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What Local Government Can Do About the Consumer-Debt Epidemic

Over-reliance on fines and fees is a big part of the problem, but there are a lot of steps that cities can take.

Piggy bank under water.
Think of it as an epidemic, one whose impact spans mental and physical health, financial security and local economies: American consumer debt has reached record levels, now nearly double what it was at its previous peak in 2008. We borrow to go to college, buy a home or finance a car. And many must borrow simply to smooth out gaps in their fluctuating incomes.

Yet there is another cause of debt that's not often discussed: debt incurred not from borrowing but from the fines and court fees some local governments assess for parking tickets, jaywalking and even such minor infractions as barbecuing in front yards. It's these types of debts that can have the biggest systemic impact, particularly on people of color and working families.

Many local governments have come to use these fines and fees as a significant revenue source, too often collecting them using such aggressive measures as suspending driver's licenses and prohibiting public employment. The impact is that those who can least afford it are the ones who suffer the most, ending up in a cycle of debt that reduces resources available to pay for basic needs or to invest in opportunities to build security and wealth. And then there are the negative consequences for the local economy: increased public-service expenditures coupled with reduced rates of business formation and homeownership.

There are three areas where local governments have tremendous opportunity to address this systemic debt and its impact on our communities. The most innovative leaders in cities across the country are already trying out new ideas:

First, local governments can replace their own detrimental delinquency, default and collections practices with constructive programs. In St. Louis, where unpaid parking tickets and traffic citations can lead to a suspended driver's license, Treasurer Tishaura Jones is developing a program of low-cost payment plans that help constituents avoid losing their licenses, which are often essential for access to jobs. Columbia, S.C., offers payment plans for fines and allows those who are still unable to pay to complete community service hours in lieu of monetary fines. Cities in California and Florida also have begun to offer such non-financial-repayment options as community service or participation in financial counseling. And Maryland's legislature has advanced a bill to prohibit imprisonment solely for inability to pay outstanding fines or fees.

Second, local governments can reassess their own fines and fees. That's important not only as a matter of fairness but also from a standpoint of efficiency: The California state auditor has found that administering and collecting fines actually costs government more than it receives in revenue. As San Francisco has done, local governments can consider assessing fines at levels proportional to both the gravity of the offense and the individual's ability to pay, and implement new strategies for collecting fines that are designed to be less punitive and to meet consumers' needs. Judges in Columbia have discretion on fine amounts based on self-reported financial burdens and a number of non-financial factors, and defendants are never given jail time for inability to pay a court fine.

Third, local governments can look for opportunities to help democratize access to high-quality credit. Cities can take legal measures against lenders whose discriminatory activities cause harm. Miami and Philadelphia, for example, are enforcing laws that prohibit racial and gender disparities in access to and cost of mortgages. In addition to the issue of discrimination, both cities pointed to the municipal financial burdens they have incurred due to lenders' actions, including reduced property-tax revenues and increased service costs.

The causes of our consumer-debt epidemic are often systemic, and they need a systemic solutions. We're inspired by the many local governments that are making real change. With the sharing of these ideas, there's a real opportunity for other local leaders to find solutions that work for their communities.

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