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Banks Shouldn’t finance LGBTQ+ discrimination

A recent NBC News report showed that Paycheck Protection Program (PPP) loans, established by the CARES Act in March 2020 as response to the coronavirus pandemic, were awarded to multiple nonprofits that have expressed hostility to hiring LGBTQ+ staff. These organizations received hundreds of thousands of dollars in potentially forgivable loans.

PPP loans are federally backed, but issued by private lenders. There are few restrictions on which employers can receive these loans. The applications for PPP loans were only one page long, so it’s likely that many banks didn’t know much about the applicants when they made their lending decisions.

They should have known more.

Many banks have adopted LGBTQ+-friendly non-discrimination policies, and have spent millions of dollars on diversity initiatives and community engagement plans. Lenders should add to those policies a commitment to conduct research into their loan applicants to determine whether the applicants have anti-discrimination policies that match the lenders’ own policies. When banks promote outreach to marginalized groups, while granting loans to organizations that openly discriminate against these same groups, it sends a mixed message to their communities. These messages can be avoided with proper research.

The Supreme Court’s ruling in Bostock v. Clayton County makes it especially problematic for banks to be associated with employers with anti-LGBTQ+ employment policies. The Bostock decision affirmed that employment discrimination based on sexual orientation and/or gender identity is a form of sex discrimination, which is prohibited by federal law. Organizations that refuse to hire LGBTQ+ employees are likely in violation of Title VII of the Civil RIghts Act of 1964, and lenders should be especially careful to avoid being affiliated with such groups.

There also have been major concerns that the PPP loan process itself is rife with discrimination, based on the results of two investigations conducted by NCRC in 2020. Through matched pair “mystery shopping” tests in 2020, NCRC determined that banks were discriminating against potential clients in the pre-application phase of PPP loans. A total of 92 bank branches in the Washington, D.C., and Los Angeles metro areas were tested, and the results showed that Black and Latino testers who inquired about PPP loans were not given the same treatment as their White counterparts. In Los Angeles, 35% of the tests resulted in the White testers being favored over testers of color. In Washington, D.C., 43% of the tests resulted in White testers being favored over testers of color.

PPP loans have been a vital tool for helping businesses compensate their employees and stay afloat during a massive economic downturn. It is essential, however, for lenders to ensure that they are carefully screening their applicants’ anti-discrimination policies before making loan decisions. It is also essential that lenders review their own fair lending procedures, in order to prevent systemic bias.

Jake Lilien is NCRC’s compliance program manager.

Photo by Giorgio Trovato on Unsplash

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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