An analysis of five years’ worth of court judgements in three metropolitan areas — St. Louis, Chicago and Newark — showed that the rate of debt collection lawsuits was twice as high in mostly black neighborhoods as it was in mostly white ones.
These findings could suggest racial bias by lenders or collectors, but another explanation is also possible: Generations of discrimination have left black families with grossly fewer resources to draw on when they come under financial pressure.
Over the last few years, there has been a pervasive shift in the way debt is collected in the U.S. Companies now routinely use the courts to pursue million of people over even small consumer debts. Court judgements grant collectors power to seize a debtor’s wages. The highest rates of garnishment are among workers who earn between $25,000 and $40,00, but the numbers are nearly as high for those who earn even less.
In the city of St. Louis and surrounding St. Louis County, only about a quarter of the population lives in neighborhoods where most residents are black. However, more than half of court judgments were concentrated in these neighborhoods.
Armed with these judgments, plaintiffs — typically debt buyers, banks, hospitals, utilities, and auto and high-cost lenders — have seized at least $34 million from residents of mostly black neighborhoods in St. Louis and St. Louis County through suits filed between 2008 and 2012, the analysis found.
April Kuehnhoff, an attorney at the National Consumer Law Center, said the analysis raised “crucial questions about how racial disparities are entering the debt collection system and what we can do to eliminate these disparities.” The findings, she said, should spur lawmakers to reform overly punitive federal and state collections laws.