Have Differences in Credit Access Diminished in an Era of Financial Market Deregulation?

Over the past few decades, financial markets became increasingly deregulated and household debt expanded, sometimes rapidly. It is thus possible that greater deregulation led to improved credit access for typically underserved groups, such as minorities and low-income families, relative to their counterparts. Credit access is measured here by loan denials, discouraged applications, and costs of credit. Based on data from the Federal Reserve’s Survey Consumer Finances and using multivariate tests, there is no clear trend, though, towards equalization of credit access from 1989 to 2004. Specifically, gaps in loan denials and discouraged applications only improved for Hispanics relative to Whites. Also, the gap in interest rates widened from 1989 to 2004 by race and income, while Hispanics possibly faced a growing difference in fees relative to Whites. Finally, by 2004, the gap in reliance on more costly sources of credit had shrunk slightly between minorities and lower-income families because the relative differences in borrowing from more expensive sources narrowed. Also, by 2004, lower-income families and minorities depended on more costly forms of credit more so than their counterparts to the same degree as they did in 1989. The results indicate that differences in credit access did not decrease on a broad basis during a period of large scale financial deregulation.