Racial Discrimination & Other Forms of Discrimination

Market discrimination is the denial of service, overtly or indirectly, to subgroups in the population because of age, race, sex, or other factors. It may be indirect, when a pattern of practice emerges in the activities of a business, or it may be overt in the pricing or availability of a good or service.

Market discrimination is measurable in that it appears as the residual after all other reasonable factors have been considered and quantified. In financial transactions, in interactions with the public, and in settings where there is an economic interest being served on the part of a business, one can consider economic benefit and economic risk to establish whether a group suffers discrimination.





Case Examples:

In the analysis of Home Mortgage Disclosure Act data (HMDA), a bank wanted to know if there was any indication of discrimination against particular subsets of the population. An initial view of the data collected by the bank would indicate that there was discrimination, as loan denials and interest rates charged to blacks, Hispanics, and other groups were higher. When the HMDA data was linked to credit score information and other indicators like Loan to Value, the patterns of discrimination disappeared, exonerating the bank of any pattern of practice that would indicate discrimination. When analyzed more closely, the same data also indicated that it was possible to find certain communities served by the bank that were borderline in their lending activities, and that there were some sub-groups in the population that could be better served. The bank responded by increasing training and monitoring in those identified communities. At the same time, the bank recognized a market opportunity for the sub-groups where the service could be improved, using the regulatory review to improve its own market share.