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Bank Discrimination and Its ‘Debilitating’ Effect on Minority Entrepreneurs

For a recent mystery shopper experiment, three business school professors recruited black, white, and Hispanic entrepreneurs across the U.S., dressed them in matching polo shirts and khakis, and sent them into banks to ask about small business loans. The results are disheartening, if not a big surprise.

White business owners got better and more encouraging service, according to a new paper describing the study in the Journal of Consumer Research. Bank employees were more likely to tell them about loan terms and fees and more likely to offer help filling out an application. Bankers were more likely to ask minority entrepreneurs about their personal finances and less likely to offer the black and Hispanic mystery shoppers a business card.