Likewise, banks are refusing loans to black-owned businesses at a rate twice that of white-owned businesses. This makes it difficult, if not impossible, to grow small black businesses. But the industry isn’t just wiping out black wealth, it is aggressively stripping it away, through excessive interest rates on consumer debt, blatant overdraft penalties, and higher fees, even for simple over-the-counter transactions. automatic.
It is not surprising that the median black family owned about a tenth of the wealth of a white family in 2016. The gap not only limits education and career options, it is also a source of wealth. lingering anxiety about how bills will be paid in the event of job loss or costly illness – setbacks millions of families, again disproportionately black, have faced during the Covid-19 pandemic.
In addition, the wealth gap is hurting the country’s economy. McKinsey & Company calculated that closing the wealth gap between blacks and whites could increase GDP by 4% to 6%, or more than $ 1,000 billion, by 2028.
A federal repairs politics are unlikely to come anytime soon. But banks and financial institutions don’t have to wait. First, they must apologize for their guilt and complicity in structural racism. Then they must make a commitment to serve black people as they do white people. Then, with these four bold policies, the industry can begin to close the wealth gap, repair the damage, and serve as a role model for a nation struggling to reckon with racism:
Cancel consumer debt for black customers
Americans are heavily in consumer debt, but as Christian Weller reports in Forbes, no one carries a greater burden than African American families. They are the only racial group that owes more than the value of their property – they could sell all of their property and they would still be in debt.
Black families had an average of $ 8,554 in consumer debt as of September 2019. And they pay more for debt – about $ 735 a year in interest on every $ 10,000 they borrow, compared to $ 514 for white families. . Because they have less access to conventional banks and the mortgage market, many black families are forced to resort to high-interest alternatives such as payday loans.
Additionally, blacks face higher bank fines and tougher penalties, including wage garnishment, for defaults, making it harder to get out of debt. Freeing families from the burden of this debt would help them build up savings and gain financial security.
Eliminate bank charges for black customers
Almost half of black households have little or no access to retail banking services. And black customers who have bank accounts pay more – $ 190 more for a checking account – than white customers, according to one. to study.