Fair Lending

 

In January 2000, my legislative office released a business lending disparity study that showed disparities by neighborhood race and by neighborhood income. I then called on the City Controller’s office to conduct a similar study on an annual basis through a City Council resolution approved unanimously. I also required banks authorized to receive City deposits to submit an annual statement of community reinvestment goals for low and moderate income (LMI) neighborhoods through an ordinance also unanimously approved by City Council and signed by the Mayor into law. These legislative actions caused the market to respond with increased small business lending to LMI neighborhoods. 

When we examined the data more closely along with data on neighborhood race, we found that lending in lower-income and majority-Black neighborhoods had not increased, but that the LMI increase was due to lending in moderate-income White neighborhoods. We were not able to determine if there was lending discrimination based on the race of loan applicant, just disparities based on the majority race of the neighborhood. I then decided to have all lending patterns of our City depository banks examined on an annual basis and found even more disparities – including disparities based on the race of the applicant in home lending. Rather than trying to reach beyond local legislative authority which would ultimately be preempted by state and federal law, I decided to work with the banking community on a pro-active solution.

In January 2007, the Philadelphia Business Builder Loan Program launched with six banks committing to over $20 million to assist LMI and minority small business borrowers. The program was modeled after a previous bank consortium program for home mortgages.

In 2009, a total of 19 applications were made and 17 were denied. Over a four-year period, a total of 12 loans were made totaling only $422,000.  The banks committed the money before the economic recession occurred due to the collapse of financial institutions.

More recent disparity analyses show an increase in small business lending in minority neighborhoods since that time, but that may be due to the gentrification of those neighborhoods and it may represent lending to more moderate-income White borrowers.