(Bloomberg) – Chicago City Council on Tuesday approved a measure to increase transparency in the lending practices of city banks and help reduce property disparities in the nation’s third most populous city.
The Lending Equity Ordinance will publicly share loan data and demand an annual information hearing with the finance committee, Alderman Harry Osterman, a senior sponsor, said on Twitter. The measure also collects data on home equity loans and the reasons for loan refusals by banks serving as municipal custodians for the city. These banks held about $ 725.3 million in city cash and certificates of deposit as of Dec.31, according to Chicago’s full annual financial report.
“Transparency is needed to educate Chicagoans about the institutions where their public funds are deposited,” according to the ordinance.
The measure publishes data by census tract such as mortgage amounts and interest rates that banks provide when bidding on city business each year. Disclosures on consumer and business loans in the city are also required. In the past, the city’s finance department did not assess whether banks provided “inclusive and equitable financial services throughout Chicago,” even if it collected data, according to an August report by the Inspector General. from the city.
Now that will change and the lending practices of banks may influence where the city deposits its funds, according to the ordinance.
The ordinance “will give us a better understanding of the lending activity,” Alderman Scott Waguespack, head of the finance committee, said at the city council meeting on Tuesday. This will “hopefully break down some barriers,” he said.
Chicago follows cities with similar oversight like Pittsburgh and Cleveland. The move comes after recent reports have shown that lending practices have contributed to the city’s racial property gap. Last year, local NPR affiliate WBEZ and the nonprofit City Bureau newsroom revealed that for every dollar loaned to banks in Chicago’s white neighborhoods, 12 cents went to the city’s black neighborhoods and 13 cents to Latino neighborhoods.
The gap in Chicago illustrates disparities across the country, which were only exacerbated during the pandemic. While white ownership in the United States rose to 74.2% in the second quarter of 2021, up from nearly 70% in 1994, black ownership rose to 44.6% and the Hispanic level to 47.5%. against less than 42% for both during the same period, according to census data. .
Illinois bankers are concerned about the new rules, however. The industry aims to improve access to mortgages and tackle inequalities in Chicago, especially among black and Latin mortgage seekers, according to an emailed statement from the Illinois Bankers Association.
But “this ordinance creates more obstacles in an already intimidating application process, which could further discourage small community banks and minority-owned banks from applying and working with the city,” the statement said.
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