New study from UH Law Center reveals racial and ethnic disparities in loan industry advertising
Professor Jim Hawkins and 3L student Tiffany Penner call for change in advertising practices and regulations
HOUSTON, December 21, 2021 / PRNewswire / – A new study written by University of houston Professor of the Law Center Jim hawkins and student Tiffany penner and published in the Emory Law Journal indicates that the payday lending industry often targets black and Latino communities in advertising their products, while the mainstream banking industry targets white consumers.
In “Advertising Injustices: Marketing Race and Credit in America”, Hawkins and Penner present two empirical studies they conducted of lenders in Houston, who verified these disparities in online advertising.
“Everyone knows that advertising affects behavior, so we looked at how banks and payday lenders advertise,” the authors said. “Sociologists have shown that people buy goods and services when they see other people like them buying these products. We wanted to know whether banks and payday lenders represented their clients in a way that represented the general population or only certain races. “
The study found:
While African Americans make up only 16% of auto securities lending clients and 23% of payday loan clients, 35% of the photographs on these lenders’ websites represent African Americans.
77% of the advertisements in the physical locations of auto lenders and payday lenders in the study targeted racial minority groups.
30% of traditional bank lender websites did not feature any African American model, and nearly 75% did not feature any Latin model.
In contrast, only 3% – a single bank’s website – did not have a white template.
Recent news articles, citing the Hawkins and Penner stock exchange, examine how lenders are maximizing their profits by demanding high interest rates during the COVID-19 pandemic when many people have been vulnerable and in dire financial straits. Data analysis by Bloomberg watch that black and Latino communities have become prime targets, and the article reports that many people have had to set aside government pandemic relief funds to help pay off debts.
Hawkins and Penner examined two important negative consequences that emerge from targeting African Americans and Latinos for payday loans and property titles while pictorially excluding them from traditional banks. The first consequence is that advertising works, and African Americans and Latinos are more likely than white customers to use high cost credit. They also found that advertising shapes societal norms and expectations about where people “fit in”. This in turn, according to the study, creates a “self-sorting” effect and contributes to racial disparity in access to credit.
Hawkins and Penner’s goal for the study is to have a positive impact that will change the way lenders advertise. Specifically, they encourage financial institutions to eliminate discriminatory marketing that omits certain racial groups, as some banks currently only feature white models in advertisements.
“We hope that companies will voluntarily change their advertising practices to represent people of all races in their advertising,” said the authors. In addition, we urge Congress to amend the Equal Credit Opportunity Act to explicitly prohibit discriminatory advertising by creditors, and federal regulators to use this law along with the Community Reinvestment Act to make advertising banks and fair payday lenders. “
Hawkins is Professor of Alumni Law at the UH Law Center. He got his JD from the University of Texas School of Law, where he was Grand Chancellor and editor-in-chief of the Texas Law Review. During his career he has published or published articles in publications such as Science, UCLA Law Review and more. His research has been featured in leading media such as the New York Times and the Washington Post.
Penner is a third-year rising student at the UH Law Center, where she is a member of the Houston Law Review and served on the board of directors of the student organization First-Generation Professionals. During her law studies, she worked as a summer partner at King & Spalding and as a judicial intern for Lee H. Rosenthal, Chief Justice of the United States District Court for the Southern District of Texas. Prior to law school, she worked at NASA as a contracting specialist for the International Space Station program.
Click here to read “Advertising Injustices: America’s Marketing and Credit Race”.
UHLC media contacts: Carrie Anna Criado, UH Law Center Assistant Dean of Communications and Marketing, 713-743-2184, [email protected]; Elena hawthorne, deputy director of communications and marketing, 713-743-1125, [email protected]; and John brannen, Media Relations Representative, 713-743-3055, [email protected]
About University of houston Center of Law
the University of houston Law Center (UHLC) is a vibrant and leading law school located in the 4th largest city in the country. Health law, intellectual property law, and part-time UHLC programs are in the Top 10 in U.S. news. It grants Doctor of Jurisprudence (JD) and Master of Law (LL.M.) degrees through its academic branch, the College of Law. . The Law Center is more than just a law school. It is a powerful center of intellectual activity with more than 11 centers and institutes which feed its educational mission and its national reputation. UHLC is fully accredited by the American Bar Association and is a member of the Association of American Law Schools.
About University of houston
the University of houston is a Carnegie Designated Tier 1 public research university recognized by a Phi Beta Kappa Chapter for the excellence of its undergraduate teaching. UH serves global competition Houston and the Gulf Coast region by providing world-class faculty, experiential learning and strategic partnerships with industry. Located in the country’s fourth largest city and one of the most ethnically and culturally diverse regions in the country, UH is a federally designated Hispanic-American and Asian-American institution with more than 47,000 students enrolled. .
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