On a recent Saturday afternoon, the mayor of Jennings, a St. Louis suburb of about 15,000, settled in before a computer in the empty city council chambers. Yolonda Fountain Henderson, 50, was elected last spring as the city’s first black mayor.
On the screen was a list of every debt collection lawsuit against a resident of her city, at least 4,500 in just five years. Henderson asked to see her own street. On her block of 16 modest ranch-style homes, lawsuits had been filed against the occupants of eight. “That’s my neighbor across the street,” she said, pointing to one line on the screen.
And then she saw her own suit. Henderson, a single mother, fell behind on her sewer bill after losing her job a few years ago, and the utility successfully sued her. That judgment was listed, as well as how one day the company seized $382 from her credit union account – all she had, but not enough to pay off the debt.
As the lines of suits scrolled by on the screen, Henderson shook her head in disbelief. “They’re just suing all of us,” she said.
The story is the same down the road in Normandy and in every other black community nearby. In fact, when ProPublica attempted to measure, for the first time, the prevalence of judgments stemming from these suits, a clear pattern emerged: they were massed in black neighborhoods.
The disparity was not merely because black families earn less than white families. Our analysis of five years of court judgments from three metropolitan areas – St. Louis, Chicago and Newark – showed that even accounting for income, the rate of judgments 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 we found that there is another explanation: That generations of discrimination have left black families with grossly fewer resources to draw on when they come under financial pressure.
Over the past year, ProPublica has investigated a little-known but pervasive shift in the way debt is collected in America: Companies now routinely use the courts to pursue millions of people over even small consumer debts. With the power granted by a court judgment, collectors can seize a chunk of a debtor’s pay.
Armed with these judgments, plaintiffs – typically debt buyers, banks, hospitals, utilities, and auto and high-cost lenders – seized at least $34 million from residents of St. Louis’ mostly black neighborhoods through suits filed between 2008 and 2012, ProPublica’s analysis found.
April Kuehnhoff, an attorney at the National Consumer Law Center, said that 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.
Collection suits – typically over smaller amounts like credit card debt – fly across the desks of local judges, sometimes hundreds in a single day. Defendants usually don’t make it to court, and when they do, rarely have an attorney. In Missouri, most judgments resulted in the plaintiff attempting garnishment, whether the defendant appeared in court or not, according to ProPublica’s analysis.
In Jennings, which since the 1960s has shifted from almost entirely white to 90 percent black, the suits are unrelentingly common. Between 2008 and 2012, there was more than one lawsuit for every four residents.
The typical household income in Jennings is about $28,000, an income level at which families spend, on average, all of their income on basic necessities, federal survey data shows. A garnishment hits this kind of household budget like a bomb. Federal law and most state laws protect only the poorest of the poor from having their wages seized, otherwise allowing plaintiffs to seize up to a quarter of a worker’s after-tax pay. If that paycheck is deposited in a bank, that and other money in the account can be seized to pay down the debt.
The Rev. Starsky Wilson is co-chair of the Ferguson Commission, a panel created by Missouri’s governor to study the underlying social and economic conditions behind the unrest. Lack of economic mobility is a key issue, he said. Improvements in education, job training and wages can push people up the ladder. But equally important, he said, are the forces that drag them down.
“If you’re still stuck in this web of indebtedness, you’re not going to be economically mobile,” he said.
Experts cite many reasons why blacks might face more lawsuits, foremost among them the immense gap in wealth between blacks and whites in the U.S. It’s a gap that extends back to the institution of slavery and, more recently, to 20th century policies that promoted white homeownership while restricting it for blacks. Today, the typical black household has a net worth of $11,000, while that of a typical white household is $141,900.
In Jennings, that is a reality felt even in City Hall, where, along with the mayor, five of the eight sitting city council members (seven of whom are black) have been sued over a debt.
“I’m in a generational hole,” said Miranda Jones, 41, a Jennings city council member and executive with Better Family Life. She and her husband have been sued three times in recent years over debts, once resulting in the seizure of $800 from her bank account.
“Coming from East St. Louis from a poor family, I started off in debt,” she said. She managed to transcend those circumstances to attain a college degree, but that accomplishment came with a load of student loan debt.
“I’m trying to break the cycle for my kids, and it’s very difficult,” she said.
MSD increases collection suits
Sometimes it’s credit card bills that get pushed to the back of the line. Sometimes it’s an old medical bill or a loan with a 100 percent interest rate. And quite often, it’s the sewer bill.
The Metropolitan St. Louis Sewer District provides service to almost all of the city of St. Louis and the surrounding county. The bill is not usually a large one – the average monthly rate in 2012 was about $29 for a single family home – but MSD, unlike other utilities like electricity, lacks the power to shut off service to customers who fall far behind.
In 2010, MSD decided too many customers weren’t paying their bills, so it dramatically increased its collection efforts. It went from filing about 3,000 suits in 2010 to filing about 11,000 in 2012, more than any other company that year.
Most of MSD’s customers are white, but the suits were largely filed against residents of black communities like Jennings. ProPublica examined MSD’s court judgments against residents of lower- and middle-income neighborhoods and found that MSD obtained judgments in the mostly black neighborhoods at a rate about four times higher than in the mostly white ones.
Latanya Graves is a 38-year-old single mother of three who lives in Jennings. After a period of unemployment, she had tried to save her home from foreclosure by taking out loans at sky-high interest rates – the only kind she could get. And with other more critical bills to pay, she’d let her MSD bill slide.
Later, Graves’ choices resulted in lawsuits: She fell hopelessly behind on the loans when she was laid off from her clerical job a second time and didn’t see a way to catch up on her sewer bill. Then the suits led to garnishments. With the interest continuing to run on her high-cost loans, the debts had grown from hundreds of dollars to thousands.
For months at a time in 2011 and then again in 2012, a quarter of her pay was gone.
“It’s a big burden on your shoulders,” Graves said. “You go to bed thinking about, ‘How am I going to pay these bills?”
Lance LeComb, MSD’s spokesman, said the company had no demographic data on its customers and treated them all the same. The racial disparity in its suits, he said, is the result of “broader ills in our community that are outside of our scope and exceed our abilities and authority to do anything about.”
MSD does have a program to reduce payments for lower-income customers. According to an estimate released by MSD earlier this year, about 39,000 customers are eligible. But as of June, only about 2,300 were enrolled. MSD is “not satisfied with this level of enrollment,” LeComb said.
Fewer sources of support
The clients at Beyond Housing, a St. Louis nonprofit that provides assistance to low-income families, are roughly half white and half black. But the staff has noticed a dispiriting difference: white clients are far more likely to have some kind of support to draw on, whether it’s their own assets or help from a family member.
For black clients, “so much of that kind of help has been already tapped out,” said Linda Ingram, the manager of the foreclosure intervention department. The lack of resources makes it harder for black clients to extricate themselves from debt.
By any measure, black households are worse off financially than white ones. They make, on average, far less money. But more pernicious is the vastly larger gap in wealth between whites and blacks – a divide that is wider than it was 30 years ago. It stems largely from “differences in the capacity of one generation of parents to transfer their resources to the next,” said William A. Darity Jr., a professor of economics and public policy at Duke University. “And those differences are strongly associated with race.”
Black families have fewer assets like homes and cars, as well as less cash stashed away. The gap remains even among families toward the lower end of the income scale: According to our analysis of the Federal Reserve’s 2013 Survey of Consumer Finances, the typical white family with annual income between $20,000 and $40,000 had about $2,010 in liquid assets, while the typical black family in that range had just $650.
Dora Byrd, 70, lives in Northwoods, a suburb that borders Jennings to the southwest, with her husband, Alphonso Byrd, 81. The couple married late in life after being introduced by their children. They are both retired after long careers, she as a domestic employee and he as a mechanic.
They live in the home Alphonso Byrd bought in 1968, when, he said, he was the first black man to move onto the block. “And then signs started going up like popcorn,” he said. The area is now 95 percent black.
Both have extended themselves to help their children. Alphonso Byrd put his name on his daughter’s house when she was faced with losing it to foreclosure, he said. Dora Byrd allowed her disabled daughter to move into her former home after she moved in with her husband.
Both were sued by MSD when the sewer bills on those houses went unpaid.
In Dora Byrd’s case, MSD went after her bank account. She’d been living primarily off of a monthly $600 Social Security check. It’s illegal for federal benefits to be garnished, but at the time, she had both a checking and a savings account, and only the money electronically deposited into her checking account was automatically protected.
As a result, MSD was able to seize $645 from her savings account, more than a third of the money in her accounts, according to bank records.
LeComb, the MSD spokesman, said that the utility does not know the age of its customers, and that if Byrd had filed a claim in court stating that the funds were exempt, the garnishment would have been terminated.
Last week, Henderson, the mayor of Jennings, picked up her paycheck at city hall, and discovered that $185 was gone – garnished by MSD. The sewer district had tracked her down at her new job and taken the maximum allowed by law, a quarter of her biweekly pay.
Without it, Henderson said, she’s not sure she’ll be able to cover all her expenses, which include caring for her 8-year-old son. “I’m going to have to scrap and scrounge and rob Peter to pay Paul here,” she said.
When asked if she’d ever heard of the “head of family” exemption, Henderson said she hadn’t, but vowed to submit the forms as soon as possible to reduce the garnishment.
She was surprised to learn that she wasn’t alone – the pay of a council member had been seized by MSD last week, too. Henderson said she’d be sure to tell her about the exemption, since the council member had a son of her own.
“We’re all in the same boat,” she said. “It’s the black community.”
Jonathan Stray contributed to this story.
This story was co-published with Marketplace.
Edited for length and reprinted with permission from www.propublica.org.
Debt garnishment by St. Louis County neighborhoods https://projects.propublica.org/garnishments/
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