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SBC Racism and Discrimination in Banking Hearing

Senate Banking Committee

Fairness in Financial Services: Racism and Discrimination in Banking

Thursday, December 1, 2022

Topline

  • Democrats focused on discrimination and racism that banks and financial institutions project on Black and Brown communities.
  • Republicans focused on the CFPB’s lack of knowledge of the racial makeup of borrowers while accusing banks of racism.

Witnesses

  • Lisa Rice, President and CEO, National Fair Housing Alliance
  • Marc H. Morial, President and CEO, National Urban League
  • Byron Donalds (R-Fla.-19), United States House of Representatives
  • Devon Westhill, President and General Counsel, Center for Equal Opportunity
  • Janai Nelson, President and Director-Counsel, NAACP Legal Defense and Educational Fund, Inc. (LDF)

Opening Statements


Chair Sherrod Brown (D-Ohio)

In his opening statement, Brown recognized that Black and Brown Americans are often left out of the financial system due to racism and discrimination. He also said that under current U.S. laws, Americans can be turned away from a bank because of their race. He noted that 11% of Black households and 9% of Hispanic households are unbanked, compared to 2% of White households.

Ranking Member Pat Toomey (R-Pa.)

In his opening statement, Toomey said banks do not knowingly discriminate because banks do not know an individual’s race or ethnicity but only their financial information. He closed by saying that the Consumer Financial Protection Bureau (CFPB) is abusing its power by implying that banks are directly discriminating against individuals because of their race.

Testimony

Ms. Lisa Rice, President and CEO, National Fair Housing Alliance

In her testimony, Rice said if we eliminate racist laws in our country, the U.S. would add approximately $5 trillion to our national GDP over a five-year period. She closed by stating that more needs to be done to close loopholes in our civil rights enforcement.

Mr. Marc H. Morial, President and CEO, National Urban League

In his testimony, Morial said that when people of color face racism in the financial realm, it causes significant monetary and non-monetary harm to both them and the nation. He noted that community members are often unable to prove that they faced discrimination. He closed by stating that every study has shown that eliminating discrimination in access to capital would benefit the country.

Rep. Byron Donalds (R-Fla.), United States House of Representatives

In his testimony, Donalds said that as a Black man, he has faced racism and discrimination and is grateful that discrimination is illegal. He followed by stating that our country’s financial system is much more inclusive than most financial systems in the world. He further noted that discrimination and racism should be taken seriously and emphasized the importance of laws, such as the Civil Rights Act, to address and eliminate racism and discrimination. He suggested that financial literacy should be prioritized and taught in underserved communities.

Mr. Devon Westhill, President and General Counsel, Center for Equal Opportunity

In his testimony, Westhill said it is rare that loans are denied due the individual’s race because lenders do not see race on applications. He noted that the disparity within the financial systems is not discrimination, bias, or racism. He closed by stating that it is more dangerous to accuse banks of racism when it is not the case.

Ms. Janai Nelson, President and Director-Counsel, NAACP Legal Defense and Educational Fund, Inc. (LDF)

In her testimony, Nelson said discrimination of Black people by banks and other financial institutions often goes unreported or underreported. She stated that financial institutions should help all Americans and noted that banks in Black and Brown communities often raise fees and rates to start and keep accounts. She concluded by noting that racial disparities that occur without motive still qualify as discrimination.

Question & Answer

Discrimination from Financial Institutions

Brown asked Rice, Morial, and Nelson if financial institutions discriminated against Black and Brown consumers. Rice responded in the affirmative and added that there was an increase of 8.7% in housing discrimination in 2022, which she noted was the highest number to date. Morial and Nelson agreed with Rice.

Sen. Tina Smith (D-Minn.) asked Rice what the consequences are of an economic system that excludes families from home ownership. Rice responded that discrimination hurts our economy greatly and huge wealth gaps exist between Black, Brown, and White households. Sen. Elizabeth Warren (D-Mass.), Mark Warner (D-Va.), and Chris Van Hollen (D-Md.) also voiced concern about racial discrimination of individuals from financial institutions.

Consumer Financial Protection Bureau

Brown asked if the panelists believed that the CFPB update, which made clear that discrimination is covered by Unfair, Deceptive, or Abusive Acts or Practices (UDAP), was an important move. Rice responded that it was important and that actions can be unfair and discriminatory. Morial agreed and stated that the CFPB can do more and has the authority to do so. Nelson agreed and added that the CFPB can do more under the Dodd-Frank Act.

Underrepresentation

Sen. Robert Menendez (D-N.J.) asked Rice and Nelson what the consequences are of underrepresentation of minorities in financial institutions. Rice answered that diverse representation when making decisions helps everyone, especially those who are not typically acknowledged or understood, such as Black and Brown communities and their struggles. Nelson agreed.

For more information on this hearing, please click here.

For an archive of past SIFMA hearing coverage, please click here.