Leasing License Practice Exam

Which term describes the illegal practice of refusing to provide loans based on race or ethnicity?

1. Redlining

2. Discrimination

3. Segregation

4. Predatory lending

The correct answer is: Redlining

The practice described in the question is referred to as redlining. This term specifically denotes a discriminatory practice often used by banks and other financial institutions where they refuse to provide loans or insurance to individuals or communities based on race or ethnicity. The name "redlining" originates from the historical use of red ink to delineate areas on maps where lenders would not invest, typically corresponding to neighborhoods predominantly inhabited by people of color. Redlining is significant in discussions about housing and lending policies because it has long-term impacts on communities, contributing to economic disparities and segregation. The practice is illegal and is recognized as a form of systemic racism in lending. Other terms listed have different meanings. Discrimination is a broader term that encompasses various unfair treatment based on race, gender, or other characteristics, but it does not specifically refer to the lending context. Segregation refers to the separation of people based on race or ethnicity, including residential patterns but not necessarily linked directly to lending. Predatory lending is a practice where lenders impose unfair or abusive loan terms on borrowers, often vulnerable individuals, but it does not specifically address the refusal of loans based on race or ethnicity.