Fifty Years of Access to Lending Opportunity: Where Are We Now?

The Equal Credit Opportunity Act (ECOA) has just entered its 51st year, providing an occasion to look back — and to look ahead.

Dr. Martin Luther King Jr. was a tireless advocate for a more just and equal society, and ensuring access to housing opportunity was a critical aspect of his movement-building work. He fought for the rights of Black Americans, who were openly excluded from living in certain areas. For example, he was a leader in the Chicago Freedom Movement and called for open housing to let Black people purchase homes wherever they could afford them. Dr. King knew that if the unfair and unjust barriers were removed, Black families would gain access not only to improved housing but also to better schools and greater job opportunities. Dr. King advocated for the Fair Housing Act, and when the legislation failed to pass Congress in 1967, he observed that “a bit of democracy” and “a bit of our commitment to justice died.” As such, it was only fitting that Congress finally did pass the law immediately following Dr. King’s untimely death.

The Fair Housing Act and its close analog, ECOA, are critically important tools the Justice Department uses safeguard the civil rights of all Americans. These two landmark laws outlaw discrimination in housing and in lending, including the practice of redlining communities of color.

Indeed, obtaining credit is an essential step toward realizing the full promises of American democracy. But for too long, unfair lending practices have harmed women, people of color, servicemembers and people in other vulnerable groups.

Put simply, credit paves the pathway to a better life. With borrowed money, more Americans can buy a car, open a new business or pay for an education. Perhaps most significant, they can own a home — a foundation on which to build many other elements of the American Dream. Home ownership symbolizes personal achievement. It contributes to community stability. It provides a course for people in historically underserved communities to begin to build wealth because, according to Kathy Flanagan Payton, who runs a community revitalization organization in Houston, it “breaks generational curses.”

Payton is alluding to the racial wealth gap in our country: median wealth for white families was $285,000 in 2022, while that for Hispanic families was $61,600 and for Black families $44,900, according to the Federal Reserve. White families are 70% more likely to own a home than Black families and 55% more likely than Hispanic families.

This inequality is not an accident. Rather, it flows directly from deliberate decisions, not only those of lenders but also those of public entities. In the 1930s, lending institution maps labeled communities of color “hazardous” or “high-risk.” And the Federal Housing Administration did not provide insurance for mortgages in or near Black neighborhoods.

In 1974, Congress set out to correct loan injustices — for women. The original ECOA prohibited lending discrimination based on sex or marital status — a vital step toward equality of opportunity but nowhere close to enough. Fortunately, two years later Congress amended the act to ban discrimination based on race, national origin, or other bases as well. ECOA extended the groundwork established by the 1968 Fair Housing Act, which prohibits housing discrimination.

Some may deem redlining to be a practice from a bygone era, but sadly, today it is alive and well. Although many lenders do comply with ECOA, in very recent years the department has identified lenders in Alabama, California, Florida, North Carolina, New Jersey, Pennsylvania, Ohio, Oklahoma, Rhode Island, Tennessee and Texas that have failed to provide equal access to loans; they have served majority-white areas within their markets while ignoring nearby communities of color. 

The Civil Rights Division fights to eliminate this scourge under a whole-of-government approach called the Combating Redlining Initiative. Launched in October 2021 by the Justice Department, and carried out through the division’s Housing and Civil Enforcement Section, the initiative works with other government entities (for example, the Consumer Financial Protection Bureau, prudential regulators and state attorneys general) to seek the relief necessary to address the harms borne by redlined communities. To date, the division has secured settlements that have provided more than $152 million in relief. That’s $134 million toward loan subsidy funds and $18 million in community partnerships that provide services related to credit (consumer financial education, foreclosure prevention) along with advertising, outreach and counseling targeted toward affected communities. As a result of our settlements, lenders are opening new branches or offices and hiring community lending officers to oversee continued development.

What’s more, and often overlooked, these settlements go further than the dollar amounts suggest. These are investments that grow. Because our experience in past cases has shown that each dollar of loan subsidy yields over $10 of new credit to affected communities, our work thus far is bringing more than $1 billion in relief. Not only that, but lenders often find that addressing fair lending risk grows their business. Some then decide to apply the measures across markets. In other words, fair lending and expanded business opportunities go hand in hand.

It's a feedback loop that only increases community stability, collective prosperity and family economic independence — not just in the neighborhoods directly served by the settlements but in neighborhoods everywhere in the United States.

In the Civil Rights Division, we use ECOA every day to help ensure fair and equal opportunity for all Americans. With the initiative, the division has attacked redlining on the broadest scale in history. Recently, we reached the first settlement agreement with a credit union, and we have reached agreements with mortgage companies as well, underscoring the fact that all lenders — not just banks — must abide by the terms of ECOA.

Fifty years in, we acknowledge that while we have made great progress, we must do still more. Eliminating modern day redlining is part of our broader efforts to ensure equal access to opportunity for all Americans.