African-Americans, Latinos and others have been the longstanding victims of racial discrimination in the financial services sector, from redlining to the subprime mortgage scheme that preyed upon Black people and led to historic losses in their wealth. After the Great Recession, Democrats under President Obama instituted the Consumer Financial Protection Bureau (CFPB), which has brought government oversight over banks, and has guarded against scams and rip-offs from financial predators, brokers and lenders. Now, President Trump and Congress are gutting the CFPB and repealing other Obama-era measures designed to fight racial discrimination against consumers, once again stacking the deck against consumers, particularly, consumers of color.
As Mother Jones reported, Trump and Congress have eliminated anti-discrimination rules for payday loans, mortgages car loans and other aspects of the financial services sector. For example, the Department of Housing and Urban Development is delaying enforcement of a measure from the Obama administration that requires local governments to identify racial segregation in housing and devise a plan to attack it. HUD Secretary Ben Carson, who warned that public housing should not be made too “cozy” for poor people, is presiding over $8.8 billion in cuts to his department as he is caught ordering $31,561 in dining furniture for his office. Lynn Patton, Trump’s party planner and now the HUD administrator for New York and New Jersey, has undermined Obama-era efforts to battle racial housing segregation in Westchester, New York.
Congress repealed a CFPB rule prohibiting clauses in financial contracts that prevent class-action lawsuits and require arbitration. Under the Trump-installed provisional CFPB chief Mick Mulvaney, the Office of Fair Lending and Equal Opportunity — which protects borrowers from racially discriminatory lending — has lost its enforcement power. The office has collected hundreds of millions of dollars in fines on behalf of borrowers of color who suffered discrimination in mortgage and auto lending, including a $169 million settlement against GE Capital in 2014 for failing to give credit cards to 108,000 customers because they were Latino.
Mulvaney has also announced a delay in compliance with new regulations for payday loans, the short-term loans with often exorbitant interest rates of hundreds of percentage points that disproportionately impact vulnerable communities, including members of racial minority groups. The CFPB recently dropped lawsuits against four payday lenders accused of charging interest rates of between 440 and 950 percent. Dismantling the CFPB is a priority, with Mulvaney as a fox guarding the henhouse. In the 2015-2016 election cycle, then-Congressman Mulvaney received nearly $32,000 in political contributions from payday lenders.
Republicans are in control of the government and leading the charge in the financial exploitation of Black people and the decimation of protections meant to attack institutional racism, but Democrats are complicit as well. Sen. Tim Kaine (D-Virginia), with the backing of a dozen Democratic senators, is sponsoring a financial deregulation bill that would undermine the ability of the CFPB to enforce laws against housing discrimination by blocking the agency from collecting data on mortgage overcharges and predatory behavior against families of color.
The legislation would exempt the 85 percent of banks and credit unions that make 500 or fewer mortgages from reporting this data, as required by an amendment to the Home Mortgage Disclosure Act (HMDA) enacted through the Dodd-Frank Wall Street Reform and Consumer Protection Act. A coalition of civil rights, fair housing, consumer and community organizations wrote a letter to the Senate opposing the bill on the grounds that it “undermines fair lending oversight & investment in underserved communities.” “For people of color, low- to moderate-income families, and borrowers in rural areas, access to mortgage credit remains tight,” the letter said.
“While the numbers of loan originations have gone down for all borrowers, African Americans and Latinos have experienced the steepest declines. … The stark disparities in access to mortgage credit and the continued struggle for economic recovery in the communities hit hardest by the financial crisis call for a strengthening of our nation’s fair lending laws, specifically HMDA, not a weakening of them. Quite simply, the updated HMDA data will provide critical information about whether similarly situated borrowers and underserved communities are receiving equitable access to mortgage credit, data that we lacked a decade ago when the crisis hit.”
This administration also seeks to weaken the Community Reinvestment Act, which Congress passed in 1977 to combat redlining, the refusal of banks to lend to low-income, Black and Brown communities. Echoing the sentiments of the banking lobby seeking to weaken the lending rules, the Treasury Department calls the act “outdated” and in need of “modernization.”
Trump — who claimed responsibility for lowering the Black unemployment rate and now presides over the undermining of anti-discrimination laws in housing and financial services — has a long history of racially discriminatory practices in his businesses. In 1973, the Department of Justice sued Trump and his father Fred for violating the Fair Housing Act by refusing to rent to African-Americans in their New York housing developments. As part of the evidence the federal government gathered, Black testers for the New York City Human Rights Division who went to Trump properties were turned down for apartments, discouraged or steered towards apartment buildings with more people of color, while white testers were offered rentals. Under a racial code in their apartment application process, a piece of paper was attached to Black applicants’ paperwork marked with the letter “C” for colored.
In 1975, Trump settled the case without admitting wrongdoing, after claiming the federal government was forcing him to rent to “welfare recipients.” His attorney was Roy Cohn, former counsel for redbaiter Sen. Joseph McCarthy. Three years later the federal government charged that the Trumps continued to discriminate against Black people despite a stipulation they would not continue to deny apartments to them. The housing discrimination lawsuit was one of the largest in U.S. history. In 1983, The New York Times reported that two Trump properties had white tenant majorities of 95 percent.
Meanwhile, the Senate is poised to vote on bank deregulation, one of its top priorities, in the coming week.