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What is Contract Redlining? Definition

What is Contract Redlining? Definition

Contract redlining is the term used to describe the illegal practice of refusing to award a contract to a company based on their geographic location. This is often done in order to avoid doing business with certain minority groups or low-income areas. The practice of contract redlining is not only illegal, but it also hurts businesses and economies as a whole. In this blog post, we will explore the effects of contract redlining and what can be done to stop it.

What is Contract Redlining?

Contract redlining is the practice of excluding or discriminating against certain types of businesses or individuals from participating in a contract. This can be done for a variety of reasons, including perceived risk, financial stability, or other factors.

In some cases, contract redlining may be illegal under anti-discrimination laws. However, there are many instances where it is perfectly legal and even common practice. For example, insurance companies often use contract redlining to exclude high-risk customers from their policies.

While contract redlining can be used for legitimate purposes, it can also be used to unfairly exclusionary businesses or individuals. If you believe you have been the victim of contract redlining, you should contact an experienced attorney to discuss your options.

The History of Contract Redlining

Contract redlining is a practice that has been used by businesses and corporations since the early 20th century. It is the process of drawing up contracts that deliberately exclude or limit certain groups of people, usually based on race or ethnicity.

This practice began in the United States during the Jim Crow era, when segregation was still legal. Businesses would add clauses to their contracts that said they would not do business with African Americans, or that any agreement between the parties would be void if either party was black.

After the Civil Rights Act of 1964 outlawed discrimination based on race, color, religion, sex, or national origin, contract redlining became more subtle. Businesses would now often include language in their contracts that made it very difficult for certain groups of people to enforce their rights under the agreement. For example, a contract might say that it can only be enforced in a court located in a different state from where the agreement was signed. This makes it much harder for someone who lives in another state to sue the company if they feel they have been treated unfairly.

Contract redlining is still used today as a way to discriminate against certain groups of people. It is often hard to prove because the language in these contracts can be very confusing and difficult to understand. If you think you may have been a victim of contract redlining, it is important to speak with an experienced attorney who can help you understand your rights and options.

How Does Contract Redlining Work?

Contract redlining is the practice of refusing to do business with certain groups or individuals based on their location, race, or other protected characteristic. It often takes the form of banks refusing to give loans to people who live in certain neighborhoods or businesses refusing to sell goods or services to people who live in certain areas.

There are a number of ways that contract redlining can work. One common way is for businesses to set up minimum requirements for doing business that are difficult or impossible for people in certain areas to meet. For example, a business may require that customers have a credit score above a certain threshold in order to qualify for service. This can effectively exclude people who live in areas with high rates of poverty or unemployment, as they are more likely to have lower credit scores.

Another way contract redlining can work is by businesses refusing to sell goods or services to people who live in certain areas. This can be done explicitly, as when a business puts up a sign saying that it does not serve customers from a particular area, or implicitly, as when a business only advertise its goods or services in areas that are not predominantly populated by people from the protected group.

Contract redlining can also take the form of differential pricing, where businesses charge different prices for the same goods or services based on the customer’s location. This can be done explicitly, as when businesses charge higher prices for delivery to certain zip codes, or implicitly, as when businesses charge different prices for the same service

Who Does Contract Redlining Impact?

There are a few different types of people who contract redlining can impact. The first type is people who are looking to buy a home or get a new mortgage. If there are areas in a city that have been designated as “redlined,” it means that banks and other financial institutions will be less likely to lend money to people looking to buy property in those areas. This can make it difficult for people of limited means to purchase a home or get a new mortgage, and may result in them having to pay higher interest rates.

The second type of person who can be impacted by contract redlining is businesses that are looking to locate in or expand into areas that have been designated as “redlined.” These businesses may find it more difficult to obtain financing, and may end up paying higher interest rates on loans. They may also have difficulty finding insurance coverage, as some insurers may be reluctant to provide coverage in “redlined” areas.

Finally, contract redlining can also impact the overall development of an area. If an area is “redlined,” it may deter investment and development, as businesses and individuals will be less likely to want to locate there. This can lead to disinvestment and decline in the affected area, which can further exacerbate the problems that led to the area being “redlined” in the first place.

Are There Any Laws That Prohibit Contract Redlining?

Yes, there are laws that prohibit contract redlining. The federal Fair Housing Act and the Equal Credit Opportunity Act both make it illegal for lenders to discriminate against borrowers on the basis of race, color, religion, national origin, sex, marital status, or age. These laws apply to all aspects of the lending process, including the negotiation and enforcement of loan contracts.

In addition to these federal laws, many states have their own laws prohibiting contract redlining. These state laws may provide additional protections for borrowers beyond what is available under federal law. For example, some state laws may prohibit lenders from using certain terms or clauses in loan contracts that are designed to disadvantage certain groups of borrowers.

If you believe that you have been the victim of contract redlining, you should contact an experienced attorney who can help you assess your legal options.

What Are Some Ways to Combat Contract Redlining?

There are a few ways to combat contract redlining, but they all come back to awareness and education.

1. Teach people what contract redlining is and how it happens.

This can be done through educational materials like blog posts (like this one!), articles, social media posts, etc. Once people know what contract redlining is, they can start to look out for it in their own lives.

2. Call out companies that engage in contract redlining.

If you see a company engaging in contract redlining, call them out on it! Social media can be a powerful tool for holding companies accountable. Write reviews, make posts, tweet at them – do whatever you can to spread the word and let others know what’s happening.

3. Put pressure on lawmakers to pass laws against contract redlining.

Laws can go a long way in combating contract redlining. If there are laws against it, companies will be less likely to engage in the practice. Lobby your representatives, write letters/emails, sign petitions – do what you can to make your voice heard and push for change.


Contract redlining is a common but often overlooked problem in the business world. It occurs when businesses refuse to do business with certain people or groups of people based on their membership in a protected class, such as race, religion, or national origin. This discriminatory practice can have a significant impact on the economy and social cohesion of a community, and it is important to be aware of it so that we can work together to combat it. Thanks for reading!

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