Don’t think that because we the people elected our first black president more than a decade ago that the old “black tax” is a thing of the past. Ask many black business owners, and I’m sure you’d soon learn it’s alive and thriving. Freddie Lee James Jr. told St. Louis Public Radio his gourmet sauce business brought in $200,000 in annual profits for years and is currently available in more than 1,000 stores in the United States and Jamaica. Still, he and his wife, Deborah, haven’t been able to land a loan for the business, according to the radio station.
“We have 750-760 credit score,” Freddie Lee James told public radio. “We pay all our debts. We don't have no problems with that. But they were saying that the sauce business is not generating enough capital to their standards.” Translation: Too black. Black credit applicants are more than two times more likely to have their applications denied than their white counterparts, according to U.S. Census data the Federal Reserve released. The data showed that of the black people who applied for credit at banks, 53.4% were turned down in 2014. That’s compared to white credit seekers who were only turned down 24.7% of the time. This is nothing new.
Discriminatory lending has long been a hurdle to home and business ownership for black people. As a federal initiative to increase homeownership and increase employment, the Home Owners' Loan Corporation was created in 1933 to give those who lost their homes due to foreclosure a chance to buy them back with low-interest loans, according to research from the Encyclopedia of Human Services and Diversity. As a way of evaluating the lending risk, federal surveyors drew red lines on maps, branding black communities the least opportune for banking loans, giving birth to the practice of redlining years before sociologist John McKnight would later coin the term in the 1960s, researchers stated. The use of the corporation's "residential security maps" became "somewhat of a standard" in both public and private bank lending, leading to "massive disinvestment" in black communities, according to the research.
Even in the decades after the Fair Housing Act originally passed in 1968 and made discriminatory lending illegal, an analysis of 31 million records by Reveal from The Center for Investigative Reporting revealed in 2018 that redlining remained in 61 metro areas from places like Atlanta, Philadelphia, and St. Louis to smaller cities like Mobile, Alabama and Gainesville, Florida.
Yet regulators rated 99% of banks “satisfactory or outstanding,” and President Donald Trump’s administration has further watered down standards banks must meet regarding more equitable access to lending in low-income communities, Reveal reported. The U.S. Justice Department didn’t sue one lender for racial discrimination in Trump’s first year in office, Reveal reported. Ask Trump, and he’d probably say that’s because he’s solved the problem, but those who know better can call the opportunistic denial what it is.
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The gap in homeownership between white and black Americans is "now wider than it was during the Jim Crow era," Reveal reported. Banks practically monopolized our list of companies to boycott in 2020. That’s because many of the big players are already boycotting black and brown people in practice and have been for decades. Necessity mothering invention like it likes to do, the lack of access coupled with growing frustration with racially motivated police brutality inspired a movement aimed at inspiring support for black-owned banks. OneUnited Bank President and COO Teri Williams thanked rapper and activist Killer Mike, who helped lead the movement, and further encouraged black people to buy property in black neighborhoods “even if you have to buy a hut!” “The biggest difference between black and white wealth today is the value of home equity,” the bank’s website stated.
As for combatting discriminatory lending practices, that’s a problem that shouldn’t be pushed to the laps of black entrepreneurs and aspiring business owners to fix because it’s not one we created. Big banks often choose to bypass otherwise well-positioned black-owned companies seeking loans, and that’s on big banks to resolve. As consumers in this capitalistic society, we have the option of taking our business elsewhere.