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NCRC ‘Mystery Shopper’ Test: Banks Discriminated in Business Lending

By David Baumann - September 05, 2023

Findings come amidst debate over CFPB small business reporting rule, which credit union groups have opposed.


Minority group “mystery shoppers” seeking small business loans in 34 New York City bank branches were more likely to be treated poorly than their White counterparts, the National Community Reinvestment Coalition (NCRC) said in a new report.

“White ‘mystery shoppers’ were more consistently treated with courtesy—and were more than twice as likely as Black participants to be offered one-on-one help completing an application,” the NCRC said.

The report found that testers experienced discrimination in 37 of the 108 interactions they had with banks.

The financial institutions were tested during the summer of 2022.

The report does not identify the banks that were tested but did say that all were subject to the Community Reinvestment Act (CRA). And since credit unions are not subject to the act, it appears none of the financial institutions in question were credit unions.

Many of the financial institutions tested “have not only received strong CRA ratings but have also made public pledges to support racial equity by meeting the needs of minority business owners,” the coalition said.

Broader Context of the Report

The study was released during a crucial time in which policymakers are struggling over a CFPB rule that requires financial institutions to report their lending to women- and minority-owned businesses.

A Texas federal court has issued an injunction prohibiting the CFPB from implementing the new law. However, the suit that resulted in the injunction was filed by the American Bankers Association, its Texas affiliate and a Texas bank. As a result, the injunction was issued blocking enforcement only for those groups.

Members of credit union trade groups and others have asked to be included in that injunction—a request the CFPB has opposed.

Additional Findings

In its report, the NCRC also reported that:

–Bank staff were more cordial, affirming and helpful to White customers than to Black or Hispanic customers.

–By a statistically significant margin, bank employees encouraged White customers to apply for a small business loan more often than they did for Black and Hispanic customers.

–Out of 36 “multi-layered” tests, the group’s fair lending review revealed 51 different instances of discrimination under the Equal Credit Opportunity Act.

–In 10 cases, Black or Hispanic customers were offered a different product than White customers.

–In one case, a bank employee made an antisemitic comment.

–A Hispanic tester was told they needed to be a customer of the bank for at least a year before they could get a loan; a White tester was told they only needed to be a customer and could obtain a loan in about two weeks.

–Black and Hispanic testers who were more qualified for a loan than White customers were quoted a higher interest rate then the White customers.

What Comes Next?

The study could add fuel to the fire in the debate over the CFPB small business lending rule.

Resolutions that would void the rule have been introduced in both Houses of Congress.

And last week, eight Republican members of the Senate Banking Committee asked CFPB Director Rohit Chopra to hold off on implementing the rule until the legal issues are settled—something that Chopra has so far refused to do.

“As a result, the Bureau arbitrarily requested thousands of community banks, credit unions and other financial institutions who are not members of the American Bankers Association or Texas Bankers Association work towards implementation of the burdensome and needlessly complex rule, while also requesting that a select few receive relief,” they wrote.

Republican senators signing the letter were John Kennedy of Louisiana, Mike Crapo of Idaho, Cynthia Lummis of Wyoming, Thom Tillis of North Carolina, Steve Daines of Montana, Bill Hagerty of Tennessee, J.D. Vance of Ohio, and Kevin Cramer of North Dakota.

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