§6.

10 PUBLIC FACILITY BIAS AND TESTERS

The discrimination in mortgage practices and in the biased new car dealer practices

uncovered by Professor Ayres’s study (see §6.9) is hardly unique. One can only wince in

imagining what happens to blacks and women forced by economic circumstances to deal

with used car dealers. The use of testers does not insure relief for those victims willing to

challenge their exclusion from the marketplace or the race or sex-burdens they bear in

doing business. But despite predictable resistance from some government officials,

scholars and civil rights advocates call on the federal government to expand the use of

undercover investigations to root out discrimination in employment, housing, and

business.1

Arguing that much bias against black and Hispanic people goes undetected, the

scholars say such operations would go a long way in documenting the problem and could

be an effective tool in enforcing antidiscrimination laws. Michael Fix, a senior researcher

at the Urban Institute, a nonprofit research institute based in Washington, D.C., asserted:

“It’s cheap, it’s doable and it provides conclusive evidence of discrimination.” Mr. Fix

suggests that the use of undercover investigators in employment discrimination could put

1
Stephen A. Holmes, U.S. Is Asked to Expand Undercover Bias Testing, N.Y. Times, Sept. 26, 1991, at
A18. The Supreme Court found in Havens Realty Co. v. Coleman, 455 U.S. 363 (1982), that testers in a
housing discrimination suit and the housing association to which they were attached had standing to sue in
their own right as injured parties. The Court reasoned that by alleging that the realtor misrepresented facts
about the availability of housing to him, the black tester gained standing. While the white tester was offered
the housing and thus could not claim misrepresentation, and thus standing to sue, both testers had standing
to assert that the defendant deprived them, as residents of the community, of the benefits of interracial
association. While the decision in Havens was unanimous, Justice Powell wrote a concurring opinion
expressing doubt that the necessary “distinct and palpable injury” requirement for standing can be met by
pleadings asserting that discrimination within two adjacent apartment complexes within a county of 259
square miles could deny plaintiffs of their right to live in an integrated community. The Rehnquist Court is
unlikely to need even this suggestion to erode — if not overturn — the Havens precedent.
to rest a thesis that the main type of bias today is favoring minorities over whites, or

“reverse discrimination.”

The technique, often used by state and local fair-housing groups to ferret out bias in

the sale and rental of housing, generally involves sending people who are alike in

virtually every way except race or ethnicity to apply for jobs, housing or mortgages. The

results are then analyzed for how differently whites are treated compared with black or

Hispanic people.

A HUD study in November 2002 showed that housing discrimination facing

minorities has declined since the last HUD study in 1989.2 In purchasing a home,

discrimination against African Americans and Hispanics has dropped over 25 percent. In

looking for rental units, discrimination against African Americans declined 18 percent but

remained unchanged for Hispanics. The decline in both categories may reflect the efforts

of government and local advocacy groups to better educate and monitor housing

practices.

These statistical improvements, however, should not overshadow the fact that the

study shows that a significant degree of racial discrimination remains even in the face of

greater legal protections and increased enforcement of fair housing laws. “Compared to

white customers, African Americans and Hispanics are less likely to be given information

about housing units, receive fewer opportunities to inspect housing, obtain less financing

and are less likely to be shown homes in predominantly white or non-Hispanic

2
The study utilized paired testing to measure housing discrimination. Under this methodology, the two
housing applicants, one minority and one white non-Hispanic with similar characteristics, respond to a
housing advertisement. See Margery Austin Turner et al., Discrimination in Metropolitan Housing Markets
(Research Report), Nov. 7, 2002.
neighborhoods,”3 said Margery Turner, a director of the Metro Center at the Urban

Institute, which conducted the study under a HUD contract.

In United States v. Kreisler (D. Minn.). Defendant was found to have violated the Fair

Housing Act when he discriminated against black tenants at two apartment complexes he

owns and manages by evicting blacks while not evicting similarly situated non-blacks,

requiring black tenants to vacate their apartments permanently due to "renovation work"

while not requiring non-black tenants to do so, and failing to provide necessary and

requested maintenance to black tenants while providing such maintenance to non-black

tenants. The affected households recovered monetary compensation and the Defendant

was ordered to hire an independent management company to operate the rental

properties, post and publish a nondiscrimination policy and pay a civil penalty, (Add FN)

Citing ethical concerns, the Board of Governors of the Federal Reserve Bank rejected

a proposal to use undercover investigators to expose mortgage lenders who discriminate

against minority borrowers. Alan Greenspan, former chairman of the Federal Reserve,

said, “I have very serious questions about whether the central bank should be sponsoring

and supporting deception.”4 Evidently, in the post-Brown era, only whites who

discriminate blatantly and openly on the basis of race are “bad guys” in the public mind,

while those who utilize more “subtle” procedures are praiseworthy until otherwise

proven. The use of testers is deemed a too effective means of proving the contrary.

When the first employment discrimination suit based on tester evidence was filed,

business representatives cried “foul.”5 Testing, they claim, is both deceptive and could
3
Tony Pugh, Hispanics Encounter More Discrimination in Housing Than Blacks, Tribune News, Nov. 8,
2002.
reflect bias against the employer. “It takes the neutrality out of the process,” said Douglas

McDowell, general counsel for the Washington-based Equal Employment Advisory

Council, an employers group.6 Conservatives have argued that statistics are not proof of

discrimination, since they cannot show whether the disparity was the result of bias or of

other factors. Even so, many civil rights groups and government agencies rely on

statistics to provide evidence of lingering discrimination.7 These groups reason that the

lack of minorities in a company or getting mortgage loans indicates the presence of bias.

Testing is the best way to verify statistical indications.

Testers have been extremely valuable in exposing smaller scale, less obvious forms of

racial discrimination facing consumers. In June 2001, a music teacher tried to purchase

some supplies at a Staples office supply store in the District of Columbia only to be

informed that he could not use an out-of-state personal check. Later he discovered that on

the same day another teacher used her Maryland bank check at the very same store. These

allegations, filed in a recent lawsuit, were confirmed by two testers — one black and one

white — sent to Staples by The Equal Rights Center (TERC). TERC has also uncovered

similar discriminatory treatment by KayBee toy stores. By sending in testers to KayBee

toy stores, TERC has discovered that similar policies of refusing to accept personal

checks exist predominantly in neighborhoods with African American customers.8

Although a consumer does not have a right to pay by check, a store that does so based on

the neighborhood its customers live in discriminates. Since a lawsuit was filed, KayBee

has accepted personal checks in all of its Washington-Baltimore stores.9

Note: Subprime mortgage crisis

 Testers do not appear to be necessary when the results show the impact of certain

practices. It is a reality that African Americans and Latinos are by far the hardest hit in a

crisis created by predatory lenders and so-called subprime loans that charge higher

interest rates and fees for those with shaky credit ratings.

Three African-American mortgage borrowers recently accused the nation’s largest

home lender of racial discrimination in a federal lawsuit. The lawsuit alleges violation of

federal housing discrimination laws by using an ‘‘unchecked, subjective surcharge’’ that

makes black borrowers pay more than whites. 4

Though "separate but equal" seemed to be way in the past, the reality in front of us

proves us otherwise. “Subprime” mortgages are offered to borrowers who do not meet the

credit standards for borrowing in the prime market and minorities in the US have a long

history of rejection from prime-rate lenders.5 The Urban Institute had issued a report

stating that “not all Americans enjoy equal access to the benefits of homeownership, in

part because of unequal access to capital . . . minorities are less likely than whites to

obtain mortgage financing and, if successful in obtaining a mortgage, tend to receive less

generous loan amounts and terms.”6

According to the U.S. Department of Housing and Urban Development and a study

by the Center for Responsible Lending African-Americans and Latinos are more likely

than whites to be steered into high-risk subprime mortgages.7 Based on information from

4
Andrew Caffrey, Countrywide Accused of Racial Bias, The Boston Globe, July 12, 2007.
5
See William C. Apgar and Allegra Calder, The Dual Mortgage Market: The Persistence of Discrimination
in Mortgage Lending (December 2005), available online at
http://www.jchs.harvard.edu/publications/finance/w05-11.pdf
6
See What We Know About Mortgage Lending Discrimination in America, available online at
http://www.huduser.org/publications/fairhsg/lending.html
7
See Center for Responsible Lending. May 31, 2006. “Unfair Lending: The effect of Race and Ethnicity on
the Price of Subprime Mortgages” Debbie Gruenstein Bocian, Keith Ernst and Wei Li.
the Federal Reserve Blacks are 3.2 times more likely to receive a subprime loan than

white borrowers. After adjusting for differences in credit scores, income, and other risk

factors between average Black and white borrowers, the study finds that Blacks are still

1.6 times more likely to get a subprime loan when purchasing a home.8

Based on data from the US Federal Reserve, about fifty percent of black and

Hispanic borrowers used high-cost loans. And according to the National Fair Housing

Alliance half of the people affected by foreclosures related to subprime mortgages would

have qualified for a regular loan. Federal Reserve chairman Ben Bernanke has stated that

“it's a crime that blacks and Latin Americans once shut out of the mortgage market are

now finding themselves out on the street after finally getting what they thought was a

piece of the American dream.”9

Because African-Americans and Hispanics were more likely to take out subprime

loans, they are currently experiencing higher defaults, which at the same time results in a

wider wealth gap between minorities and whites.10 Moreover, Tom Shapiro, a professor

who studies homeownership and wealth issues in the context of race believes that

institutional and geographical factors are important, but that the race factor cannot be

ignored.11

8
See e.g., Subprime Lending and Alternative Financial Service Providers: a Literature Review and
Empirical Analysis, prepared for the U.S. Department of Housing and Urban Development Office of Policy
Development and Research, available online at http://www.huduser.org/Publications/pdf/sublending.pdf.
See also Robert B. Avery, Kenneth P. Brevoort and Glen B. Canner, “Higher Priced Home Lending and the
2005 HMDA Data,” Federal Reserve Bulletin, amended September 18, 2006.
9
See U.S. 'subprime' mortgage crisis hitting blacks, Latinos hardest (May 19, 2007), available online at
http://www.brooksbulletin.com/news/business.asp?itemid=62858)
10
A 2007 study by the Woodstock Institute, a community development research group notes “a clustering of
foreclosures around low-income and minority communities.” See US subprime mortgage crisis hurts
individuals and whole communities (April 14, 2007), available online at
http://www.citymayors.com/finance/us-subprime.html
11
See Thomas M. Shapiro, Race, Homeownership and Wealth. Washington University Journal of Law &
Policy 20. (2006)
 For instance, a report by the National Community Reinvestment Coalition in

Washington, looked at subprime mortgage loans in 380 metropolitan areas in 2005

finding that racial disparities in lending exist across the nation, despite borrowers’ income

levels.12

Widespread fair treatment of minorities in the marketplace — whether that market be

public accommodation facilities, government services, retail sales, housing, or lending —

is perplexingly absent. Discriminatory marketplace treatment entirely contradicts the

profit motive that conservatives so often tout as laissez-faire’s ultimately solvent

principle. Racism so pollutes this country that people of color cannot even spend their

money without encountering hostility and obstacles. Testers only enhance the relative

improvement in this area of civil rights wherein most progress, given the money

incentive, has occurred; nevertheless, discrimination remains a serious problem. There

exists lack of will and lack of way; when normal legal enforcement of anti-discrimination

statutes such as Title II and §1981 falls short and a feasible solution such as testing

appears, authoritative tap dancing renders even that solution impotent. Those in power,

such as Alan Greenspan, charged that testing creates ethical problems: In that charge is

buried, however, disinterest in the ethical problems of racism. Even where the

government agrees to enforce marketplace fairness via testing, one might wonder whether

expanded testing would meet the same fate as most civil rights measures — sophisticated

subversion, political fatigue, and eventual abandonment.

12
See Income is No Shield Against Racial Differences in Lending: A Comparison of High-Cost Lending in
America’s Metropolitan Areas (July 2007), available online at
http://www.ncrc.org/pressandpubs/documents/NCRC%20metro%20study%20race%20and%20income%20
disparity%20July%2007.pdf
 Racism is an institutional poison. In the end, even given a profit motive to treat

people of color fairly and respectfully, not much changes.