New policy brief on Second Chance Lending

A new policy brief from Prosperity Now, developed in collaboration with the Collateral Consequences Resource Center, examines how criminal records can stand between otherwise qualified entrepreneurs and the capital needed to start or grow a business. Second Chance Lending: Criminal History, Creditworthiness, and Access to Small-Business Capital draws on research and discussions at the September 1, 2026, Second Chance Lending Forum, jointly convened by the two organizations in Washington, D.C., with keynote remarks by Federal Reserve Governor Michael S. Barr. CCRC Board Secretary Brad Blower worked with colleagues at both organizations to develop this report.

The report builds on CCRC’s longstanding research and advocacy concerning criminal history restrictions in pandemic relief and SBA lending, including its comments supporting reform of SBA eligibility rules and efforts to obtain agency data shedding light on repayment risk through the Freedom of Information Act.

The report highlights a central problem: People with criminal records often turn to entrepreneurship because employment opportunities are restricted, only to encounter another set of barriers when seeking financing. Research reviewed in the report finds that business owners with felony convictions are about 19 percent less likely to obtain startup loans and 21 percent less likely to obtain expansion financing than similar owners without felony convictions. Yet available evidence has not established whether criminal history adds meaningful information about repayment risk beyond ordinary financial factors. Screening practices, uncertainty about regulatory requirements, and credit histories damaged by incarceration can all impede access to capital. Although the SBA removed many formal eligibility restrictions in 2023 and 2024, it left lenders free to conduct their own criminal-history screening. The report argues that changing eligibility rules must be accompanied by practical measures that help lenders evaluate applicants on the merits of their businesses and their capacity to repay.

The report proposes a coordinated agenda for turning these reforms into meaningful access to credit. A first step is to analyze the SBA’s historical loan-performance data, including loans approved under its former “character determination” process, to test assumptions about risk and inform lending practices. Other recommendations include individualized assessments that consider current business performance, cash flow, and relevant evidence of rehabilitation; clearer federal guidance on compliance obligations; and outreach so entrepreneurs know that eligibility rules have changed. The report also calls for partnerships between banks and community development financial institutions, loan-loss reserves that help lenders serve this market, and working-capital lines of credit alongside startup loans. Pairing financing with business training, mentoring, and professional networks would help entrepreneurs translate access to capital into sustainable businesses. The goal is to replace unsupported assumptions with evidence while expanding opportunities for economic independence, job creation, and community investment.

CCRC looks forward to working with Prosperity Now and relevant regulatory agencies in the months ahead to implement the reform agenda proposed in the policy brief.

 

 

 

 

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Clean slate expungement bill passes in Missouri

On May 15, the Missouri legislature gave bipartisan approval to a measure mandating automatic expungement of felony and misdemeanor drug possession convictions, and convictions for unlawful use of drug paraphernalia. If SB 1421 is approved by the governor, felonies will be expunged after three years without a new conviction, and misdemeanors will be expunged after one year.  A person is limited to three misdemeanor and two felony expungements under the bill, combined with existing expungement laws.

The bill sets forth detailed provisions for its administration, both by the courts and by the state highway patrol.  It is to be effective “when technically feasible,” but “no later than January 1, 2027.”

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Federal expungement for survivors of human trafficking

Until this year, there was no federal law authorizing expungement or sealing of a federal conviction.  That changed on January 23, 2026, when President Trump signed into law the Trafficking Survivors Relief Act (TSRA), 18 U.S.C. § 3771A.  The TSRA authorizes courts to grant record relief in the form of vacatur and expungement to survivors of human trafficking arrested or convicted of a nonviolent federal crime as a direct result of their being a victim of trafficking, defined as sex or labor trafficking under 22 U.S.C. 7102.  Our research indicates that this is the first time in our Nation’s history that expungement of a conviction record has been explicitly authorized in federal law.

The only federal authority for expungement before enactment of the TSRA was the extremely narrow provision in the so-called Federal First Offender Act, 18 U.S.C. § 3607(a), which allows a person who is arrested for misdemeanor drug possession under 21 U.S.C. § 844 to avoid a conviction by participating in a program of deferred adjudication, as long as they have no prior drug conviction.  Upon successful completion of the program, the charges are dismissed and no conviction results.  Expungement is available for the resulting non-conviction record, but only if the person was under 21 at the time of the offense. See § 3607(c).  Other than this one very limited authority, until the TRSA there was no authority in federal law to expunge or seal even acquittals and other non-conviction records.  See Section III of the Federal profile from the Restoration of Rights Project.

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Maine governor vetoes clean slate bill

On April 29, Maine governor Janet Mills vetoed a bill that would have authorized automatic sealing of many misdemeanor convictions after five conviction-free years, and made Maine the 14th state to adopt a “clean slate” record relief measure.  Efforts to override her veto failed, but supporters of the failed record relief bill vowed to bring it back in the next legislative session.

Our recent annual report notes that Illinois became the 13th “clean slate” state when Governor Pritzker signed it into law in January.  The Illinois law’s provisions are explained in a post we published last fall.

In support of her veto, Governor Mills’ letter cited the bill’s extension to domestic violence convictions, as well as recurring concerns held by opponents of automatic sealing: cost and constitutionality.

There are several significant problems with the legislation. First, as drafted, L.D. 1911 would mandate the sealing of records for Class D domestic violence assault – a result that is plainly contrary to the public interest. Second, a ruling by the U.S. Court of Appeals for the First Circuit strongly suggests that categorically sealing criminal records without conducting a case-by-case review of the circumstances violates the First Amendment. Third, this legislation would commit the State to hiring seven permanent employees to conduct the work of sealing records. Only a fraction of this cost has been appropriated. This is a significant on-going expense that could be avoided by allowing interested persons to request that their records be sealed, rather that requiring the Judicial Branch to seal all records eligible records as a matter of course.

The bill’s supporters argued that the inclusion of domestic violence convictions was an acknowledged clerical error that would have been corrected in the implementation process, and that the governor’s other objections (cost and constitutionality) were overblown, and outweighed by the advantages for the many Maine citizens who stood to gain from the bill, which had been passed with bipartisan support.  They pointed out that the petition-based sealing process enacted in 2024 is rarely used, largely because of the difficulties faced by individuals navigating the judicial process.  The bill would have given thousands of deserving Mainers new opportunities for employment and housing.

While efforts to override the governor’s veto fell short this year, the bill’s primary sponsor stated that “There is a commitment to working in a future Legislature on bringing this proposal back. . . .  A lot of the groundwork, momentum and excitement for this has been growing.”

 

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Criminal record reforms continue to deliver in 2025

For almost a decade, at the beginning of each new year, CCRC has published a report describing and evaluating record reforms enacted in the previous year. Our reports have documented the steady progress of what we characterized six years ago as “a full-fledged law reform movement” aimed at restoring rights and status to individuals who have successfully navigated the criminal law system.

Our 2025 report on newly enacted record reforms is a bit late this year due to technical difficulties with our website, but it shows that the steady progress of law reform has continued. In fact, 2025 was the most productive legislative year since 2020, measured in sheer numbers of new laws. Even Congress got into the record reform act in 2025, approving a bill to enact the very first federal expungement law, for survivors of human trafficking convicted of crime related to their trafficked status.  President Trump signed this bill into law in early 2026, and it is described in the Federal profile from the Restoration of Rights Project. (We expect to publish a comprehensive analysis of human trafficking record relief laws in coming weeks.)

Our report for this year has a different format, aimed at highlighting what has been accomplished by the states.  While we recognize Alabama and Virginia as having enacted the most impressive slates of new laws in 2025, we commend several other states for noteworthy accomplishments. Additional details on specific reform measures mentioned in the report can be found in the relevant state profiles from CCRC’s Restoration of Rights Project.

Having had an opportunity to preview what’s coming in 2026, we are excited to see that even in an election year there will be a continuing expansion of record clearing opportunities.  Two states have already enacted a broad regime of automatic sealing (Maine and Illinois), and bills making their way through the process reduce access barriers like lengthy waiting periods, outstanding court debt and application-related costs. We can already see efforts to improve records management to accommodate automation of record clearance.  Several states have enacted broad occupational licensing reforms, an area where bipartisan interest has benefitted from helpful model laws, and from federal efforts to support entrepreneurship by people with a criminal history.  Programs to avoid conviction through judicial diversion and deferred adjudication are also being expanded.  We have come a long way in the past decade, and there is evidently still a hearty appetite for reform. 

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