Do lending institutions have a discrimination problem?
Several Senate Democrats on Wednesday introduced a bill that would prohibit financial institutions from discriminating against customers.
While the Civil Rights Act of 1964 outlawed discrimination in certain places of public accommodation, it does not include banks or other financial institutions. The new bill, the Fair Access to Financial Services Act, would prohibit financial institutions from discrimination in providing services on the basis of race, color, religion, national origin, sex, gender identity, or sexual orientation. The bill was introduced by senators Sherrod Brown (D-Ohio), Tina Smith (D-Minn.), Cory Booker (D-N.J.), Bob Menendez (D-N.J.), Elizabeth Warren (D-Mass.) and Chris Van Hollen (D-Md.).
While the Fair Housing Act already makes it illegal to discriminate in lending, financial institutions have frequently been called on the carpet for doing just that. In recent years, several big banks, including Wells Fargo and JPMorgan Chase, have been accused of discriminating against minority borrowers – and Black borrowers pay an average of 13 basis points more for mortgages than white borrowers. All this comes as the homeownership gap between Black and white Americans is widening; at the end of 2019, the gap was larger than it was 50 years ago.
However, borrowers who feel they are discriminated against often have little recourse due to the banking loophole in the Civil Rights Act, according to a 2019 New York Times report. The act lists specific businesses that may not discriminate against customers: movie theaters, restaurants, hotels, and performance and sports venues. Federal courts have found that because the act listed specific businesses, those not on that list – including financial institutions – aren’t bound by it.
The new bill attempts to remedy that problem, Brown said.
“Too many Black and brown Americans experience racial profiling and unequal treatment when trying to access services at banks and other financial institutions,” he said. “Victims of discrimination are not even able to hold financial institutions accountable. It is shameful. It is past time we pass legislation that explicitly outlaws discrimination in our nation’s financial system so that Black and brown people can have complete access to financial services free from harassment.”
“When we talk about ending systemic racism and other institutionalized forms of discrimination in our society, we can’t ignore the economic inequalities that hold certain communities back,” Menendez said. “It is harder for communities of color and other minority groups to access our banking systems, open an account, secure credit, a small-business loan or a mortgage – barriers that cut people off from our financial system and make in nearly impossible to accumulate wealth. Our bill levels the playing field by making it illegal for financial institutions to discriminate simply on the basis of race, gender, orientation or religion.”