Color and Credit: Race, Regulation, and the Quality of Financial Services

51 Pages Posted: 24 Mar 2017 Last revised: 2 Jul 2020

See all articles by Taylor A. Begley

Taylor A. Begley

Washington University in St. Louis - John M. Olin Business School

Amiyatosh Purnanandam

University of Michigan, Stephen M. Ross School of Business

Date Written: July 1, 2020

Abstract

The incidence of mis-selling, fraud, and poor customer service by retail banks is significantly higher in areas where government regulation promotes increased quantity of lending.
Specifically, low-to-moderate-income (LMI) areas targeted by the Community Reinvestment Act have significantly worse outcomes, and this effect is larger for LMI areas with a high-minority population share. The results highlight an unintended adverse consequence of such quantity-focused regulations on the quality of credit to lower-income and minority customers.

Keywords: discrimination, product quality, financial sophistication, consumer protection, regulation

JEL Classification: G21, G28, L13, L14

Suggested Citation

Begley, Taylor A. and Purnanandam, Amiyatosh, Color and Credit: Race, Regulation, and the Quality of Financial Services (July 1, 2020). Available at SSRN: https://ssrn.com/abstract=2939923 or http://dx.doi.org/10.2139/ssrn.2939923

Taylor A. Begley (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

HOME PAGE: http://www.taylorbegley.com

Amiyatosh Purnanandam

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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