Fair credit denials limit wealth-building for Black consumers and businesses

CFPB lawsuit settlement forces agency to collect data on credit access

Charlene Crowell NNPA contributor | 3/12/2020, midnight

For much of Black America, access to fair and responsible credit has been an elusive promise. Whether as consumers seeking the pride of homeownership or businesses seeking to begin or expand, securing credit remains an age-old, arduous and often frustrating pursuit - despite a slew of federal and state laws enacted to overcome these long-standing racial disparities.

But on Feb. 26, the Consumer Financial Protection Bureau (CFPB) settled a federal lawsuit brought by small business owners and advocates who together challenged CFPB’s lack of enforcement of anti-discrimination laws that protect minority-owned and women-owned businesses from unequal access to financial products and services.

The lawsuit charged the CFPB with failure to issue required regulations that mandate that financial institutions collect and maintain important data for these two types of businesses.

The settlement sets out specific, time-lined goals as well as an ongoing review process. Although its terms require federal court approval before it can take effect, plaintiffs were jubilant in their ability to force CFPB into collecting and disclosing data.

“It’s safe to say that without this lawsuit, the Trump administration would be content to continue its unlawful refusal to protect women, minority, and small business owners from discrimination,” said Anne Harkavy, executive director of Democracy Forward that represented the plaintiffs.

Based in the District of Columbia, this nonprofit organization has a two-pronged purpose: publicly speaking about unlawful government acts and empowering those who have been harmed to fight back.

Plaintiffs in the case include the National Association for Latino Community Asset Builders (NALCAB), and small businesses located in Waterloo, Iowa and in Portland, Oregon.

Paulina Gonzalez-Brito, executive director of the California Reinvestment Coalition, also reacted.

“For nearly a decade since Dodd-Frank became law, our members throughout California have been on the frontlines pushing for this rule to move forward,” noted Gonzalez-Brito. “This settlement is a victory for impacted communities and small business owners of color striving to build wealth and a better life.”

Key actions that CFPB has agreed to include:

• By September 2020, publicly release a draft proposal for collecting small business data;

• By October 2020, establish a Small Business Advocacy Review panel that will offer direct input on behalf of the small business plaintiff groups;

• In negotiation with plaintiffs establish deadlines for each stage of rulemaking - including a final data collection rule;

• Every 90 days, submit status reports detailing CFPB’s progress toward the data collection rule; and

• Accept court-ordered deadlines if parties fail to agree.

Strong and credible data collection can and often does make the difference between anecdotal critiques and eventual court actions. Particularly for Black businesses, the vigilant and long-term struggle for access to credit has often translated into home equity loans for financing new businesses or business expansion. But without access to affordable credit and an absence of home equity, the likelihood of Black businesses being under-capitalized runs high.

At the same time, ample data paints a picture of drastic disparities when it comes to Blacks buying a home.