The CFPB released a Report giving the results of some “matched-pair testing” it recently conducted with the Department of Justice (DOJ). The intent of the testing was to determine whether financial institutions treated Black small business owners seeking credit differently than White small business owners. Some troublesome examples of different treatment were noted during the testing. A couple of these include:
In one paired test, the Black tester was told his business was too small to qualify for any of the bank’s small business loan products. The paired White tester, with a business of the same size, met with the same bank representative at the same banking office and was encouraged to apply for a small business line of credit at the bank for the amount of 10 percent of his business revenues.
In one test, the White tester was told he qualified for a loan with the bank by a representative who provided encouragement to apply. The Black tester, with a similar business and credit profile, met with the same representative, who told him he did not qualify and suggested he go to a Small Business Administration loan office instead.
The CFPB acknowledged that this testing was limited but it hints that the actual incidence of different treatment is likely higher, especially considering that previous research indicates that marginally qualified applicants face the greatest risk of discrimination.
Published
2024/12/04
