Lending Discrimination: Black Borrowers Face Higher Hurdles, Study Shows: Qualifying for a loan in today's tight credit market is hard. But add race to the mix, and a borrower's odds can go from bad to worse, a new report suggests.
In a study of loans created on Prosper.com, a peer-to-peer lending website where applicants are encouraged to include a personal photo, researchers found that black borrowers are 25 to 35 percent less likely to receive funding than a white borrower with similar credit.
The report, entitled "What's in a Picture? Evidence of Discrimination From Prosper.com," studied 110,000 loan applications from the popular lending website created between June 2006 and May 2007.
"By far the biggest factor was race," said Devin Pope, co-author and assistant professor at the University of Chicago Booth School of Business. Of the 110,000 loans studied, about 5,000 were home finance or repair related.
