Residents in a predominantly black neighborhood of Richmond might have difficulty getting traditional bank loans, but it appears they have little trouble borrowing at a high interest rate from a consumer finance company.
Those are among the findings of a recent study that suggests the Richmonders most likely to be drawn into expensive consumer loans have low incomes and are often black.
Kevin Byers, who formerly worked with a nonprofit housing partnership in Williamsburg, conducted the study with a grant from the Mary Reynolds Babcock Foundation in Winston-Salem, N.C. He gathered information on loans made in 1992 to residents in Richmond, Petersburg and Henrico County by eight of the nation’s largest consumer finance companies.
He said his study is not conclusive, and that he plans a follow-up study of 1993 loans.
Those in the consumer finance industry dismiss Byers’ study of eight institutions as a “minute extrapolation of what’s out there,” pointing out that more than 200 mortgage lenders do business in the state.
The study was looking for was evidence of “reverse redlining,” a phenomena that occurs when lenders intentionally aim their sales efforts toward poor, often minority, home owners. Some banks have been accused of redlining, or refusing to do business in poor urban areas, throughout the nation.
Byers found that the predominantly black Highland Park, which represents only 6 percent of the city’s owner-occupied homes, accounted for 16 percent of loans made in the city by the finance companies. But the area has a high denial rate for the more typical loans offered by banks, thrifts and mortgage companies, Byers said.
