NCPA - National Center for Policy Analysis

FINANCIAL BIAS IN EUROPE

May 9, 2006

Redlining -- or the practice of refusing people bank loans based on their address -- has long been outlawed in the United States as discriminatory. But in Europe, although many countries are facing increasingly tense relations with their minority populations, there has been little debate about how financial discrimination -- ranging from redlining to setting higher insurance rates -- affects immigrants seeking to better integrate. Critics say that unless this changes, Europe will struggle to assimilate its already alienated immigrant population.

The approach to immigrants by many European banks and insurers stands in contrast to how they are treated in the United States and the United Kingdom, where banks have identified immigrant communities as a growth area. Some practices elsewhere in Europe legally treat immigrants differently from nationals.

  • In Ireland, some banks ask African immigrants to take an HIV test for a life-insurance policy as part of a housing-loan package.
  • In France, the national Constitutional Court overruled an official consumer-rights watchdog when it sought to stop credit companies from classifying customers as European or non-European when assessing their creditworthiness.
  • In Switzerland, which isn't a member of the EU, insurance companies can legally set different rates for foreign-born clients -- for instance, those from Eastern or Southern Europe.

In the wake of the 2001 race riots in Yorkshire, England, the Bradford City Metropolitan District Council focused on access to financial services as a key to better integration of minorities, earning praise from race-relations experts.

In the Netherlands, the Dutch government also is starting to focus on immigrants' access to finance. The finance minister has reiterated a formal request to the Dutch banking association, first made in 2003 but never implemented, to explicitly ban the practice of denying loans based on post codes.

Source: Charles Fleming, "Financial Bias Simmers in Europe; Insurance, Lending RatesOften Vary by Nationality, Fueling Immigrant Tensions," Wall Street Journal, May 8, 2006.

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