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First of all… Happy Women’s History Month. Shoutout to all the women who overcame inconceivable odds to really make this world a better place and those shining in happiness living their best lives. I was raised mostly by women. Several of my former bosses are women. Many of my best friends are women. More than half of the people who read The Dime are women. The classmates, professors and colleagues who pushed and supported me through law school? Mainly women. And at the end of the day… women inspired, directed and influenced many of my ideologies on what it means to be a man. Appreciate y’all for real. I’m forever thankful. And I show my gratitude by getting us all to the money.
For this week's edition of The Dime I wanted to hit one of my favorite subjects, loans.
Everyone and they momma has been talking about which next stock is hot. Folks even went and started playing GameStop again (what the hell is wrong with them?). But what’s been wholly missed is the fact that credit guidelines have changed a bit this year and since small business development, gig work and side hustles remain big time plays, I figured you might need a breakdown on what's changed—because at some point you’re likely going to need or want to borrow money.
The Consumer Finance Protection Bureau (CFPB) is the government agency that protects people from getting scammed (they really need to get at these people shilling “trading courses” but imma mind my business). Another thing they do is make adjustments to laws that FICO, Experian, Transunion, banks, and other creditors follow. They just released guidance of Regulation B of the Equal Credit Opportunity Act (ECOA). The goal of the ECOA is to do exactly what it says, give folks equal access to credit regardless of race, gender, or creed. Regulation B is a provision of the ECOA that’s supposed to be the enforcement mechanism (I call it the teeth) to protect people from credit discrimination.
Before we get into the meat and potatoes, here are some stats that Regulation B is trying to remedy:
Black people tend to pay more for both conventional and nonconventional loans.
Approximately 16% of Black people are denied conventional home-purchase loans. This is high in comparison to white home borrowers which only have a 6.1% denial rate.
Black people are denied credit at 44% while White people only get denied a fraction of that at rate, 19%.
Black businesses are twice as likely to get rejected for business loans.
Research has shown that denials to certain types of credit has created a wide disparity between Black and White wealth. The typical White family has $188,200 in family wealth which is like 8 times more than the typical Black family which has about $24,100 in family wealth.
Access to credit has given folks more access to wealth through asset purchases like homes, businesses, and other things that add dollars to your pocket.
So now that you have the skinny on what Regulation B is trying to fix, let’s see how they’re trying to fix it.
A ton of banks made strategic decisions to align with “the Black struggle” during the George Floyd protests of 2020. Additionally, the government started putting out a bunch of “Special Purpose Credit Programs” to essentially figure out new ways to ensure that Black borrowers get less denials and more access to loans. To qualify for these “Special Purpose Credit Programs” you have to fit the “Social Need” which really is short for you have to be in the group the credit program is trying to help. Unfortunately, this isn't widely publicized, so you have to be in the know.
Now you are.
So, the next time you hit the bank ask them if they have any “Special Purpose Credit Programs” available and if they don't ask more questions, such as why they don't. That may be a finesse you can use to access a loan. The issue some have taken with these “Special Purpose Credit Programs” is that while they’re meant to help certain people, others may get denied access who wouldn’t necessarily fit into the particular “class” or group of people it’s meant to help.
So the CFPB said here’s what lenders need to do (aka here’s what you need to look for) when it comes to “Special Purpose Credit Programs”
- There needs to be a “Written Plan” and the written plan needs to describe the “class” of persons that would qualify.
- There needs to be information on either (a) how long the program would last for or (b) when the program will be reevaluated to see if there’s a need to continue to do it.
So really this Regulation B guidance is telling me that if you need a loan from a Bank—and Black people need to hurry up and get it fast because these joints may be here for only a limited time.
Another thing that I noticed with the credit guidelines on these “Special Purpose Credit Programs” is that the “class of persons” really needs to focus on a group of people who historically had issues getting access to credit. So, while the guidance is really screaming BLACK PEOPLE (based on the data above), other people “could” fit in this category.
Either way… If you’re trying to get access to funds to expand your business ask specifically for these special purpose credit program. Get your loan. Start that business. Future generations are going to thank you for it.
Carl H. Joseph-Black is the founder of The Dime and runs The Blacklist Social Club. You can contact him anywhere on social media @CJoeBlack
