If you are Black, you're far more likely to see your electricity cut, more likely to be sued over a debt and more likely to land in jail because of a parking ticket.
It is not unreasonable to attribute these perils to discrimination. But there's no question that the main reason small financial problems can have such a disproportionate effect on Black families is that, for largely historical reasons rooted in racism, Black families have far smaller financial reserves to fall back on than white families.
The most recent federal survey in 2013 put the difference in net worth between the typical white and Black family at $131,000. That's a big number, but here's an even more troubling statistic: About one-quarter of African-American families had less than $5 in reserve. Low-income whites had about $375.
Any setback, from a medical emergency to the unexpected loss of hours at work, can be devastating. It means harsh punishments for the failure to pay small debts harm Black families inordinately. Sometimes, the consequence is jail. Other times, electricity is cut or wages garnished.
The modern roots of the racial wealth gap can be traced back to the post-World War II housing boom, when federal agencies blocked loans to Black Americans, locking them out of the greatest wealth accumulation this country has ever experienced. More recently, the bursting of the housing bubble and subsequent recession slammed minorities. In 2013, the median wealth of white households was 13 times the median wealth of Black households, the widest gap since 1989.
Earlier this year, experts took a close look at debt-collection lawsuits in three major American cities. They expected to see a pattern driven by income, with collectors and credit card lenders suing people most often in lower-income areas.
But income was just half the story.
Even accounting for income, the rate of court judgments from these lawsuits was twice as high in mostly Black communities as it was in mostly white ones.
When debts turn into court judgments, plaintiffs gain the power to collect by cleaning out bank accounts and seizing wages. Federal and state laws generally don't protect anyone but the poorest debtors, and because judgments are valid for a decade or more, the threat of garnishment can linger for years. The paycheck from that new job may suddenly be slashed, and savings may disappear.
Sometimes the consequence of not having the money to pay a bill is immediate. In a 2009 national survey of lower-income households by the federal Energy Information Administration, 9 percent of Blacks reported having their electricity disconnected in the previous year because they had been unable to pay. For whites, the number was less than 4 percent.
And sometimes the consequence of unmanageable debt is more debt. In a 2013 Federal Reserve survey, about three times as many Blacks reported taking out a high-interest payday loan in the previous year as did whites at the same income level. Desperate consumers use these loans to catch up on bills, but often get tripped up by high interest payments.
When combined with discriminatory policing practices, the effect of the asset gap is to magnify the racial disparity. In its report on the Ferguson (Missouri) Police Department, the Justice Department found that officers disproportionately stopped and ticketed Black citizens. For a "manner of walking" violation, it was $302; for "high grass and weeds," $531.
The racial wealth gap "creates this cyclical effect," said Nusrat Choudhury, an ACLU attorney. An unpaid speeding ticket may result in a suspended driver's license, which may lead to a more severe violation. Unable to pay their fines, Black defendants become more crushingly entangled in debt.
What can be done? The best place to start is by identifying practices that are particularly damaging to Black communities, and then fixing them.
Policy makers should pay attention. Making it easier to recover from small setbacks can make a big difference in people's lives.