Redlining is the practice of denying credit to particular neighborhoods on a discriminatory basis. The flip side is reverse redlining, the practice of targeting these same communities or protected classes for predatory lending. The creditor may not even offer better terms to other borrowers, but the key element of reverse redlining is the targeting of protected racial groups, elders, and others for unusually bad credit terms.
A lawsuit filed in June 2011 brings the reverse redlining legal claims to the for-profit higher education industry. The class action lawsuit, filed in U.S. Distrcit Court in Washington,D.C. by attorneys John Relman and Glenn Schlactus, alleges that RSHT (formerly known as Richmond School of Health and Technology) targets poor and minority students with an inferior education product. The lawsuit alleges that the school is a sham that “exists to make money without any regard for the education its students receive in exchange.”
Reverse redlining is a very important legal claim that gained traction during the subprime mortgage crisis. Numerous reports backed up the allegations in these lawsuits that predatory mortgage lenders were targeting minority neigborhoods and that these lenders had an unusually large share of lending in African-American and Hispanic neighborhoods.
The RSHT lawsuit highlights the dispropriate impact of abusive for-profit school practices on poor and minority students. According to a report by the Education Trust, low-income students make up half of the enrollment at for- profit colleges and minorities comprise 37 percent. In releasing the report, the Education Trust described for-profit education companies that “…aggressively market to low-income individuals and people of color whose dreams of a secure place in the American mainstream include a college degree. And yet these institutions do a far better job at turning a profit for stockholders than ensuring that their students graduate. And while too few of their students acquire degrees, too many end up saddled with crippling debt.”