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Last week, many Chicago Chase Bank branches were closed temporarily as protesters called for racial equity and lending from the nation’s largest bank. The practice of denying various services by federal government agencies, local governments, as well as as the private sector based on race, was outlawed in 1968.
An exposé published in early June by a non-profit newsroom City Bureau and WBEZ Radio found that out of the $7.5 billion for Chicago home purchase loans Chase has been approving since 2012, less than 2% was lent to black majority neighborhoods. A federal class action lawsuit alleges that the bank chased out underserved small business borrowers from the Paycheck Protection Program (PPP).
Stacy Hawkins-Armstrong, an entrepreneur in Westchester, told ABC 7 Chicago that she tried to file her PPP loan application with Chase Bank, but she got nothing but error messages. To keep her employees on payroll and the business running, she was forced to secure a smaller loan from another bank. She believes that Chase prioritized its favorite customers and left small businesses like hers out in the cold.
Major Banks Under Investigation for Discrimination
The U.S. House of Representatives is raising questions on how several banks including JPMorgan Chase, Bank of America, and Citigroup made PPP loans according to the Orange County register. There are allegations that big banks serve big business customers and push away underserved borrowers from the funding pool. According to Everett Sands, CEO of Lendistry, there are questions about how PPP loans are distributed. As Business Wars Daily reported earlier this month, the small business group administration gave no guidance to lenders to prioritize underserved communities. About 90% of black-owned businesses have no employees. Sand says that PPP rules regarding solo proprietors came last. This leaves these entrepreneurs unclear about which loans are available to them.
The SPA hasn’t received a demographic of who received the PPP, but a survey by Color of Change and UnidosUS reports more than half of black and Latin business owners requested less than $20,000 in funding, but only 1-10 received the finding thy asked for.
OneUnited, the nation’s largest black-owned bank has been trying to help black business owners get access to loans. In the second round of stimulus funding, the federal government allowed $30 billion to smaller and minority-owned banks. OneUnited secured some of the funding and with that, the bank launched its PPP program on April 29. The bank is committed to lending loans to black-owned businesses and its first loan went to an Uber driver!
Time will tell who was more effective in lending loans to black-owned businesses. A report by Brookings Institution warns that the Corona pandemic could wipe out a decade of the economic gains by the black-owned businesses. As Congress debates whether to create another stimulus round, the future of many black-owned businesses hangs in the balance.
What do you think of the discrimination black-owned businesses face in regards to bank loans? Let us know your views in the comment section below.
This article originally published on GREY Journal.