Debt-related driving bans create instability – Fed research

Debt-related suspensions of driving licences in Ohio are having a destabilising effect on the broader economy, argue researchers with the Federal Reserve Bank of Cleveland. 

“More than 60% of Ohio’s driver’s licence suspensions do not stem from bad driving,” write Kyle Fee and Brian Mikelbank in their report. “Instead, they arise because the driver owes an unpaid debt.”  

The debts in question are monies owed to courts, to the Ohio Bureau of Motor Vehicles or to private third parties.

The authors say jobs requiring driving licences are more common in Ohio than elsewhere in the US. They claim that if only half of the drivers in the state with debt-related suspensions abided by their terms, more than 830,000 people could be unable to work: “That equates to 14.4% of the labour force.” 

The researchers find the effects of debt-related driving bans are concentrated in low- and middle-income and minority communities.

“Lower- and middle-wage occupations tend to have the highest rates of job ads requesting a driver’s licence,” they write. “This indicates that [debt-related suspension] can be more problematic for hiring into middle- and lower-wage occupations.”

Fee and Mikelbank argue that these bans could prevent people from working to pay off the debt that triggered the suspensions. This, they claim, frequently triggers a cycle of debt that is hard to escape.

The researchers say that between 2016 and 2020, around $150 million was levied each year in charges and fees for debt-related driving bans. However, drivers only paid about $33 million annually during that period. 

“The unpaid amount accumulates over time, averaging about $922 million [in total outstanding fees and charges] during those five years,” they say. 

According to campaigning organisation Free to Drive, 28 US states still, to varying extents, suspend people’s driving licences for failure to pay debts.