CFPB Releases Report on Matched-Pair Testing in Two Small Business Lending Markets

In a recent study of small business lending by large banks in two populous suburban counties, the CFPB found that prospective Black borrowers were treated less favorably than prospective white borrowers in two of the four areas examined. 

The CFPB and the DOJ performed an experiment in which the agencies employed testers to pose as well-qualified Black and white small business owners asking about business credit from large bank lenders in Fairfax County, Virginia and Nassau County, New York.  One Black tester and one white tester each visited 25 bank branches in each county — representing 100 total visits to 23 different banks — over a multi-month period in 2023.  The testers recorded audio during their visits and, after their visits, filled out a survey about their experiences.

According to the CFPB, its analyses of the aggregate data showed that Black testers were treated less favorably than white testers with respect to two of the four categories considered.  First, the Bureau asserted that its results showed that Black testers were treated less favorably than white testers with respect to measures of encouragement/discouragement to apply for financing.  Second, the Bureau asserted that its results showed that bank representatives were more likely to discuss credit products not requested by testers (such as business credit cards and real estate-secured loans) with white testers compared to Black testers.

The CFPB concluded that its findings emphasized the differential treatment that exists between Black and white borrowers in small business lending.  Nevertheless, the Bureau cautioned that these findings should not be extrapolated to the greater small business lending market and may not be representative of any particular financial institution that was tested.