People in minority communities are more likely to submit grievances to the government’s consumer watchdog about their banks than those in predominantly white areas, a trend that raises questions about fair lending practices, the National Community Reinvestment Coalition said in a report released Tuesday.
The advocacy group analyzed 17,168 complaints that the Consumer Financial Protection Bureau received as of June 20 from bank customers who had trouble opening accounts, depositing money, withdrawing funds and using debit cards, among other things.
Using the Zip codes included in the complaints and Census Bureau data, researchers determined that black and Hispanic neighborhoods reported a disproportionate number of problems with their banks. Consumers from predominantly black communities accounted for nearly 10 percent of complaints to the CFPB, though they represented only 6 percent of households examined in the study.
NCRC researchers said banks were more likely to address the concerns of consumers from predominantly white neighborhoods than those from minority areas. Yet minority customers were more likely to receive monetary relief as compensation for their grievances, according to the report.
“The level of products and services serving communities of color continues to be second-rate,” said John Taylor, president and chief executive of the NCRC. “There isn’t the same level of commitment to communities of color from the banks that we’d all like to see.”
Industry groups took issue with the methodology of the NCRC report and the conclusions drawn from the findings. For instance, industry officials said, the NCRC could not definitively determine the race of those complaining about their banks
“The analysis is flawed and does not support the report’s recommendations,” said Richard Riese, senior vice president of the Center for Regulatory Compliance at the American Bankers Association, a trade group. “The banking industry’s record of supporting a color-blind, discrimination-free lending environment remains strong.”
The NCRC’s report did not name individual banks, but the CFPB has jurisdiction over institutions with at least $10 billion in assets, including the nation’s largest financial firms.
The findings highlight deep-rooted tensions within minority communities over disparities in financial services. For decades, large banks had few, if any, branches in communities of color, leaving families with limited access to mortgages and auto loans. The Community Reinvestment Act, passed in 1977 to encourage banks to lend to low- and moderate-income communities, helped narrow gaps in service.
But the housing crisis revealed a new kind of discrimination against black and Hispanic borrowers, who were disproportionately targeted by unscrupulous lenders for risky, high-cost mortgages, advocates say. Once the housing market crashed, the unsustainable subprime loans led to an enormous loss of wealth for minorities.
The NCRC is calling on the banking regulators to use the CFPB complaint database to assess whether institutions are providing affordable and reliable loans and bank accounts.
Officials at the CFPB declined to comment on the report, but a spokesman said consumer complaints help the bureau “supervise companies, enforce federal consumer financial laws and write rules and regulations.”
The coalition’s report arrives amid a growing number of bank branch closings that advocacy groups say could exacerbate service disparities in communities of color. Nearly 1,000 bank branches closed across the country for the year ended June 30, according to data from the Federal Deposit Insurance Corp.
“It’s one thing to close a branch in a neighborhood that already has six, but its a whole other thing to be the last branch standing and to close,” Taylor said. “You can guarantee that the basic banking services for that neighborhood will be check cashers, pawn shops and payday lenders.”