located at the Unicredit “Debt Resolution Center.” This space was equipped with furniture and decorations similar to those used in actual court offices, including “a raised bench area where a judge would be seated; two tables and chairs in front of the ‘bench’ for attorneys and defendants; a simulated witness stand; seating for spectators; and legal books on bookshelves.” It is reported that during some proceedings, an individual dressed in black was seated where one would expect to see a judge. These bogus court proceedings were used to intimidate consumers into providing their bank account information and giving up vehicle titles and other assets.

The Pennsylvania Attorney General’s Office spokesman said that 370 affected consumers have been identified in Erie County Court records thus far. Two lawyers are believed to have been involved in these fraudulent, misleading practices. Erie County Chief Deputy Sheriff Jon Habursky told AOL News that Unicredit seems to have targeted the elderly and the sickly.

In October, the Attorney General’s Bureau of Consumer Protection filed a lawsuit against Unicredit America, Inc., and a petition for special and preliminary injunction, asking the court to prohibit the company from engaging in any debt collection and immediately stop all fake hearings or depositions.

At the first hearing, Unicredit agreed to put an end the tactics at the center of the government’s complaint and to stop sending letters threatening consumers with arrest. Judge Michael E. Dunlavey also ordered the mock courtroom to be torn down within 30 days. At the second hearing the judge ordered the entire Unicredit operation closed in order to reinforce the actions of the Attorney General’s office.

As discussed in a previous blog, Illinois recently passed the Debt Settlement Consumer Protection Act (Public Act 96-1420). The new law requires a written contract that clearly indicates the terms of the debt settlement agreement and that must be signed by both the service provider and the customer. The Illinois Department of Financial and Professional Regulation has accepted public comments on proposed rules implementing the law and is expected to announce the final rule within the next few months. This law will help protect Illinois residents as they consider whether or not to utilize a debt settlement company and does not include any new protections for consumers regarding debt collection practices. Given, however, the new debt collectors’ new schemes, it may be time to consider more regulation in this area as well.

This article was coauthored by Ji Won Kim.

• Print
• Comments
• Trackbacks
• Share Link

Some people are spinning hard about the outcome of the recent mid-term elections. They are trying to say that the changes in Congress were a “mandate” to repeal health care reform. As usual, most of those spinners have little to say about how to resolve health care issues--for them health care is an ideological or political issue, not an issue of importance in everyday lives. It is a tactical issue in the beltway game, a ploy in the never-ending struggle for power and for special interest money.

But out here, when the issue is reduced to kitchen-table reality, people don’t think ideologically or politically. They think about their own health care, their families’ health care, and their own financial circumstances. 

Here are some numbers about health coverage and the election. 

Even on the ideological level on which they choose to operate, the spinners are wrong. The election result was driven by concern about the economy and jobs, not health care. According to a CNN exit poll, only 19% of voters named health care reform as their top concern--a distant second to the 61% of voters most concerned with the economy.

On the big abstract ideological question about support for the health reform law, the voters split down the middle: 48% say they support repeal and 47% say they want the reform law to stay the same or be expanded. Some mandate. 

Polls consistently confirm that, when the public hears truthful facts (as opposed to the other kind of “facts”) about the health reform law, they want the benefits and support health reform. The specifics of health care reform already help people in ways that matter deeply to them. Undoing health care reform would mean:

• People would continue to be denied coverage or charged more for it due to pre-existing conditions.
• People diagnosed with the particular pre-existing condition of being female would continue to be discriminated against in the cost of their coverage. The spinners would continue that outrageous discrimination. 
• People would continue to have coverage dropped when they get sick.
• People would continue to have lifetime caps on their insurance coverage.
• Small businesses would continue to have to pay higher rates for health insurance than big corporations.
• There will be no smart investment in prevention as the focus of our healthcare system--clearly the way to get both lower cost and better patient outcomes.
• People would lose the comfort of knowing that, no matter what happens to their job, their health, or their family, there will always be access to affordable, decent coverage.  
• Entrepreneurs would continue to experience the drag on their creativity and chances for success caused by the health coverage problems. And health coverage issues would continue to prevent would-be entrepreneurs from even getting started, stuck in their current jobs in order to retain insurance.

The post-election spinners stay far away from these real problems. The new law leaves the private insurance sector in place (a single-payer system would have ended it), but imposes fair boundaries on it. The spinners, scrupulously avoiding anything specific about how to address health coverage issues, instead simply call the new law names: “takeover,” “socialism.” But calling something a name is not the same as talking about it honestly--indeed, it’s a time-honored way to stifle full discussion. The health reform law is in fact a very promising public-private effort to address a problem that plagues American households everywhere. The spinners are wrong about the importance to real people of health care reform. When the focus is on the actual health coverage problems that plague American households, most Americans want their federal and state officials to get on with implementation--and do a good job of it.

• Print
• Comments (3)
• Trackbacks
• Share Link

On October 6^th the Office of Thrift Supervision (OTS) issued a supervisory directive to Iowa-based MetaBank Financial stating that because the bank was guilty of engaging in unfair and deceptive practices it will be required to obtain written approval to enter into any new third-party relationship agreements.

Last tax season, MetaBank began issuing refund anticipation loans (RALs) for Jackson Hewitt. RALs are short-term, high-interest-rate bank loans sold through tax preparation sites like Jackson Hewitt that are heavily marketed and sold in low-income communities. RALs provide taxpayers an immediate advance on their anticipated tax refund, however, they have interest rates ranging from 50% for a $10,000 RAL to 500% for a $300 RAL. As discussed in previous blogs, these loans are particularly toxic since they are targeted to low-income and minority communities.

Under the OTS directive, MetaBank will need prior written approval to:

• Enter into any new third party relationship agreements for any credit product, deposit product (including prepaid access), or automatic teller machine or to materially amend any existing agreements or publicly announce any new third party relationship agreements;
• Originate, directly or through a third party, income tax refund anticipation loans or other loans where the expected source of repayment is a tax refund; and
• Offer an income tax refund transfer processing service directly or through any third party during the 2011 tax season.

This action is the latest in a series of regulatory agencies’ actions against RALs. In 2008, the Internal Revenue Service (IRS) and the U.S. Treasury Department issued an advance notice of proposed rulemaking regarding the marketing of RALs. Although no final rules were issued at that time, in January of this year the IRS announced it was creating a Task Force to study RALs.  

In February the Office of the Comptroller of the Currency (OCC) issued new guidance on the delivery of RALs. In addition to this new guidance, both the OCC and the Federal Deposit Insurance Corporation have recently issued cease and desist orders to a few banks funding RALs. Finally, in August, the IRS announced that it would no longer provide tax preparers and associated financial institutions with the “debt indicator,” which is used to underwrite RALs. As the IRS correctly noted, “refund anticipation loans are often targeted at lower-income taxpayers ... [but] with e-file and direct deposit, these taxpayers now have other ways to quickly access their cash.” 

This recent IRS decision may be one reason why some banks are refusing to fund RALs despite the fact that they have existing contracts to fund them. In October H&R Block filed suit against HSBC for breach of contract after HSBC stopped funding H&R Block’s RAL product. HSBC cited the IRS decision to eliminate the debt indicator as the purported reason for breaching the contract. If HSBC wins, then other banks may follow suit and withdraw from the market using the IRS’ decision as justification.

The Shriver Center applauds the OTS for its action; however, while RALs still remain in the marketplace, we concur with consumer advocates calling for supervised banks to underwrite RALs based on the borrower’s ability to repay the loan taking into consideration their income, assets, and debt-to-income ratio. Actions such as these by the FDIC, OTS, OCC and the IRS signify that regulators are attuned to the dangers of RALs and are moving closer to banning the product entirely. We can hardly wait for that day.

• Print
• Comments (2)
• Trackbacks
• Share Link

Wondering about the level of honest discourse to expect from leaders of the new Republican majority in the U.S. House of Representatives?  Their first salvo does not bode well.  

House Republicans announced earlier this week that they are targeting the Temporary Assistance for Needy Families emergency contingency fund (TANF ECF) for elimination.  

Representative Tom Price (R-Ga.), chairman of the House Republican Study Committee, explained that the program encourages states to increase their welfare caseloads “without requiring able-bodied individuals to work, get job training, or make other efforts to move off of taxpayer assistance.”  

Price claimed that eliminating the program would save $25 billion over ten years.   

Now the facts:

1. The TANF ECF primarily funded jobs for the recently unemployed. For example, Illinois used over 90 percent of its TANF ECF allotment to provide 25,000 jobs through the Put Illinois to Work program.      
   
   
2. TANF recipients who did not participate in the Put Illinois to Work program still were subject to the TANF program’s work requirements, instituted as part of welfare reform 14 years ago. Representative Price was in office when the Bush Administration made TANF work requirements even more stringent in 2006.
   
   
3. The $25 billion in savings claimed by the Republicans assumes that the program would be funded at the level of $2.5 billion for the next ten years. But the program expired on September 30th, so “eliminating” it would produce no savings at all. 
   
   
4. Furthermore, the longest extension considered before the program expired would have been for one year, not ten.

The bottom line: make-believe cuts to a program that has been wholly mischaracterized and no longer exists.   

• Print
• Comments
• Trackbacks
• Share Link

Unlike many industrialized countries, the United States does not require employers to provide their workers with any paid sick days. As a result, American workers are often forced to go to work when they or their children are sick, putting themselves, their families, their co-workers, and the general public in harm’s way. This problem is particularly severe among low-income workers, who are less likely to have paid vacation or personal leave that they can use when they are sick. 

After San Francisco passed its paid sick leave ordinance in early 2007, paid sick leave advocates hoped that other states and localities would quickly enact paid sick leave policies of their own. While Washington D.C. now has a paid sick leave law, and California, New Jersey, and Washington have laws requiring employers to provide paid family leave, most communities’ efforts to achieve paid sick leave for their workers continue to encounter obstacles.

In 2008, a California bill that would have provided workers with paid sick leave died in committee after being approved by the state assembly. Earlier this month, New York City Council Speaker Christine Quinn refused to call a vote on the proposed New York City paid sick leave bill despite the support of a supermajority in the New York City Council. The New York City bill would have required employers to provide workers with at least five sick days a year to take care of their own illnesses or the illnesses of family members. The bill would not have applied to workers who already had a week or more of paid leave. Quinn said that she could not allow the bill to pass because it “threaten[ed] the survival of small business owners.”

More recently, paid sick leave supporters in Wisconsin are holding their breath as they wait for a final decision on Milwaukee’s paid sick leave ordinance. 9to5 Milwaukee led a coalition of organizations that fought to get a paid sick leave proposal on the ballot in 2008. Milwaukee voters approved the ballot initiative by an overwhelming 70 percent. The resulting ordinance requires employers to provide employees with at least one hour of paid sick leave for every 30 hours worked by an employee, among other requirements.

The ordinance was challenged in state court by the Metropolitan Milwaukee Chamber of Commerce. Legal wrangling continued through October 2010, when the Wisconsin Supreme Court refused to issue a final decision in the case and ordered an intermediate appellate court to decide the matter—even though the appellate court had previously ruled that only Wisconsin’s highest court could decide the issue.

Notably, the trial court's reasoning for striking the ordinance down was not straightforward disapproval of paid sick leave, but based on an issue of constitutional law and statutory interpretation. The text of the Milwaukee ordinance provides that an employee can use sick leave not only for his or her illness or the illness of a family member, but also to address issues related to “domestic violence, sexual abuse, or stalking.” The full text of the proposed ordinance was published in polling places and newspapers, as required by Wisconsin statute. Notably, however, the domestic violence-related language was not included on the actual ballot. It was the absence of that language on the 2008 ballot that formed the basis of the trial court’s original ruling. Specifically, the trial court held that the ballot question was unconstitutional because it did not provide voters with sufficient information about the ordinance. The trial court also held that the sections of the ordinance relating to domestic violence were outside the scope of Milwaukee’s police powers. 

The Shriver Center has been at the forefront of efforts to enact paid sick leave policies at both the state and national level. In Illinois, the Shriver Center has joined with Women Employed and other organizations to advocate for paid sick leave policies. On a national level, the Shriver Center is a member of Family Values at Work, a coalition of leaders advocating for paid sick leave and other family-friendly employment policies. Last April, Wendy Pollack, Director of the Shriver Center’s Women’s Law and Policy Project, joined the Family Values at Work coalition in Washington, D.C. to lobby for the Healthy Families Act, proposed federal legislation that would give workers up to seven paid sick days a year for themselves or to care for sick family members.   

As Wendy wrote in her November-December 2008 Clearinghouse Review article, What's a Mother to Do? Women, Low-Wage Employment, and Leave Policies, “the lack of adequate sick pay puts workers in an untenable position if they get sick or need to take care of a sick child or elderly parents—stay at work when you should not or lose a day of pay, and possibly even your job, if you stay home.” Regardless of the eventual outcome in Wisconsin, the Shriver Center will continue to work with its state and national partners to ensure that American workers will one day have the paid sick leave that they need and deserve. 

• Print
• Comments
• Trackbacks
• Share Link