NAACP Reacts to Plans to Address Discriminatory Lending Practices

In response to Wells Fargo's announcement today of its plans to address gaps in Black homeownership, NAACP President and CEO Derrick Johnson released the following statement:

"The recent Bloomberg report documenting challenges in Black homeownership was infuriating. For far too long, we have seen how public policy and industry lending practices have widened the racial wealth gap while preventing Black Americans from accessing the opportunities for homeownership that they deserve," said NAACP President & CEO, Derrick Johnson. "These inequities are not limited to first-time buyers but also impact the ability for long-time, qualified borrowers to refinance at rates similar to white counterparts. We're pleased that Wells Fargo plans to address this pattern of injustice, and we welcome efforts by Wells Fargo and other lenders to acknowledge gaps in minority homeownership caused by historical, systemic inequity in access to credit.

"While the steps Wells Fargo has announced are an important starting point, we must be clear: these steps are a floor, not a ceiling, if these institutions are to truly achieve racial parity in practice. The Bloomberg report and other reports recently published point to the need for a broader examination of industry practices. Wells Fargo's announcement provides the opportunity for this broader consideration of industry measures in order to correct long-standing systemic inequity. The NAACP will closely monitor Wells Fargo and other financial institutions, using data driven-insights, to provide constructive advice on corrective measures that will provide Black Americans with the financial options that they deserve."

The systemic inequity clearly outlined in industry reports reflects one small aspect of a pervasive issue. To truly provide opportunity, lenders must identify patterns of systemic practice within their institutions that continue to reinforce the racial wealth gap and take meaningful steps to fundamentally reform these systems. The NAACP urges Wells Fargo and other lending institutions to take the following actions to achieve systemic change:

• A racial equity audit across all lines of business, including mortgage banking.
• Zipcode analysis and application review of all rejected Black applications to identify potential patterns in the rejection of applications for credit. 
• Zipcode identification of areas of the country with high rates of rejection by race.  
• Training for lending and consumer-facing staff on implicit bias in the lending process.
• A special purpose credit vehicle for applicants with one or more negative factors featuring a prime interest rate with additional supports offered on budgeting, personal finance, and financial counseling, using payment terms to facilitate credit reconstruction.
• Adoption of alternate credit scoring models, e.g. the use of rental and utility payments – potentially in partnership with an objective third-party vendor.
• Objective third-party review of disaggregated data and analysis on the basis of race.

"A sincere approach to close the racial wealth gap and put a permanent end to discriminatory lending must address these flawed systems and processes," continued NAACP President & CEO Derrick Johnson.  "Corrective action is simply one measure that must be part of a larger, comprehensive plan to ensure equity in the treatment of Black Americans from our financial institutions."