Racism and Systemic Bias Still Endemic in the National Financial System: Report
Some 57% of black Americans agree that their personal finances would be more prosperous if financial services companies treated them fairly. In contrast, 31% of the general public feels that way.
And 13% of black Americans earning $ 50,000 or less a year report being rejected entirely, more than double that of white Americans with similar incomes.
These are among the revelations of a special report from the Edelman Trust 2021 Barometer, an online survey conducted last spring among more than 1,500 Americas. The new study has shown a wide awareness and recognition of systemic biases, especially on the part of the black community.
The analysis comes as racism and discrimination for decades created a strained relationship between communities of color and financial services companies that continues today. Public relations giant Edelman said its latest report, which just came out, aims to better understand the long-term impact of racism on America’s financial system.
For their part, many American companies, including banks, have pledged billions of dollars for racial equity efforts since 2020. Yet the big questions for this year and the years to come are when these commitments will materialize and what economic changes will they bring, especially in the black community?
Edelman reports that his groundbreaking research examines systemic inequalities and feelings of mistrust that have a huge impact on the bottom line of people of color. He assessed white, black, Latin and Asian populations to spot barriers to wealth accumulation. The report identified tangible solutions for banks, lenders, financial advisers and institutions to improve their relationships with communities of color.
Lisa Osborne Ross, CEO of Edelman US, has publicly explained that in 2021, the public has become aware of the legacy of redlining and its implications for homeownership and wealth creation. She noted that some of the consequences of systemic racism in the financial services industry are striking.
For example, the typical white family has eight times the wealth of the typical black family. Black and Latin households are nearly five times more likely to be unbanked than white households. Black Americans make up only 3% of conventional mortgage applications, but face the highest refusal rate. Black college graduates owe an average of $ 25,000 more in student loans than white college graduates.
Among the other main findings of the report:
- The majority of black Americans report systemic bias and discrimination across all sub-sectors of the industry. For example, 71% report discrimination among mortgage lenders; 62% among banks; 60% among auto lenders and credit card companies: and 54% among insurance companies
- 40% of the black population say they need to change their behavior or appearance to interact with banks compared to 26% for the general population.
- Confidence in the credit sub-sectors is particularly low. 73% of black Americans say credit criteria for mortgages are biased; 68% say the same for auto loans.
- The main negative experiences reported were given higher rates or fees due to skin color and were asked to provide more proof of use than necessary.
- Due to abuse and prejudice, 51% of Black Americans and 47% of Latinxes are more likely to use resources outside the system, such as pawn shops and payday loans. That number is 31% for white Americans.
Edelman provided BLACK COMPANY Osborne Ross comments to help conquer the problem.
“The solutions in this space may not be easy, but they are actually obvious and achievable. Many financial institutions are already doing the hard and necessary work of reviewing, unpacking, and redesigning their commitments to specific communities of color. “
She added, “Our research reveals that the most impactful solutions may in fact be the simplest: strengthen representation in the workforce, undertake bias mitigation training, treat customers fairly and create inclusive and welcoming environments.