Can USDA’s efforts on equity help Black farmers overcome ‘toxic debt’?

It was nearly a quarter century ago when thousands of Black farmers filed a class action discrimination lawsuit with the U.S. Department of Agriculture to receive financial compensation. More than 15,000 got $50,000 lump sum payments, and a small number were approved for larger payments. Some had hoped that it would finally help them get out from under debt to the department. 

But for some farmers, the funds weren’t enough. And a second version of the settlement reaching other Black farmers in 2010 didn’t solve the underlying problem either.

“The toxic debt just continues to stick around,” said Sylvia Stewart, research communications director and senior research associate for the Institute for Economic and Racial Equity at Brandeis University in Waltham, Massachusetts, who’s conducting a study on the impact of the lawsuit Pigford v. Glickman and its settlement for Black farmers. 

After Black farmers filed the Pigford suit, Native American, Latino and female farmers filed similar lawsuits claiming discrimination by the department in loan and benefit programs. All ended with settlements. 

And yet, nearly 25 years later, USDA officials said they are still trying to address disparities stemming from discrimination in farm loan lending. 

Episode 4

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But the USDA of today, under the Biden administration, said it wants to correct racial discrimination by taking a broad-based approach to equity that targets all borrowers in financial distress and finds any discriminatory actions that have affected farmers of all races in its farm loan programs. Black borrowers are the racial group that most struggles to get out from their USDA debt.

The USDA is grappling with how to identify which individuals should get compensation for historical injustice done to groups of people many years ago, and how that gets done in legislation that is specific to contemporary phenomena, like COVID. But it’s also up against the context of one side of Congress being controlled by Republicans who deny the existence of racial inequality as a modern-day problem. Their idea of a “colorblind” government and justice system that denies any responsibility for righting injustices based on past discrimination was buoyed by a recent Supreme Court decision striking down affirmative action in college admissions. 

“Race is not the only factor that we consider as we’re trying to reach equity,” said Dewayne Goldmon, senior advisor for racial equity to the secretary of agriculture. 

Given the history of USDA, it’s difficult to make “significant improvements” without at least acknowledging that there are “disparities that exist among the different races of customers that we’re trying to assist, and try and figure out a way to address those disparities in a very transparent and productive way,” Goldmon said.

“Race is not the only factor that we consider as we’re trying to reach equity.” 

Dewayne Goldmon, senior advisor for racial equity to the secretary of agriculture

The current administration is attempting to address disparities through new programs included in the Inflation Reduction Act of 2022 that do not rely on racial identification to help farmers get out from under their USDA debt. 

However, the efforts came after a federal judge blocked implementation of debt relief to farmers of color in the American Rescue Plan Act of 2021, a COVID-relief bill, on grounds that it discriminated against white farmers. As a result, Congress changed course.

One of the programs in the Inflation Reduction Act provides debt relief for borrowers of any race who are considered economically distressed. Congress appropriated $3.1 billion for borrowers who are behind on loan payments or face other financial risks. Financial assistance includes loan payments of past due amounts and the next installment of loan payments. 

The USDA began releasing payments in October 2022 and as of May 23, it has distributed $1.1 billion in debt relief payments.

In another program in the Inflation Reduction Act, Congress appropriated $2.2 billion in financial assistance to farmers of any race who experienced discrimination in USDA’s farm loan programs prior to Jan. 1, 2021. For this program and others, USDA is working closely with community-based organizations, which are trusted by the diverse populations it’s trying to reach, said Zach Ducheneaux, administrator of the Farm Service Agency, the arm of the USDA that manages loans.

“We’ve been intentional about developing and cultivating relationships with outside NGOs to ensure we’re reaching the folks that may need a little extra hands on technical assistance to meaningfully participate in all of our programs,” Ducheneaux said. 

The discrimination program will potentially reimburse farmers for federal payments that were garnished, or offset, to repay loans that are found to be tied to discrimination in the agency’s farm loan programs. 

Farmers who fall delinquent in their loans may see federal payments like Social Security checks, income tax returns, pensions and farm subsidies garnished, or offset, and put toward their debt. A loan becomes delinquent after a borrower fails to make a scheduled payment on their loan. 

An ‘ill fate’

In 1997, Timothy Pigford filed the initial suit that eventually became a class action lawsuit. Known as Pigford vs. Glickman, the civil case alleged the federal agency engaged in racial discrimination against Black farmers in how the agency allocated its loan programs by delaying or denying loans to Black farmers. It also claimed that the USDA had consistently failed to address official complaints about that discrimination. 

The case never went to trial. In 1999, the parties agreed to a settlement that presented farmers with two different categories of claims — Track A and Track B. Each farmer had to pick a track to pursue as part of the settlement agreement. 

Track A included a $50,000 award and the chance to have outstanding debt in a loan program forgiven if it was connected to the claim of discrimination. But farmers who chose Track A had to show that when they applied for a USDA loan, that the loan was denied, delayed or decreased. They needed to show that a white farmer with a similar situation had been treated more favorably than they were. Finally, they’d need to be able to show that all of that added up to an economic loss. 

For Track B, farmers were allowed to claim full damages, but they were also required to provide a “preponderance of evidence” of discrimination. Farmers would need to show an arbitrator that USDA discrimination had cost him more than $50,000 in damages by providing evidence including documents and present it at a mini trial. But if the farmer succeeded, they could be compensated for all of the costs tied to the discrimination they’d faced. 

Despite the strict eligibility criteria, the process was full of accusations that some money went to the wrong people. The New York Times in 2013 published an investigative report that detailed massive fraud, “a runaway train, driven by racial politics, pressure from influential members of Congress and law firms that stand to gain more than $130 million in fees.”

In all, 15,645 claims were approved for Track A and 115 claims were resolved in Track B from the 22,721 eligible class members.

Among them, a small portion — about 425 people, or 2.7% of claimants — received debt relief.

Eleven years later, a second settlement was created for people who were too late to participate in the initial suit. Between both Pigford settlements, more than 60,000 people submitted claims. Roughly half won some kind of damages. 

Listen to what Timothy Pigford has to say about the USDA

As a result of Pigford, the federal government returned more than $2 billion to claimants. 

Black farmers have lost $326 billion in land between 1920 and 1997, according to a study published by the American Economic Association last year.

But since most didn’t get debt relief, many used their settlement money to pay off other debt that they had to take on to continue farming, according to the Pigford Project, a research initiative by the Institute for Economic and Racial Equity at Brandeis University and the Federation of Southern Cooperatives/Land Assistance Fund.

Although USDA could not foreclose on farmers while their claim was being processed, claimants were still obligated to make payments on their loans. Meanwhile, interest accrued. The process dragged on for years. And in the end, some claimants never had their debt forgiven, according to the Project.

“Farmers applied to track A to get their debt relieved and be free and clear,” said Stewart, of Brandeis University. “However, we only have those big picture figures of how many people got [debt relief], or what [loans were] forgiven. We don’t have a strong list of who got what and why and what the reasons are.”

It’s also unclear how many of those Pigford class members who were successful in their claims were later subject to offsets, or garnishments. However, some offset payments were given back to some claimants after the claims process. 

Local farmers who sat on county committees and had influence over who was deemed credit worthy and employees of the Farm Service Agency might send farmers into offset “in retaliation for applying for the Pigford claims,” said Stephon Bowens, an attorney who represented some claimants that disagreed with the settlement agreement in the lawsuit.

Offsets will factor into the amount of financial assistance that is offered to a borrower, such as a Pigford claimant who no longer has an active loan, who actually suffered from past discrimination in farm lending programs, said Goldmon, the senior advisor for racial equity to the USDA secretary. 

There were outcomes that did not meet the expectations of class members. For example, when some relief was provided, and a farmer didn’t get total relief, they were subjected to offsets from loan balances that they thought would have been paid off. 

“What we’re trying to do is come up with a system that will hopefully provide some financial assistance for those folks that have suffered from that ill fate,” Goldmon said. “And at the same time though, connect them with access to a more responsive, more inclusive Farm Service Agency, farm lending programs that give them better access as they go forward.” 

This story was produced in partnership with the McGraw Center for Business Journalism at the Craig Newmark Graduate School of Journalism at the City University of New York.