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Debt Burden for Formerly Incarcerated Tops $4 Billion

January 13th, 2021

Hope Policy Institute calls for changes in public, private sectors to facilitate successful re-entry
January 13, 2021

JACKSON, MS – Debts associated with the criminal justice system in the Deep South topped $4 billion dollars in 2019 – twice the amount held by people who were formerly incarcerated just ten years earlier. In its newly released paper, Examining the Intersection Between Criminal Justice and Financial Services in the Deep South, analysis conducted by the Hope Policy Institute (HPI) concluded outstanding debts for people exiting the criminal justice system stood directly in opposition to economic opportunity and served as a barrier to successful re-entry.

Through interviews with associates at Hope Credit Union and people who were formerly incarcerated, the Hope Policy Institute found:

  • A lack of identification restricted the ability of people who were formerly incarcerated to establish a relationship with a financial institution;
  • The absence of a relationship with a financial institution put people who were formerly incarcerated at risk of relying on high cost loans and limited one’s ability to build credit;
  • Limited opportunities to build credit contributed to difficulty securing employment.

As formerly incarcerated people struggled to find solid ground after their release, they were met with diminished opportunities for economic advancement while working to manage the mounting costs imposed by the justice system. In the face of these challenges, families, nonprofit re-entry programs and community development financial institutions provided critical supports to prevent re-incarceration.

Calandra Davis, Policy Analyst, Hope Policy Institute, called on lawmakers and the financial service industry to change the policies and practices associated with the issues identified in the paper. “It is imperative that policy makers prioritize the easing of debt collection practices and prevent the accumulation of debt during incarceration – the costs of which are disproportionately borne by people with low-incomes” said Davis. “Upon re-entry, access to financial services is critical for placing people on a path towards economic security and opportunity.”

Several recommendations were referenced as avenues to change conditions in the Deep South states where incarceration rates are among the highest in the country:

  • Waiving of fees and fines imposed on individuals involved in the justice system;
  • Opening of federal Small Business Administration loan programs to people who were formerly incarcerated;
  • Adoption of municipal identification programs;
  • Use of non-traditional credit in loan underwriting at banks and credit unions;
  • Accepting of prison identification to open depository accounts at financial institutions.

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