Predatory finance and the legal system

Predatory financial practices are embedded in the criminal justice system, according to a report by the Consumer Financial Protection Bureau (CFRB).

From the dominance of for-profit corporations that overcharge incarcerated people for essential goods, to escalating fines and court costs, financial abuse is exacerbating the already precarious situation of the vast majority of Americans who are involved in justice, the report says.

The report released this week represents the first-ever effort by the CFRB, created as an independent federal agency in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act, to examine financial practices related to judicial system.

The agency’s mandate includes monitoring and enforcing consumer protection laws and investigating “abusive financial practices.”

The authors argue that predatory monetary practices manifest themselves at every stage of the criminal justice process—pretrial, during incarceration, and upon reincarceration—and have far-reaching consequences for those involved in justice.

“The implications go beyond finances to affect people’s personal lives and can impact the legal issues they face,” they write.

“Failure to pay court fees while on bail, for example, can result not only in additional interest or financial penalties, but also in jail. In turn, incarceration could lead to job loss, housing instability, or other personal consequences.

Predatory practices begin during pre-harvest. Immediately after an arrest, those involved in the justice system often find themselves forced to accept any bond agreement to secure their release, including those with disadvantageous terms.

Moreover, private bond agents can “collect aggressively,” the authors write, locking people into financially disastrous deals. Often wielding quasi-governmental powers, bail officers in some states are authorized to arrest their clients “for any reason — or not at all.”

The real cost of incarceration

Financial difficulties only worsen during incarceration. In recent years, governments have shifted the cost of incarceration onto the incarcerated themselves, forcing them to pay for hygiene items, food, and access to telephones and email.

As a result, incarcerated people often depend on friends and family to supplement the meager wages they earn from prison jobs. Yet families are often unable to choose which money transfer service they use to deposit money into prison accounts, forcing them to choose services that incur high fees.

Incarceration itself often functions as a financial vacuum, the report says. In other words, incarcerated people generally lack the ability to manage their finances while incarcerated, leading to increased debt, deteriorating credit ratings, and reduced access to credit.

Upon release, the negative effects of incarceration on a person’s consumer relationships may manifest as an inability to find housing, find employment, or access reintegration credit. In fact, the average credit score of ex-prisoners is 50 points lower than that of non-prisoners.

“Difficulties managing debt, lack of credit history, and difficulties monitoring credit reports while in jail or jail can all negatively affect the credit scores of an individual involved in the justice system,” the authors write.

“A lower credit score or insufficient credit reports after prolonged imprisonment can make it difficult, if not impossible, for people to get back into finance upon release.”

Predatory practices also characterize reintegration, causing financial problems for ex-prisoners long after their sentences are over.

On the one hand, the prepaid debit cards people receive upon release, which hold money they had when they were arrested and their police account balance, can impose high fees both for usage and inactivity.

“The fees on these cards may be higher than the fees assessed on those offered to the general market,” the authors write.

Credit checks and banking

Beyond access to this money, formerly incarcerated people often struggle to access affordable banking services, as account opening requirements – passing credit checks – are hampered while incarcerated. Criminal record restrictions that limit access to small business loans make economic progress particularly difficult.

According to the authors, the factors that hinder financial stability before trial, during incarceration and upon reincarceration are integrated into the criminal justice system.

“The legal system often forces people to use a prescribed set of products and services. Even when people have a choice of which product or service to use, the stress that comes from involvement with the legal system can limit their ability to seek alternatives,” they write.

“Even then, the alternatives available may not be meaningful. Financial impacts can linger long after a person has left the justice system, and any criminal record, even an arrest record, can become a barrier to accessing housing, employment, and other necessities. for stability and successful reintegration.

The full report can be accessed here.

Eva Herscowitz is a contributing writer for TCR.