The Fleecing of Black America: How Companies Use Collection Suits to Bring Black Families to Their Knees

The economic exploitation of the Black community continues.  Lenders and collectors are pursuing a new tactic in fleecing Black neighborhoods, with the use of the courts and debt collection lawsuits to receive judgments from unpaid bills, even small amounts.

A ProPublica study published in Salon investigated a pervasive practice in debt collection that has to date, flown under the radar screens of most people, even the communities that are targeted.  On a regular basis, companies utilize the courts to pursue millions of people for even small consumer debts, and through a court judgment can garnish their wages and seize a portion of their pay.  The highest rates of garnishment are among those who earn between $25,000 and $40,000, although, as the ProPublica report notes, the amounts are nearly as high for those earning less than this.

The ProPublica analysis examined five years of court judgments from St. Louis, Chicago and Newark, and found that even when accounting for income, the rate of judgments in Black communities was double that of white neighborhoods.

“These findings could suggest racial bias by lenders or collectors,” the report notes. “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.”

In one example, Yolonda Fountain Henderson, the recently elected first mayor of the St. Louis suburb of Jennings, Missouri, discovered a list of at least 4,500 debt collection lawsuits against residents of her city of 15,000, including herself. A single mother, Henderson, fell behind on her sewer bill. The utility company sued her and seized all she had—$382 from her credit union account.

Since the 1960s, Jennings has turned from an entirely white town to a population that is 90 percent Black. Household incomes are around $28,000, a level where families are only spending on basic necessities. In the city of St. Louis and the surrounding county of St. Louis, in which Jennings is located, only a quarter of the population lives in mostly Black neighborhoods.  Yet, over half of court judgments emanated from these communities.  In Jennings, there was more than one lawsuit for every four residents between 2008 and 2012.  During that time, banks, hospitals, debt buyers, auto lenders and other high-cost lenders have seized $34 million from the Black neighborhoods of St. Louis, according to ProPublica.  Plaintiffs typically seek garnishment whether the defendant, who typically has no legal representation, is present in the court.

Ferguson, which like Jennings, is also a part of St. Louis County, was placed in the spotlight not only for the killing of Michael Brown, an unarmed teenager by police, but also the underlying social and economic problems undergirding the unrest and community tensions.  The municipal court system which jailed residents for unpaid traffic tickets and used Ferguson’s poor Black residents as a major revenue stream is but another example of the exploitation of Black people, who, because of institutional racism have far fewer resources to draw upon.

While the typical white household has a net worth of $141,900, a Black family’s is a mere $11,000. Over the past 30 years, the racial wealth gap between whites and Blacks has widened. Predatory lending, subprime mortgages and other discriminatory policies that prey upon the Black community have led to a massive loss of Black wealth, leaving Black families with no resources to transfer to future generations.

Meanwhile, an investigation of Newark and Chicago found that debts leading to suits in Black areas were 20 to 25 percent smaller than the debts of residents in predominantly white neighborhoods.  For example, in the Newark area, a company sued a white middle-income resident for an average of $3,466, but in a Black neighborhood, the average was $2,628.

Further, there are racial disparities in bankruptcy filings.  A 2012 study found that Blacks were twice as likely to file under Chapter 13, and that they are often steered in such a direction.  Chapter 7 is a better choice that is less costly and provides near-immediate relief, while most Chapter 13 filers default on their bankruptcy plan payments and retain their debts.

The ProPublica report on the fleecing of Black neighborhoods sounds similar to the situation in Baltimore, in which vulture capitalists buy up liens on unpaid utility bills as small as a few hundred dollars, hike up the interest and take the poor Black residents’ homes when they are unable to pay.

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