Race, Gender, 'Redlining,' and the Discriminatory Access to Loans, Credit, and Insurance: An Historical and Empirical Analysis of Consumers Who Sued Lenders and Insurers in Federal and State Courts, 1950-1995

Abstract

Courts have failed to consistently remedy insurers’ and lenders’ discrimination against low-income individuals, women, and minorities. State and federal courts have tried to resolve disputes involving redlining, unequal access to capital, and insurance discrimination. Because of courts’ failures, Congress passed the Equal Credit Opportunity Act of 1974 (“ECOA”) and the Community Reinvestment Act of 1977 (“CRA”) to protect minorities and low income individuals. But the ECOA and CRA have not achieved their stated goals of eradicating either insurance or mortgage redlining.

In most states, the responsibility of enforcing federal fair-lending laws and eradicating all sorts of financial redlining is given to states’ insurance superintendents, finance commissioners, and human/civil rights commissioners. These agencies are responsible for enforcing a state’s anti-redlining and equal-access-to-credit laws. But state agencies and commissions--like their federal counterparts--are not effective; they have not been able to prevent or eradicate either insurance or mortgage redlining.

Additionally, federal and state judicial proceedings are truly inferior settings for addressing these types of consumers’ complaints. Courts are likely to allow impermissible and prejudicial factors to influence their procedural and substantive rulings. Prejudice could be avoided by state and federal regulators using their political power and acumen to lobby for the creation of courts specialized in eradicating insurance or mortgage redlining.

Keywords: discrimination, redlining, unequal access, insurance, Equal Credit Opportunity Act of 1974, ECOA, Community Reinvestment Act of 1977, CRA, civil rights, prejudicial factors, courts, alternative forums, state insurance superintendent, finance commissioners, human/civil rights commissioners, mortgage