Financial discrimination is the unethical or illegal practice of unevenly offering compensation, financial assistance, access to financing or financial services on the basis of non-relevant factors such as profit interest, illogical reasoning and religious orientation.
An example of financial discrimination is when a lender or servicer denies, adjusts or rejects a legitimate financial claim via an unfair qualification or indemnification process. Financial discrimination can occur across a range of industries and economic sectors such as insurance and municipal services.
for equal work is a form of financial discrimination. The infamous
“glass ceiling” is a recognized inequality brought about by
gender perceptions. Possible indicators of gender based financial
discrimination are evident in data from government agencies such as
the U.S. Bureau of Labor Statistics. More specifically, according to
the BLS, the difference between income among male and female
caucasians in 2012 was $169 or 19.22 percent. Another form of income
discrimination is the legal mechanism of deeming work by contractors
unqualified for minimum wage.
According to the Consumer Financial Protection Bureau or CFPB, denying credit, and even discouraging potential applicants from pursuing credit on the basis of race, gender and age is illegal credit discrimination. Many industries are vulnerable to this because illegitimate reasons are easily replaced by legitimate ones. For example, even if a home loan applicant pre-qualifies for a mortgage, they may not be pre-approved or discriminated against on the basis of a minor financial detail that does not substantially impact that applicants ability to qualify.
ability to set their own lending policy within the law, the raising
of prices for one group of people while keeping prices lower for
another within the same marketplace is possible. This practice is
brought about by official or unofficial policy or underwriting
practices that selectively or falsely target financial criteria as
being a greater financial risk. Thus, if a loan applicant is seen as
a higher risk via a biased, but seemingly objective lending policy,
that borrower could technically be charged a higher rate of interest.
While laws such as the Equal Credit Opportunity Act offer consumers protection against financial discrimination, enforcing laws designed to protect against financial discrimination is not always easy. To illustrate, auditing a multitude of corporations amid a nexus of almost endless and shapeless financial criteria is not only expensive, but an unrealistic undertaking. At some point, an element of trust and public faith is both necessary and reasonable despite those things being taken advantage of.
discrimination outside of the sphere of legitimate free market
enterprise is a serious issue. However, investigating and evaluating
every suspected instance of financial discrimination is not
guaranteed to be feasible. This provides an opportunity to those who
seek to discriminate. Consumers can protect themselves from financial
discrimination by becoming aware of what financial discrimination is,
and what laws, policies and organizations exist to prosecute or
mediate instances of such.
About the author:
A.W. Berry is the blog manager for Moneycation, a website dedicated to building financial awareness and literacy.