Story at a glance
- The study found Black and white borrowers experienced “different levels of encouragement to apply for loans, different products offered and different information provided by bank representatives.”
- Black borrowers were offered different products and treated significantly worse than white borrowers in 43 percent of the tests, the study found.
- The tests were done over the telephone between April 27 and May 29 with 17 banks in the Washington, D.C. metropolitan area.
A new study claims white applicants looking to secure Paycheck Protection Program (PPP) loans to help small businesses stay afloat during the coronavirus pandemic were treated more fairly than Black applicants.
The study conducted by the National Community Reinvestment Coalition (NCRC) sent Black and white borrowers with similar credit and asset characteristics to talk directly with banks about the federal loans.
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The study found Black and white borrowers experienced “different levels of encouragement to apply for loans, different products offered and different information provided by bank representatives.”
Black borrowers were offered different products and treated significantly worse than white borrowers in 43 percent of the tests, the study found.
The tests were done over the telephone between April 27 and May 29 with 17 banks in the Washington, D.C., metropolitan area.
Matched-pair testing is used to detect discrimination by using people of different races with similar profiles to determine differences in treatment, according to NCRC.
“The tests show that old patterns of systemic discrimination in lending didn’t magically disappear when banks made PPP loans,” Jesse Van Tol, CEO of NCRC, said in a statement.
“Banks still have a long way to go to root out discrimination, and clearly they need better training for their employees and more testing to create internal checks and internal pressure to drive out racist practices.”
The federal program that delivered emergency funds to nearly 4.9 million borrowers in less than three months as the coronavirus ravaged the economy has been criticized after some recipients included top lobbying and law firms, investment companies, private-equity backed restaurants and Kanye West’s clothing business, according to Politico.
More than $520 billion in loans were given out and about $130 billion remains uncommitted, according to Politico.
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