Some 57% of black Americans agree with their personal opinion finance would be more prosperous if financial services companies treated them fairly. In contrast, 31% of the general public feels that way.
And 13% of black Americans earning $50,000 or less a year say they have been rejected entirely, more than double that of white Americans with a similar income.
These are among the revelations of a 2021 Edelman Trust Barometer Special Report, an online survey of more than 1,500 Americas last spring. The new study showed widespread awareness and acknowledgment of systemic biases, particularly from the black community.
The analysis comes as decades of racism and discrimination have created a strained relationship between communities of color and financial services companies that persists today. Public relations giant Edelman says its latest report, just released, aims to better understand the long-term impact of racism on the US financial system.
For their part, many corporate America, including banks, have pledged billions of dollars for racial equity efforts since 2020. Yet some big questions for this year and years to come are when will those pledges come to fruition? will fully materialize and what economic changes will they bring, especially in the black community?
Edelman reports that her inaugural research examines systemic inequalities and feelings of mistrust that dramatically impact the financial outcomes of people of color. He assessed white, black, Latina, and Asian populations to spot barriers to wealth accumulation. The report identified tangible solutions for banks, lenders, financial advisors and institutions to improve their relationships with communities of color.
Lisa Osborne Ross, CEO of Edelman US, has publicly reflected on how in 2021 there has been a new public awareness of the legacy of redlining and its implications for homeownership and wealth generation. She noted that some consequences of systemic racism in the financial services industry are stark.
For example, the typical white family has eight times the wealth of the typical black family. Black and Latino households are nearly five times more likely to be unbanked than white households. Black Americans make up just 3% of conventional mortgage applications but face the highest rejection rate. Black college graduates owe an average of $25,000 more in student loans than white college graduates.
Among the other key findings of the report:
- The majority of Black Americans report systemic bias and discrimination across all industry sub-sectors. For example, 71% report discrimination among mortgage lenders; 62% among banks; 60% at car lenders and credit card companies: and 54% at insurance companies
- 40% of the black population say they need to change their behavior or appearance to interact with banks compared to 26% for the general population.
- Confidence in the lending sub-sectors is particularly low. 73% of Black Americans say credit criteria for mortgages are biased; 68% report the same for car loans.
- Major negative experiences reported were given higher rates or fees due to skin color and were asked to provide more proof of employment than necessary.
- Due to mistreatment and bias, 51% of Black Americans and 47% of Latinx are more likely to use resources outside the system, such as pawnshops and payday loans. That number is 31% for white Americans.
Edelman provided BLACK CORPORATE Osborne Ross comments to help overcome the problem.
“The solutions in this space may not be easy, but they are in fact obvious and achievable. Many financial institutions are already doing the difficult and necessary work of reviewing, unpacking and redesigning their commitments to communities of specific colors.
She added: “Our research reveals that the most effective solutions may in fact be the simplest: building representation within the workforce, undertaking bias mitigation training, treating customers fairly and creating inclusive and welcoming environments.