Discrimination and Credit

Discrimination in the extension of credit is volatile issue in the United States. Although federal government efforts to end such discrimination have been pursued for two decades, critics contend that much work is still required.

Discrimination in lending is a part of the larger problem of housing discrimination. Discrimination exists in the United States with respect to a variety of factors. The most publicized form of discrimination is that associated with racial and ethnic background. Such discrimination is also based at times on age, sexual preference, behavior, and other factors. The means by which discrimination is applied to lending vary. Overt refusal to lend money to an individual because of racial or ethnic background is not only illegal in the United States, it is also relatively rare. Such legal prohibitions are often circumvented in a number of ways, however, such as a failure to offer certain loan programs to certain individuals, and rejection on the basis of other factors that appear unrelated to racial or ethnic background, but which, in fact, may be contrived, and may not be applied equally to white applicants. Although illegal, this practice often results in the denial of funds to members of racial and ethnic minorities, and even to neighborhoods that are predominantly occupied by members of racial and ethnic minorities. This latter practice is known as "redlining."

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housing (either purchase or rental) on the basis of personal characteristics. In 1974, the discrimination provisions were expanded to prohibit the denial of access to housing on the basis of an individual's sex, and the denial of access provisions were expanded to housing-related credit extensions. These expansions of the equal housing opportunity legislation were implemented via the Community Development Act. Prohibitions against discrimination in housing and credit extension on the basis of age and handicap were enacted in 1988, as a part of the bill to extend the Civil Rights Act. Official concern with credit extension was expanded again in 1975, with the enactment of the Home Mortgage Disclosure Act. This act made it a less difficult for both individuals and public officials to ascertain whether depository institutions were in fact discriminating in the granting of credit. The Home Mortgage Disclosure Act (HMDA) was structured to deal with discrimination on the basis of geographic criteria, and was perceived as a means of dealing with the problem of redlining. Thus, the geographic criteria were conceived of as indirect means of attacking discrimination in credit against minority population groups that were restricted t

Category: Business - D