Go to Top

Collateral Consequences: Why Bar Sex Offenders From Business Loans?

The principals of a small business seeking government-backed loans expect to be asked about their commercial backgrounds and credit histories. They probably do not expect to be asked whether they are former sex offenders.

But those with businesses that want to take advantage of the Small Business Lending Fund (SBLF), created last year as part of the Small Business Jobs Act, had better be prepared to discuss both. To qualify for loans from institutions participating in the SBLF, businesses must certify that none of their principals has been convicted of, or pleaded no contest to, a sex offense against a minor.

The SBLF provides capital to community banks that can, in turn, lend to small businesses. It has nothing to do with children or sex offenses. As far as I know, there is no evidence that those convicted sex offenders are less capable than anyone else of running a business that can create jobs, or that sex offenders are less likely to repay their loans.

This little-known provision is just one example of a growing array of collateral consequences, which are legally imposed civil limitations that those convicted of crimes must face after their penal sentences expire. Some post-sentence restrictions are justifiable on public protection grounds. For example, those convicted of criminal offenses involving dishonesty, breaches of trust or money laundering may be barred from working at institutions insured by the Federal Deposit Insurance Corporation. Yet other collateral consequences, such as the SBLF exclusion, have little apparent relationship to the crimes they target. These restrictions seem to exist solely as an added punishment, on top of the sentence prescribed in the criminal laws.

Because of collateral consequences, convictions can have long-lasting ramifications for civic participation, employment, housing and eligibility for public benefits. These barriers can affect former offenders long after they’ve completed their official sentences. The American Bar Association has identified 38,000 separate statutes that contain collateral consequences. According to Stephen A. Saltzburg, who worked on the ABA project, 84 percent of these legal barriers are job-related, which contributes to an 11 percent reduction in wages for those former offenders who are able to find work.

Drug convictions come with an especially heavy load of collateral consequences, and can lead to disqualification for federal and state assistance, including food stamps and public housing. Students convicted of selling or possessing drugs can also lose their federal financial aid, including eligibility for work-study programs. Given the income gap between those with college degrees and those without, this policy seems notably counterproductive, forcing those convicted of drug offenses to accept a future of lesser-paid work rather than giving them the opportunity to eventually become more productive members of society.

Even in some cases where the laws purport to protect the public, the effects can be unnecessarily devastating for those seeking fresh starts after serving their sentences.

In one particularly egregious example, sex offenders in Miami were forced to erect a tent city beneath the Julia Tuttle Causeway after the city passed a law prohibiting them from living within 2,500 feet of anyplace where children gather. In a densely packed city with a normal complement of schools, parks, playgrounds and houses of worship, the sex offenders were left with nowhere else to go. One man told The New York Times in 2009 that he had the money to rent an apartment and had looked at 17 prospective places, but none of them would enable him to comply with the law. His driver’s license listed his address as “Julia Tuttle Bridge.” After three years, the tent city’s residents were eventually relocated by the Miami-Dade Homeless Trust.

According to a working group of judges, law professors and lawyers formed to study the issue of collateral consequences in New York state, “collateral consequences of criminal prosecutions are growing in number, scope and duration.” Because collateral consequences are the product of a wide assortment of statutes, administered by a diverse collection of agencies, they cannot be controlled through sentencing, and there is no easy way for defendants or their attorneys to learn all of the possible consequences of any given conviction. As the working group noted, this makes it “extremely difficult for judges, practitioners and the public they serve to fully appreciate what lies ahead” and “bedevils efforts at appropriate sentencing and competent counseling.”

Bit by bit, we are letting politics take the place of justice, and in the process we are forgetting the principle that an offender should be allowed to start anew after paying his or her debt to society. We are creating sweeping categories of crimes that carry life sentences in prisons without walls. This is not making our society safer, and it certainly is not making it fairer or better.

Lawmakers have a responsibility to protect the law-abiding public from crime and from criminals. I would grant that lengthy sentences and post-prison restrictions are, in some cases, the most effective barrier to recidivism. But another barrier to recidivism is to allow former criminals to rejoin law-abiding society by rebuilding their lives on solid foundations.

That’s hard to do while living under a bridge.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

The views expressed in this post are solely those of the author. We welcome additional perspectives in our comments section as long as they are on topic, civil in tone and signed with the writer's full name. All comments will be reviewed by our moderator prior to publication.

, , , , ,