Consumer Finance Insights
December 30, 2021

Emory Law Journal Reports New Studies That Authors Claim Show Racial Inequities in Lender Advertisements

A new essay published in the Emory Law Journal argues that two empirical studies of advertising by certain banks and payday lenders in Houston, Texas indicate that payday lenders steer African Americans and Latinos to their products, while banks market primarily to white consumers.  The authors suggest that, consistent with the results of their studies, mainstream banks should audit themselves to detect whether they are failing to market to African Americans and Latinos.  They also urge regulators to take a more aggressive approach as to what constitutes discriminatory advertising, including by focusing on whether the races of models in lenders’ advertisements mirror the general population.

In Advertising Injustices: Marketing Race and Credit in America (the “Essay”), the authors, a University of Houston Law Center Professor and a law student, present two studies they conducted in fall 2014 and fall 2020.  The first study “evaluated advertising on payday lending and auto title lending websites and in their stores in Houston, Texas, in fall 2014.”  Essay, at 1636.  The second study “evaluated the advertising on websites of banks located in Houston, Texas, in both fall 2014 and fall 2020.”  Id.  The authors represent that while African Americans make up roughly 12% of the Texas population, almost 35% of the pictures on the payday and title lender websites they reviewed were of African American models.  Id. at 1638.  They also claim that “[w]hile Latinos comprise less than 20% of payday and title lending customers, more than 30% of the pictures [on the websites the authors reviewed] were of Latino customers.”  Id.  In contrast, the authors represent that “almost 30% of the websites [they reviewed of mainstream banks] did not have a single picture of an African American model,” and “[a]lmost 75% of [the] mainstream banks [they reviewed] did not feature a single picture of a Latino individual.”  Id.  Further, the authors claim that “the advertising at payday and title lending storefronts in 2014 reveals these lenders’ focus on Latino borrowers.”  Id. at 1640.  According to their studies, “[t]he vast majority of these locations, 77.30%, had advertisements in Spanish.  In contrast, not a single mainstream bank website in 2014 had an advertisement in Spanish.”  Id.

In the Essay, the authors write that their studies “reveal that fringe banks target African Americans and Latinos, while mainstream banks often focus their advertising on whites.”  Id. at 1638.  They argue that, as one negative consequence of their findings, “[a]dvertising that excludes African Americans and Latinos from mainstream banks harms these groups by not educating them about the products that these banks offer.”  Id. at 1643.  As a result, the authors urge “[b]oth policymakers and banks themselves” to “chang[e] advertising practices that perpetuate economic subordination by steering African American and Latino communities to fringe banks and away from mainstream banks.”  Id. at 1645.  For example, the authors urge mainstream banks to “audit their websites to determine whether the pictures on them are representative of the population of their states or their customers.”  Id.  They also argue that “banks should insist that their outside advertising firms or their internal advertising teams have diverse racial backgrounds.”  Id. at 1646.  As to policymakers, the authors argue that the Equal Credit Opportunity Act (ECOA) and Regulation B should be expanded to mirror the Fair Housing Act’s (FHA) prohibition on discriminatory advertisements. Id. at 1647-49.  They also argue that, consistent with the findings from their studies, “regulators charged with enforcing the ECOA could take a more aggressive approach to advertising, including looking specifically at the pictorial content of advertisements.”  Id. at 1650.  Finally, the authors suggest that the Community Reinvestment Act (CRA) is “a feasible and desirable regulatory mechanism to address advertising discrimination,” such as the pictorial discrimination they found in their studies.  Id. at 1654.

Lenders should take note of the Essay and the studies it describes, as they may foreshadow the future direction of regulators’ fair lending enforcement efforts. Lenders should also audit themselves to ensure that they are in compliance with the ECOA and Regulation B, FHA, and CRA, to ensure that they are advertising their credit in a fair and non-discriminatory manner.  LenderLaw Watch will continue to monitor enforcement activity against lenders and highlight potential changes to regulators’ enforcement priorities and approaches as they arise.

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