Editing Redlining (section)

===Financial services===
{{See also|Criticism of credit scoring systems in the United States}}

==== Student loans ====
In December 2007, a [[class action]] [[lawsuit]] was brought against student loan lending giant [[Sallie Mae]] in the [[United States District Court for the District of Connecticut]]. The class alleged that Sallie Mae discriminated against African American and [[Hispanic]] private student loan applicants.<ref>{{cite web |url=http://www.newamerica.net/files/sallie%20mae%20lawsuit.pdf |title=Sasha Rodriguez & Cathelyn Gregoire on Behalf of All Persons Similarly Situated vs. Sallie Mae (SLM) Corporation |publisher=New America Foundation |date=December 17, 2007 |access-date=March 6, 2017 |archive-url=https://web.archive.org/web/20141006133740/http://www.newamerica.net/files/sallie%20mae%20lawsuit.pdf |archive-date=2014-10-06 |url-status=dead}}</ref>

The case alleged that the factors Sallie Mae used to [[Underwriting|underwrite]] [[private student loans]] caused a [[disparate impact]] on students attending schools with higher minority populations. The suit also alleged that Sallie Mae failed to properly disclose loan terms to private student loan borrowers.

The lawsuit was settled in 2011. The terms of the settlement included Sallie Mae agreeing to make a $500,000 donation to the [[United Negro College Fund]] and the attorneys for the plaintiffs receiving $1.8 million in attorneys' fees.<ref>{{cite web |url=https://ecf.ctd.uscourts.gov/doc1/04113074545 |title=SDSD District Version 1.3 |publisher=United States District Court for the District of Connecticut |access-date=July 25, 2014}}{{subscription required}}</ref><ref>{{Cite web |url=https://www.finaid.org/loans/discrimination.phtml |title=FinAid {{!}} Loans {{!}} Anti-Discrimination Rules for Education Lenders |website=www.finaid.org |access-date=2020-02-18 |archive-date=February 18, 2020 |archive-url=https://web.archive.org/web/20200218175228/https://www.finaid.org/loans/discrimination.phtml |url-status=dead}}</ref>

==== Credit cards ====
[[Credit card]] redlining is a spatially discriminatory practice among credit card issuers, of providing different amounts of [[Credit score in the United States|credit]] to different areas, based on their ethnic-minority composition, rather than on economic criteria, such as the potential profitability of operating in those areas.<ref name=Cohen-Cole2011>{{Cite journal |doi=10.1162/REST_a_00052 |title=Credit Card Redlining |year=2011 |last1=Cohen-Cole |first1=Ethan |journal=Review of Economics and Statistics |volume=93 |issue=2 |pages=700–713 |ssrn=1098403 |s2cid=18480342}}</ref> Scholars assess certain policies, such as credit card issuers reducing credit lines of individuals with a record of purchases at retailers frequented by so-called "high-risk" customers, to be akin to redlining.<ref name=Cohen-Cole2011/>

==== Banks ====
Much of the economic impacts we find as a result of redlining and the banking system directly impact the African American community. Beginning in the 1960s, there was a large influx of black [[veteran]]s and their families moving into suburban white communities. As blacks moved in, whites moved out and the market value of these homes dropped dramatically. In observation of said market values, bank lenders were able to keep close track by literally drawing red lines around the neighborhoods on a map. These lines signified areas that they would not invest in. By way of racial redlining, not only banks but savings and loans companies, insurance companies, grocery chains, and even pizza delivery companies thwarted economic vitality in black communities.<ref>{{Cite journal |jstor=3132626 |title=Environmental Justice in the 21st Century: Race Still Matters |last1=Bullard |first1=Robert D. |journal=Phylon |volume=49 |issue=3/4 |pages=151–171 |year=2001 |doi=10.2307/3132626 |url=https://uwosh.edu/sirt/wp-content/uploads/sites/86/2017/08/Bullard_Environmental-Justice-in-the-21st-Century.pdf}}</ref> The severe lacking in civil rights laws in combination with the economic impact led to the passing of the [[Community Reinvestment Act]] in 1977.

Racial and economic redlining set the people who live in these communities up for failure from the start, so much so that banks would often deny people who came from these areas bank loans or offered them at stricter repayment rates. As a result, there was a very low rate at which people (in particular African Americans) were able to own their homes; opening the door for [[Slumlord|slum landlords]] (who could get approved for low interest loans in those communities) to take over and do as they saw fit.<ref>{{Cite journal |doi=10.1016/S0094-1190(02)00508-9 |title=Redlining, the Community Reinvestment Act, and private mortgage insurance |journal=Journal of Urban Economics |volume=55 |issue=2 |pages=278–297 |year=2004 |last1=Ross |first1=Stephen L. |last2=Tootell |first2=Geoffrey M.B. |url=https://opencommons.uconn.edu/cgi/viewcontent.cgi?article=1311&context=econ_wpapers |citeseerx=10.1.1.194.5280}}</ref>

==== Insurance ====
Gregory D. Squires wrote in 2003 that data showed that race continues to affect the policies and practices of the insurance industry.<ref name="Squires2016">{{cite journal |doi=10.1111/1467-9906.t01-1-00168 |title=Racial Profiling, Insurance Style: Insurance Redlining and the Uneven Development of Metropolitan Areas |journal=Journal of Urban Affairs |volume=25 |issue=4 |pages=391–410 |year=2016 |last1=Squires |first1=Gregory D |s2cid=10070258}}</ref> [[Racial profiling]] or redlining has a long history in the property-insurance industry in the United States.<ref name="Journal of American History 2021"/> From a review of industry underwriting and marketing materials, court documents, and research by government agencies, industry and community groups, and academics, it is clear that race has long affected and continues to affect the policies and practices of the insurance industry.<ref name="Squires2016" /> Home-insurance agents may try to assess the ethnicity of a potential customer just by telephone, affecting what services they offer to inquiries about purchasing a home insurance policy. This type of discrimination is called [[Linguistic Profiling|linguistic profiling]].<ref name="SquiresChadwick2006">{{cite journal |doi=10.1177/1078087405281064 |title=Linguistic Profiling |journal=Urban Affairs Review |volume=41 |issue=3 |pages=400–15 |year=2016 |last1=Squires |first1=Gregory D |last2=Chadwick |first2=Jan |s2cid=154136739}}</ref> There have also been concerns raised about redlining in the [[car insurance|automotive insurance]] industry.<ref>{{cite web |title=Michigan to crack down on uninsured drivers |url=http://www.itd.idaho.gov/transporter/2003/080803_Trans/080803_MIuninsured.html |author=Karen Bouffard |archive-url=https://web.archive.org/web/20071128033237/http://www.itd.idaho.gov/transporter/2003/080803_Trans/080803_MIuninsured.html |archive-date=2007-11-28 |work=[[The Detroit News]] |via=Idaho Transportation Department |url-status=dead}}</ref> Reviews of [[insurance score]]s based on credit are shown to have unequal results by ethnic group. The Ohio Department of Insurance in the early 21st century allows insurance providers to use maps and collection of demographic data by ZIP code in determining insurance rates. The FHEO Director of Investigations at the [[United States Department of Housing and Urban Development|Department of Housing and Urban Development]], Sara Pratt, wrote:<ref>{{Cite web |url=https://fairhousing.com/resources/history-insurance-redlining |title=The History of Insurance Redlining |website=National Fair Housing Advocate Online |access-date=2017-03-16 |archive-date=2017-03-17 |archive-url=https://web.archive.org/web/20170317143050/https://fairhousing.com/resources/history-insurance-redlining |url-status=dead}}</ref>

<blockquote>Like other forms of discrimination, the history of insurance redlining began in conscious, overt racial discrimination practiced openly and with significant community support in communities throughout the country. There was documented overt discrimination in practices relating to residential housing—from the appraisal manuals which established an articulated "policy" of preferences based on race, religion and national origin. to lending practices which only made loans available in certain parts of town or to certain borrowers, to the decision-making process in loans and insurance which allowed the insertion of discriminatory assessments into final decisions about either.</blockquote>

==== Mortgages ====
In reverse redlining, lenders and insurers target minority consumers by charging them more than a similarly situated white consumer would be charged, specifically marketing the most expensive and onerous loan products. In the 2000s, some financial institutions considered black communities as suitable for subprime mortgages. [[Wells Fargo]] partnered with churches in black communities, where pastors would deliver "wealth building" sermons encouraging new mortgage applications. The bank would then make a donation to the church in return for every new application. Many working-class blacks wanted to be included in the nation's home-owning trend. Instead of empowering them to contribute to homeownership and community progress, predatory lending practices through reverse redlining stripped the equity homeowners sought and drained the wealth of those communities for the enrichment of [[Financial institution|financial firms]]. The growth of [[subprime lending]], higher cost loans to borrowers with flaws on their credit records, prior to the [[2008 financial crisis]], coupled with growing law enforcement activity in those areas, clearly showed a surge in manipulative practices. Not all subprime loans were predatory, but virtually all [[Predatory lending|predatory loans]] were subprime. Predatory loans are dangerous because they charge unreasonably higher rates and fees compared to the risk, trapping homeowners in unaffordable debt and often costing them their homes and life savings.<ref name="The Recession's Racial Divide">{{cite news |last1=Ehrenreich |first1=Barbara |last2=Muhammad |first2=Dedrick |date=September 13, 2009 |title=The Recession's Racial Divide |work=The New York Times |url=https://www.nytimes.com/2009/09/13/opinion/13ehrenreich.html?pagewanted=print}}</ref><ref name="Powell">{{cite news |last=Powell |first=Michael |date=June 7, 2009 |title=Bank Accused of Pushing Mortgage Deals on Blacks |work=The New York Times |url=https://www.nytimes.com/2009/06/07/us/07baltimore.html}}</ref>

A survey of two districts of similar incomes, one being largely white and the other largely black, found that bank branches in the black community offered exclusively subprime loans. Studies found out that high-income blacks were almost twice as likely to end up with subprime home-purchase mortgages compared to low-income whites. Fueled by deep racism, some loan officers referred to blacks as "mud people" and to subprime lending as "ghetto loans".<ref name="The Recession's Racial Divide"/><ref name="Powell"/><ref>{{cite web |url=http://www.marketwatch.com/story/minority-families-face-wave-of-foreclosures |title=Minority families face wave of foreclosures: Consumer groups urge more 'teeth' in laws combating predators |first=Ruth |last=Mantell |date=July 6, 2007 |access-date=December 22, 2009 |website=marketwatch}}</ref> Lower savings rate and distrust of banks, stemming from this legacy of redlining, may explain why there are fewer financial institutions in minority neighborhoods. In the early 21st century, brokers and telemarketers actively encouraged subprime mortgages to be offered to minority residents. A majority of the loans were refinance transactions, allowing homeowners to take cash out of their appreciating property or pay off credit card and other debt.<ref>{{cite news |url=https://www.nytimes.com/2007/11/04/weekinreview/04bajaj.html |work=The New York Times |first1=Vikas |last1=Bajaj |first2=Ford |last2=Fessenden |title=What's Behind the Race Gap? |date=November 4, 2007}}</ref>

Redlining has helped preserve [[residential segregation in the United States|residential segregation]] between blacks and whites in the United States. Lending institutions such as [[Wells Fargo]] have shown that they treat black mortgage applicants differently when they are buying homes in white neighborhoods than when buying homes in black neighborhoods by offering them subprime and predatory loans when black residents try and integrate neighborhoods.<ref name="The Recession's Racial Divide" /><ref name="Powell" /><ref>{{Cite journal |jstor=2564210 |title=Exploring the Neighborhood Contingency of Race Discrimination in Mortgage Lending in Columbus, Ohio |last1=Holloway |first1=Steven R. |journal=Annals of the Association of American Geographers |volume=88 |issue=2 |pages=252–276 |year=1998 |doi=10.1111/1467-8306.00093}}</ref>

The inequality in loaning extends past residential to commercial loans as well; Dan Immergluck writes that in 2002, small businesses in black neighborhoods received fewer loans, even after accounting for business density, business size, industrial mix, neighborhood income, and the credit quality of local businesses.<ref>{{Cite journal |doi=10.1177/107808702401097781 |title=Redlining Redux: Black Neighborhoods, Black-Owned Firms, and the Regulatory Cold Shoulder |journal=Urban Affairs Review |volume=38 |issue=1 |pages=22–41 |year=2002 |last1=Immergluck |first1=Dan |s2cid=153818729 |url=https://scholarworks.gvsu.edu/cgi/viewcontent.cgi?article=1003&context=spnha_articles}}</ref>

Several State Attorneys General have begun investigating these de facto practices, which may violate fair lending laws. The [[National Association for the Advancement of Colored People|NAACP]] filed a class-action lawsuit charging systematic racial discrimination by more than a dozen banks.

These are not isolated incidents. According to the US Department of Justice, since 2021 alone, the department has announced 11 redlining cases and secured over $109 million in relief for communities of color that have been the victims of lending discrimination nationwide.<ref name="justice.gov">{{cite web |title=Office of Public Affairs {{!}} Justice Department Reaches Settlement with Wells Fargo Resulting in More Than $175 Million in Relief for Homeowners to Resolve Fair Lending Claims {{!}} United States Department of Justice |url=https://www.justice.gov/opa/pr/justice-department-reaches-settlement-wells-fargo-resulting-more-175-million-relief |website=www.justice.gov |access-date=5 April 2024 |language=en |date=12 July 2012}}</ref> The three most wealthy banks in the U.S.A, [[Bank of America]], [[JPMorgan Chase]], and [[Wells Fargo]] have all been discovered participating in discriminatory lending.

Wells Fargo, the largest residential home mortgage originator in the United States settled a lawsuit in 2012 after it was discovered they were using discriminatory lending practices against African-American and Hispanic borrowers between 2004 and 2009. This settlement, the second largest fair lending settlement in the history of the [[United States Department of Justice]], involves compensation of $184.3 million for wholesale borrowers who were steered into subprime mortgages or charged higher fees and rates than white borrowers due to their race or national origin. Wells Fargo agreed to provide $50 million in direct down payment assistance to affected communities.<ref>{{cite web |last1=Savage |first1=Charlie |title=Wells Fargo Will Settle Mortgage Bias Charges |url=https://www.nytimes.com/2012/07/13/business/wells-fargo-to-settle-mortgage-discrimination-charges.html |website=The New York Times |access-date=5 April 2024 |date=12 July 2012}}</ref><ref name="justice.gov"/> In this suit, it was shown that in 2007 customers in the Chicago area who borrowed $300,000 from Wells Fargo through an independent broker had on average paid $2,937 more in broker fees if African-American, and $2,187 more if Hispanic, compared with white borrowers with similar credit risk.<ref name="nytimes.com">{{cite web |last1=Savage |first1=Charlie |title=Countrywide Will Settle a Bias Suit |url=https://www.nytimes.com/2011/12/22/business/us-settlement-reported-on-countrywide-lending.html |website=The New York Times |access-date=5 April 2024 |date=21 December 2011}}</ref>

In 2011, [[Bank of America]], the second largest bank in the U.S. settled a lawsuit for $335 million. The lawsuit alleged that the bank charged higher fees and interest rates to African American and Hispanic borrowers compared to white borrowers with similar credit profiles.<ref name="nytimes.com"/> These citizens were completely taken advantage of. “Chances are, the victims had no idea they were being victimized, It was discrimination with a smile” said [[Thomas E. Perez]], the Justice Department’s assistant attorney general for civil rights. More recently, in 2017, [[JPMorgan Chase]] settled a lawsuit for $55 million. The lawsuit again alleged that the bank charged higher interest rates and fees to minority borrowers than to white borrowers with similar credit profiles for mortgage loans between 2006 and 2009.<ref>{{cite web |last1=Corkery |first1=Michael |title=JPMorgan to Pay $55 Million to Settle Mortgage Discrimination Complaint |url=https://www.nytimes.com/2017/01/18/business/dealbook/jpmorgan-55-million-mortgage-discrimination-settlement.html |website=The New York Times |access-date=5 April 2024 |date=18 January 2017}}</ref>

A quantitative analysis examining trends in racial discrimination in the U.S. housing market from 1976-2016 found that discrimination by the means of direct denial of mortgage rates has significantly decreased since the 1970s, but that racial gaps in mortgage costs have not.<ref name=":7">{{Cite journal |last1=Quillian |first1=Lincoln |last2=Lee |first2=John J. |last3=Honoré |first3=Brandon |date=March 2020 |title=Racial Discrimination in the U.S. Housing and Mortgage Lending Markets: A Quantitative Review of Trends, 1976–2016 |url=http://link.springer.com/10.1007/s12552-019-09276-x |journal=Race and Social Problems |language=en |volume=12 |issue=1 |pages=13–28 |doi=10.1007/s12552-019-09276-x |issn=1867-1748}}</ref> In addition, they found that the probability of receiving a response to an initial inquiry is 8% lower among blacks, 4% lower among Hispanics, and 3% lower among Asians compared to whites.<ref name=":7" />