Background: Racial differences in financial markets have been reported in the areas of net worth (Straight, 2002), liquidity constraint (Lyons, 2003), loan denial (Weller, 2009), savings behavior (Fisher, 2010) and financial risk tolerance (Fisher and Yao, 2017) among others.
Data/Methods: We examine the 2013 Survey of Consumer Finance (SCF), using weighted logit regression. We employed the repeated-imputation inference (RII) method.
Results: Racial differences exist in loan denial rates as well as financial variables (such as income, net worth, home ownership, use of credit cards and bank accounts), planning horizon, and demographic variables (such as age and marital status). Black households are thirty-five percent more likely to experience loan denials than White households after financial and demographic variables are controlled for. We recognize the potential benefits of professional advice and examine whether the households received advice from an accountant, banker, broker, financial planner and lawyer. We note that Whites are more likely to get advice from an accountant, financial planner or broker than Blacks and Hispanics. We find no significant racial differences in loan denial likelihood among the consumers who got advice from a broker, financial planner or lawyer. On the other hand, Black consumers who did not get advice from a broker, financial planner or lawyer are 32%, 34% and 34% more likely to experience loan denials than Whites, respectively.
Policy Implications: Policy makers may be able to better support minority groups that are disadvantaged in credit markets by providing professional advice or subsidies to provide such services.