“Redlining” is the act of denying services, either directly or through selectively raising prices, to residents of a certain area based on race or ethnicity. Federal law prohibits creditors from this type of discrimination, but New Jersey-based Hudson City Savings Bank is now on the hook for a total of nearly $33 million for allegedly providing unequal access to credit in parts of four states. [More]
The New York Times combed through the data and found that when the banks close branches, they’re doing it in poorer neighborhoods. And when they open a new branch, it’s more likely to be in a well-off area. While that makes business sense, it could violate the spirit of the Community Reinvestment Act which was passed to curb “redlining,” where lower-income neighborhoods are discriminated against by the financial services industry.
Regulating consumer predators is a bit like Whac-a-Mole. No matter how many times you put the bad guys out of business, they keep popping up again and again. Maybe it is time to consider a lifetime ban from financial services for the worst offenders. The Consumer Financial Protection Agency proposed by the President may be just the right watchdog for the job of handing out such banishments.
The NAACP this week filed a class action suit accusing Wells Fargo and HSBC of charging unfairly high interest rates to African American homeowners with high incomes and high credit scores. The banks were quick to slap down the charges as “totally unfounded and reckless,” even in the face of convincing evidence from the NAACP.
Prospective home buyers may need to pony up more cash up front to secure a mortgage if they are looking to buy in one of hundreds of zip codes that lenders now consider “soft markets.” Countrywide and GMAC recently ranked over 1,000 zip codes on a risk scale of 1-5. Lenders to moderate risk zip codes, ranked 1-3, may require borrowers to pay an additional 5% down payment. Unlucky buyers in high risk zip codes, ranked 4 or 5, are now automatically required to put down the extra 5%.