Washington, D.C. – Today, U.S. Rep. Terri Sewell (AL-07) voted to pass the Financial Services Racial Equity, Inclusion, and Economic Justice Act. This legislation would advance racial equity and economic justice by combating discriminatory practices in in employment, income, wealth, and access to affordable credit. In doing so, it would extend life-changing financial opportunities to all Americans regardless of their race or economic status. This bill passed the House of Representatives today by a vote of 215 to 207.

“Stable employment, home ownership, and financial security are essential to the American Dream and should be accessible to all people regardless of race or economic status,” said Rep. Sewell. “I was proud to vote for the Financial Services Racial Equity, Inclusion, and Economic Justice Act to ensure every individual, every family, and every small business has an equal chance at achieving good financial health and well-being.”

As it stands today, on average, Black and Latino households earn only half as much as the average white household and own only 15 to 20 percent as much net wealth. According to Brookings, the racial wealth gap between white and Black households is $10 trillion. In 2020, only 44% of Black families owned homes compared to 75% of white families. These disparities have been caused in large part by discriminatory practices such as modern-day redlining, and borrowers of color routinely being denied access to credit at much higher rates than their white counterparts. 

It’s not just individuals and families, but small businesses too that are affected by discrimination. Minority-owned small businesses face challenges when applying for affordable and timely credit and even with good credit scores, entrepreneurs of color are less likely to have their financing needs met compared to their white peers. In terms of representation, boards of both the largest banks and investment firms are roughly 80% White and 70% male. Women of color are even less likely to reach senior level positions within financial institutions.

Minority depository institutions (MDIs) and community development financial institutions (CDFIs) have a proven track record of providing greater financial access to low-income communities and communities of color compared to other financial institutions, but these diverse and mission-driven community institutions have faced a number of challenges in recent years. Tragically, more than half of Black-owned banks have closed their doors since 2008. While Congress made an initial investment to bolster CDFIs and MDIs in December 2020, more financial support and reforms are needed to support these institutions as they provide financial access to communities of color and underserved communities. 

The Financial Services Racial Equity, Inclusion, and Economic Justice Act includes several provisions:

• The Federal Reserve Racial and Economic Equity Act would require the Federal Reserve to use its role to help eliminate racial and ethnic disparities in employment, income, wealth, and access to affordable credit. 
• The Diversity and Inclusion Data Accountability and Transparency Act would require diversity and inclusion data disclosure from federally regulated financial firms.
• The LGBTQ Business Equal Credit Enforcement and Investment Act would require financial institutions to collect their self-identified sexual orientation and gender identity information to help combat discriminatory practices against lesbian, gay, bisexual, transgender and queer (LGBTQ+) business owners.
• The Improving Language Access in Mortgage Servicing Act would establish language access requirements for creditors and servicers to better serve borrowers with limited English proficiency.
• The Fair Lending for All Act would clarify and extend anti-discrimination laws, establishes criminal penalties for credit discrimination, and creates a CFPB Office of Fair Lending Testing to review loan applications for compliance with applicable laws.
• The Promoting and Advancing Communities of Color Through Inclusive Lending Act would make bold reforms to support MDIs, CDFIs, minority lending institutions (MLIs), and young entrepreneurs. 
• The Promoting New and Diverse Depository Institutions Act would require Federal banking regulators to study examining challenges new depository institutions face and to develop a strategic plan to support the creation of newly chartered depository institutions, especially MDIs and CDFIs.
• The Promoting Diversity and Inclusion in Banking Act would require Federal banking regulators to include a diversity and inclusion component in the CAMELS rating system to evaluate how federally insured depository institutions are promoting diversity and inclusion.
• The Improving Corporate Governance Through Diversity Act would require public companies to annually disclose diversity among their board directors and confirm whether it has adopted any policy to strengthen diversity among board members or company executives.
• The Ensuring Diversity in Community Banking Act would strengthen MDIs and “impact banks” that predominantly serve low-income communities. 
• The Expanding Opportunity for MDIs Act would codify the Treasury’s Financial Agent Mentor-Protégé Program, providing MDIs and other small financial institutions with mentorship opportunities from larger institutions.
• The CDFI Bond Guarantee Program Improvement Act would reauthorize the CDFI Bond Guarantee Program for 4 years and reduce the minimum issuance threshold from $100 million to $25 million to allow more CDFIs to participate.
• The Expanding Financial Access for Underserved Communities Act would allow all federal credit unions to expand their membership to include underserved communities and exempt small business loans made in underserved areas from the credit union member business lending cap.  

Today, the House has made strides towards ensuring every individual, family, and small business can access financial health and well-being.