WASHINGTON–Hidden in a newly released report from the Fed is a piece of data about a type of debt being carried by many Americans.
As CUToday.info reported here, the Fed has released a new “Report on the Economic Well-Being of U.S. Households, Featuring Supplemental Data from April 2020.” Not surprisingly, the report found financial conditions have changed dramatically for people who experienced job loss or reduced hours during March 2020 as the spread of COVID-19 intensified in the United States.
But buried in the data in what appears to be for the first time ever, the Fed has included “fees and fines” held by Americans, according to the Brennan Center for Justice at NYU Law.
“Six percent of all adults, and one-fifth of those who have had an immediate family member in prison or jail, indicated that their family had such debt at the time of the survey,” the report notes.
In response, Lauren-Brooke Eisen, director of the Justice Program at the Brennan Center, said, “The Federal Reserve is the definitive authority on economic conditions in the country. So, the fact that they recognized that court costs and legal fees can affect American households, and for years after they incur these debts, is hugely significant.”
Costs 121 Times More
On Twitter, Eisen said the reason it’s significant is “almost every cent spent on court fee and fine collection is wasted as compared to collecting tax revenue. It's inefficient and makes no fiscal or economic sense. We also found it costs jurisdictions, on average, 121 times more to collect criminal fees and fines even without including some of those costs — than it costs the IRS to gather taxes…This is also significant, according to the Federal Reserve, because debt from legal expenses correlates with less access to credit and banking products, which can exacerbate financial challenges.”