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Are race-based lawsuits affecting community lenders?

BII in the Media

Shelterforce spoke with community-lending leaders and experts about the current mood across the sector. What, if anything, are organizations planning to do to avoid becoming the next target?

A year has passed since the U.S. Supreme Court struck down the use of affirmative action in college admissions. While the ruling in Students for Fair Admissions Inc. v. Harvard and UNC applied only to the use of race in determining college admissions, in its wake, conservative activists are mounting new challenges to a variety of programs that provide money or services to historically disadvantaged communities and people of color.

Targets include community development financial institutions (CDFIs), specialized lenders that serve low-income communities not traditionally reached by mainstream lenders, as well as local governments and nonprofit funders and investors.

Some examples:

  • LiftFund, a CDFI that administers the Bexar County Small Business Assistance Program in Texas, was named in a lawsuit last year challenging its grant program, which weighed factors such as minority ownership in assessing applications.
  • Massachusetts Growth Capital Corporation, a quasi-public state agency, was sued for a program that directed grants to pandemic-affected businesses operated by women and people of color. (The state agreed to put a pause on business grants even while the suit was pending.)
  • The Fearless Fund, a venture capital firm founded by Black women, was sued for its Strivers Grant Contest for Black female entrepreneurs.
  • And recently, a judge ruled that the long-standing federal Minority Business Development Agency (MBDA) must stop considering race in its application acceptance.