Bigotry evident in ongoing bank redlining

The Center for Responsible Lending tells it like it is: African-American and Hispanic banking customers are continuing to get the short end of the stick when it comes to consumer credit. Discriminatory practices like redlining have once again risen up as the U.S. struggles to emerge from the economic recession. Lack of access to short term installment loans and mortgages in significant portions of minority communities has changed its face, however not its heart of discrimination. Resource for this article – Racial discrimination evident in continued bank redlining by MoneyBlogNewz.

Rate of home loss high for minorities

Michel Calhoun is the President of the Center for Responsible Lending. He told USA Today that minorities in the U.S. have "received the worst treatment, at a very high cost." Estimates that 20 percent of African-American and Hispanic householders will lose their homes in the mortgage crisis – a rate more than double that of white householders – suggest the gap between the minority and the majority is growing.

African Americans are 41.7 percent more likely to be denied a traditional bank loan than a Caucasian person is according to a 2008 study done by Christian Weller called "Credit Access, the Costs of Credit and Credit Market Discrimination." Weller is of the Center for American Progress and the University of Massachusetts. When considering mortgages, the gap got even bigger.

The ‘dual system of finance’ isn’t equal

John Taylor, CEO of National Community Reinvestment Coalition, sees a double standard.

"It's about a dual system of finance," he says. "People of color do not have the same access that most American citizens enjoy.

The alternative when traditional banks deny low or middle-income minorities credit is frequently no credit check payday loans from payday lenders. The short term installment loans, for an emergency, are a convenient choice that many might choose. Still, Hilary Shelton, National Association for the Advancement of Colored People Senior V.P. for Advocacy and Policy, explained the fees are often larger than traditional loans. Payday loans are too small to make up for a lost mortgage. Minorities are out of luck.

Deregulation in banks

Everyone noticed the 1990s when several neighborhoods were not able to get bank loans, mortgages or insurance. These entire neighborhoods were shut out. At this time, banking and utility deregulation started. That was when redlining started to occur. Redlining started to be combated by the Community Reinvestment Act and Home Mortgage Disclosure Act. Nevertheless, practices continued such as giving higher rates to minority neighborhood residences. The Wall Street crisis occurred due to this.

What regulators are doing now to stem the tide

• There are 28 volunteer banks the FDIC is trying to get a two-year short term installment loan program started at.
• The Department of Justice has created a fair lending unit to police redlining.
• The CFPB will open in July 2011.

Articles cited

Peri

peri.umass.edu/fileadmin/pdf/working_papers/working_papers_151-200/WP171.pdf

IBEW

ibew1613.org/library/redlining.html

USA Today

usatoday.com/money/perfi/general/2011-04-04-real-estate-financial-discrimination.htm

Did banking deregulation stack the deck against minorities?

youtube.com/watch?v=FDYXAywWWdk