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Credit Discrimination: 7.3.4.2.1 The FHA applies to insurance

The federal Fair Housing Act (FHA) is another important option, particularly with respect to the sale of insurance related to a dwelling, such as homeowners insurance.113 Throughout the 1980s, there was a split among the circuit courts regarding FHA applicability to insurance.114 The tide began to turn in 1989 when the Department of Housing and Urban Development (HUD) enacted a regulation prohibiting discriminatory refusals to provide “property or hazard insurance for dwellings” or providing ins

Credit Discrimination: 7.3.4.2.2 Preemption and the McCarran-Ferguson Act

Assuming the court agrees with the majority view that the FHA applies, the court must still determine whether the McCarran-Ferguson Act137 prevents the FHA from applying to the sale of insurance.138 The McCarran-Ferguson Act prohibits federal statutes from invalidating, superseding, or impairing a state law regulating insurance unless the federal statute specifically relates to the business of insurance.

Credit Discrimination: 7.3.4.3 The Federal Civil Rights Acts

The federal Civil Rights Acts should apply to discrimination in the sale of any form of insurance, because insurance is a contract.150 While the McCarran-Ferguson Act prevents federal statutes from invalidating state laws that regulate insurance unless the federal statute specifically relates to insurance, preemption of the federal regulation of insurance here is unlikely.151 Similar to their analysis under the FHA, the courts have almost unanimously found that the Civil Rights Acts are applicab

Credit Discrimination: 7.3.4.4 State Laws

In addition to federal laws and regulations, the majority of states have some form of general discrimination laws or unfair insurance practices (UNIP) statute (also known as unfair trade practices acts or UTPA), under which insurance discrimination claims may be brought.

Credit Discrimination: 11.2.1 Direct Creditor Liability

Creditors that directly extend or refuse to extend credit, as well as persons who regularly arrange for the extension, renewal, or continuation of credit, are almost always covered by the credit discrimination laws.2 There are only a few exceptions. For example, the Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA) do not apply to an individual creditor who only makes one or two isolated loans.3 The FHA is further limited to credit discrimination related to a dwelling.

Credit Discrimination: 11.2.2.1 General

Liability under both the ECOA and the FHA may stretch well beyond the direct creditors who extend or deny credit. This liability is critical because financial players other than the direct creditors often have the deepest pockets.

Credit Discrimination: 11.3.1 General

Under any of the credit discrimination statutes, it is important that the plaintiff be “aggrieved” by the statutory violation. Otherwise, the plaintiff may not have either statutory standing or standing under Article III of the United States Constitution. In Spokeo v.

Credit Discrimination: 11.3.2.1 General

As noted in the previous section, the Equal Credit Opportunity Act’s (ECOA) limiting of actions to those brought on behalf of applicants poses a major barrier for testers and nonprofit organizations hoping to bring ECOA claims. Although the definition of applicant may be interpreted broadly, it generally will not apply to organizations acting on behalf of persons alleging discrimination.61

Credit Discrimination: 11.3.2.2 FHA Standing for Testers

Fair housing organizations often employ testers to uncover unlawful housing discrimination. Both the testers and the organizations that employ them may attempt to bring claims of unlawful discrimination. There are distinct issues when considering standing for testers as opposed to standing for organizations.

Credit Discrimination: 11.3.2.3 FHA Standing for Organizational Plaintiffs

An organization, such as a fair housing nonprofit, may have standing to assert its own interests in a Fair Housing Act (FHA) case. A fair housing organization may recover even if unlawful discrimination is found only involving its testers and not involving others.73 This broad interpretation of standing may also apply to a nonprofit organization seeking to pursue FHA claims on behalf of unnamed third parties.74

Credit Discrimination: 11.3.2.4 FHA Standing for Municipalities

In Bank of America Corp. v. City of Miami, the Supreme Court held that “the City’s claims of financial injury in their amended complaints—specifically, lost tax revenue and extra municipal expenses—satisfy the ‘cause-of-action’ (or ‘prudential standing’) requirement. . . .

Credit Discrimination: 11.3.3 Associational Standing

The aggrieved individual bringing an Equal Credit Opportunity Act (ECOA), Fair Housing Act (FHA), or federal Civil Rights Act suit need not be a member of the protected group being discriminated against, as long as the individual is injured by the discrimination.84 The “injury in fact” requirement for standing must be a direct injury resulting from the challenged conduct.85 For example, a White person can bring an action under any of the credit discrimination laws if denied credit because they l

Credit Discrimination: 11.4 Class Actions

Class actions are available under all the credit discrimination statutes, and the same issues arise in such class actions as with any other type of consumer class action.91 This section focuses on how several of these issues have been decided in the credit discrimination context.

Credit Discrimination: 11.5.1.2.1 General

If federal court is the preferred forum, then either the requirements for diversity jurisdiction must be met or at least one claim must be made under the federal credit discrimination laws—the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), or the federal Civil Rights Acts.

Credit Discrimination: 11.5.1.2.2 Removal and remand

If the plaintiff prefers a state forum, the plaintiff must anticipate that the defendant will prefer a federal forum. If the plaintiff’s complaint includes a claim under a federal discrimination law, the defendant may be able to remove a state court case to federal court pursuant to 28 U.S.C. § 1441. This statute provides for removal of any civil action “of which the district courts of the United States have original jurisdiction.”123

Credit Discrimination: 11.5.1.2.3 Counterclaims and parallel actions

A consumer may also wish to bring a federal credit discrimination law claim as a counterclaim in a creditor’s state court collection action. The counterclaim will not provide a basis for either party to remove an action to federal court, because the federal question must appear in the complaint.135

Credit Discrimination: 11.5.1.2.4 The Rooker-Feldman doctrine

There is an additional doctrine to consider if the plaintiff’s claims raised in federal court would explicitly or in effect lead to reversal or modification of an adverse state court judgment. The Rooker-Feldman doctrine precludes federal court subject matter jurisdiction over claims that in essence seek reversal of a state court judgment because, no matter how erroneous or unconstitutional the state court judgment may be, the U.S.

Credit Discrimination: 11.5.1.2.5 Abstention

In rare circumstances, an abstention doctrine may limit the plaintiff’s access to their forum of choice. For example, if a foreclosure is pending in state court, a federal court may abstain when presented with the plaintiff’s request for declaratory relief when the loan transactions, which are also at issue in the foreclosure, violate the ECOA.157

Credit Discrimination: 11.5.2.2 Reasons to Choose Administrative or Judicial Option

The administrative complaint procedure will, in many cases, offer a satisfactory method of redress at a substantially lower cost than a private action. The greatest advantage of the administrative route is this low cost to the complainant, as HUD bears the burden of investigating and determining whether there is reasonable cause to believe discrimination has occurred. Should it make a “cause” finding, one or more government lawyers are assigned to prosecuting the case, either before an administrative law judge or in federal court.

Credit Discrimination: 11.5.2.3 How the Administrative Procedure Works

An individual begins the administrative process by filing a complaint with the Department of Housing and Urban Development (HUD). Although HUD has developed a form to use for housing discrimination complaints, the agency will accept any written statement that contains the allegations of a discriminatory housing practice, provided that the following information is included in the complaint:

Credit Discrimination: 11.5.3.1 Introduction

NCLC’s Consumer Arbitration Agreements183 examines the enforceability of arbitration agreements in detail. This section introduces the topic and considers issues of special relevance to Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA) claims.