Individuals and business owners rely on loans as a financing option. In 2022, Americans filled out nearly 14.5 million loan applications to purchase homes. Americans also filled out loan applications to finance vehicle purchases, education, and business ventures. The prevalence of loans means that lenders must adhere to fair lending practices and avoid lender discrimination.
Various laws exist to define and prevent lender discrimination. Lender discrimination occurs when an institutional or private lender denies a loan applicant for reasons outside of the applicant’s financial standing. The Fair Housing Act, for example, makes it illegal to deny someone a home loan on the grounds of the applicant’s race, religion, gender identity, or sexual orientation.
The Fair Housing Act underscores that lender discrimination can occur at any point during the loan process, even after an applicant obtains a loan. Examples of lender discrimination beyond illegal loan application denial include inferior servicing, home loan modification assistance, difficulties with homeowners insurance, and unfair rates, terms, and fees.
Loan applicants facing lender discrimination can contact the Department of Housing and Urban Development and the Civil Rights Division of the Department of Justice.
