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ABA: Mystery Shopping: Taking the Mystery out of Fair Lending

ABA, July 6, 2021, Mystery Shopping: Taking the Mystery out of Fair Lending

Mystery shopping is a long-standing testing technique used by various agencies and entities to test for fair treatment in credit transactions, particularly in the housing market. The surging focus on racial equity across many different aspects of society and commerce includes more attention on fair lending practices at banks. For example, one of the immediate priorities for the Biden administration is to advance racial equity and civil rights. Similarly, racial equity is a current stated priority for the Consumer Financial Protection Bureau, with Acting Director Dave Uejio remarking, “It’s also time for the CFPB to take bold and swift action on racial equity. . . . This of course means that fair lending enforcement is a top priority and will be emphasized accordingly. But we will also look more broadly, beyond fair lending. . . .”

In November 2020, a study was released by the National Community Reinvestment Coalition regarding Paycheck Protection Program loans that used matched-pair testing. NCRC performed past matched-pair “mystery shopper” tests in 2017, 2019, and earlier in 2020.

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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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