By Tanya Ladha, Senior Director, and Hannah Kramer, Manager, Financial Health Network
People who are arrested, detained, and/or incarcerated often have interactions with the criminal justice system that lead to short-term financial crises and long-term financial instability for themselves and their families. In many cases, families forgo basic needs because of loss of income following their loved one’s incarceration. Punitive fines and fees create a cycle of debt that can damage credit scores and lead to wage garnishment, driver’s license suspension, and, in some instances, reincarceration.
The criminal justice system disproportionately affects communities of color, with individuals of color making up 67% of the incarcerated population, but only 37% of the general population. Developing and testing solutions for these challenges will have an outsized impact in reducing that gap and promoting financial health for all.
Financial Health Challenges Across the Criminal Justice Ecosystem
While individual experiences with criminal justice vary greatly, most people face three distinct moments of financial challenge after entering the court system. The potential for impact via innovation at each stage is vast:
- People entering the court system can face bail amounts from a few hundred dollars up to $25,000, creating a financial burden that many families cannot afford to pay.
- On any given day, 550,000 people who are sitting in jail are not convicted or sentenced for a crime, but remain incarcerated because they cannot pay bail.
- Defendants who remain in jail while awaiting trial are more likely to be convicted, receive longer prison sentences, and experience less favorable results in the plea-bargaining processes than those who can afford to post bail or are not held pre-trial.
- Nearly half of formerly incarcerated individuals contributed 50% or more to their families’ total household income prior to incarceration.
- Loss of income can create immediate financial hardship for families, who find themselves suddenly unable to afford basic necessities or rent or mortgage payments.
- These challenges can cause families to slip into a cycle of debt that is hard to escape.
- Nearly 600,000 people return to our communities from incarceration every year.
- These individuals often accrue debt from child support payments, mortgages, rent, and/or loans while detained, then face additional fines and fees associated with their detainment upon release.
- The average post-incarceration debt amounts to more than $13,000.
- Incarceration limits future opportunities for economic mobility, including access to public benefits, eligibility for public housing, and the ability to find employment upon re-entry.
To learn more about these issues, please read our blog posts detailing the extensive fines and fees levied by the criminal justice system and the barriers to voting, employment, and public benefits for people with criminal records.
What’s Next? The Role of Innovation
So many Americans are affected by inequities of the criminal justice system and unable to rebuild their financial health. The financial harm associated with being incarcerated is just one of many areas in need of reform within the criminal justice system, but we believe this is where our expertise can be most valuable.
That’s why, in 2021, we’re investing in bettering the financial health of underserved communities and people of color impacted by the U.S. criminal justice system. We believe that, through innovation and collaboration, we can uncover effective solutions. Our goal is to design grant programs that help pilot and test possible tools, products, and interventions in the criminal justice space.
About the Initiatives
- The Financial Solutions Lab Exchange
The Exchange serves as a meeting place for interested nonprofit and fintech providers to explore collaboration,swap insights, and build high-impact partnerships. Our 2021 Challenge launching this spring will provide funding and technical support to pilot nonprofit-fintech partnerships that serve justice-involved individuals and their families. The Exchange is recruiting partnered nonprofit-fintech grant applicants (must apply together) from a broad range of demographics, locations, and challenge areas within the criminal justice ecosystem.
- The Financial Solutions Lab Collaborative
The Collaborative targets consumer needs where there are few or no existing financial health solutions, and where multiple stakeholders may be required to solve issues. In 2021, we’ll launch a Challenge to identify an unmet financial health need for justice-involved individuals and their families. The Collaborative will conduct workshops in the spring and fall to explore potential solutions, then award grant funding and technical support to select participants for building, testing, and piloting.
Partners Wanted: How to Get Involved
In 2021, our team will continue to pursue a better understanding of the intersections between the criminal justice system and financial health. We will also explore ways to support people with a criminal background across the U.S. who are struggling to reenter the workforce; as well as their local economies and their communities. We look forward to collaborating with our partners JPMorgan Chase and Prudential Financial on this common cause.
Our organization is also seeking new partners to help bring about financial solutions for justice-involved individuals and returning citizens. If you’d like to connect to share insights or explore collaborations on financial health solutions, please reach out to firstname.lastname@example.org.