Reverse redlining occurs when a business targets a predominantly nonwhite neighborhood for selling their products and services at a higher price than the price they offer for the same products or services in a white neighborhoods where competition is high. and still remains a concern in many parts. Redlining has been an issue for long in the U.S. But according to the law, this must be based on the economic factors and not on the race, religion, sex or marital status. They may impose higher rates or stricter repayment terms on certain borrowers. Financial institutions may, however, consider the economic factors at hand when evaluating a loan application. Back to: BANKING, LENDING, & CREDIT INDUSTRY. The term is used for describing a situation when a particular ethnic group or race is denied the financial services including mortgages, insurance, or loans. The Fair Housing Act aims to prohibit discrimination against neighborhoods based on their racial profile. Redlining is an unethical and unlawful discriminatory practice of systematic denial of services to a certain race or ethnic group. All financial institutions must provide its services to anyone irrespective of their neighborhood or race. According to the law, no lending institution is allowed to exclude a neighborhood on the basis of race of its residents from its services. in 1977 after the enactment of the Community Reinvestment Act. Redlining practices were declared illegal in the U.S. Redlining has been observed in credit cards, insurance, students loans, and mortgages. Their qualification or creditworthiness were not taken into consideration. This resulted in lender providing loans only to the whites in higher-income neighborhoods, while minorities in lower-income neighborhoods had no access to capital. That line indicates where the lenders will not lend. He explained the lenders would actually put a red line on the map where the African Americans reside. The term was coined by sociologist James McKnight in the 1960s to describe the situation faced by African Americans in the United States. Duties within a Partnership Back to: BANKING, LENDING, & CREDIT INDUSTRY How Does Racial Redlining Work?
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