Color and credit: Race, regulation, and the quality of financial services

Taylor A. Begley and Amiyatosh Purnanandam

Journal of Financial Economics, 2021, vol. 141, issue 1, 48-65

Abstract: The incidence of misselling, fraud, and poor customer service by retail banks is significantly higher in areas with higher proportions of poor and minority borrowers and in areas where government regulation promotes an increased quantity of lending. Specifically, low-to-moderate-income (LMI) areas targeted by the Community Reinvestment Act have significantly worse outcomes, and this effect is larger for LMI areas with a high-minority population share. The results highlight an unintended adverse consequence of such quantity-focused regulations on the quality of credit to lower-income and minority customers.

Keywords: Product quality; Discrimination; Regulation; Consumer protection (search for similar items in EconPapers)
JEL-codes: G21 G28 L13 L14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:141:y:2021:i:1:p:48-65

DOI: 10.1016/j.jfineco.2021.03.001

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