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Credit Discrimination: 11.6.1.1 General

Plaintiffs in credit discrimination cases may have claims under the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), certain civil rights statutes (42 U.S.C. § 1981 and 42 U.S.C. § 1982), state credit discrimination statutes, and state statutes that prohibit unfair or deceptive practices (UDAP statutes). With certain important exceptions detailed below, the best strategy is often to plead as many causes of action as are viable.

Credit Discrimination: 11.6.2 What Causes of Action May Be Brought in the Same Lawsuit?

The Equal Credit Opportunity Act (ECOA), federal Fair Housing Act (FHA), federal Civil Rights Acts, and state anti-discrimination laws all provide remedies for illegal discrimination. Aggrieved individuals can recover their actual damages only once, but issues sometimes arise as to whether an individual can seek punitive damages under different statutes or minimum or multiple damages under a state statute and punitive damages under a federal one.

Credit Discrimination: 11.7 Discovery Issues

A defendant in a disparate impact case may attempt to shift the focus to the individual transactions made by the named plaintiffs. In furtherance of this effort, it may seek information related to their creditworthiness, financial acumen, or the purpose of the transaction.

Credit Discrimination: 11.8.1 Overview

The various federal statutes that prohibit credit discrimination provide similar remedial schemes.332 They all provide for actual and punitive damages, equitable relief, and attorney fees for successful claims. None of the federal statutes provide statutory damages.

Credit Discrimination: 11.8.2.1 General

It should not be necessary for a plaintiff to establish actual damages in order to take advantage of other possible statutory remedies, such as punitive damages, equitable and declaratory relief, and attorney fees.342 There are, however, other sound reasons for establishing the existence of actual damages.

Credit Discrimination: 11.8.2.2 Tangible Injury

Actual, out-of-pocket expenses and other tangible injuries are recoverable as actual damages under the ECOA, the federal FHA, the federal Civil Rights Acts, and state credit discrimination statutes.347 These damages can arise in a number of ways. The following should be explored with the consumer:

Credit Discrimination: 11.8.4.1 General

Punitive damages are available under the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the federal Civil Rights Acts. While some courts are reluctant to award such damages, others are not. A plaintiff’s settlement posture and trial prospects are both enhanced if punitive damages may be warranted.

Credit Discrimination: 11.8.4.3.1 Generally

The Equal Credit Opportunity Act (ECOA) contains language that appears to mandate an award of punitive damages. A non-complying creditor “shall be liable . . . for punitive damages in an amount not greater than $10,000 in addition to any actual damages” awarded.396 The one statutory exception is that no punitive damages are available in actions brought against a creditor that is a government or a governmental subdivision, agency, or instrumentality.397

Credit Discrimination: 11.8.4.3.3.1 General

As noted, the Equal Credit Opportunity Act (ECOA) provides a list of relevant factors to be considered by a court when determining the amount of punitive damages to be awarded. These factors are:

Credit Discrimination: 11.8.4.3.3.2 Amount of actual damages awarded

The statute provides that, to determine the amount of punitive damages to award, “the court shall consider, among other relevant factors, the amount of any actual damages awarded.”413 As noted above, actual damages are not a prerequisite to the award of punitive damages under the ECOA, but a large actual damages award is one factor favoring a large punitive damages award.

Credit Discrimination: 11.8.4.3.3.3 Frequency and persistence of creditor’s non-compliance

Another factor used to determine the amount of punitive damages is the frequency and persistence of the creditor’s failure to comply.414 This factor can be interpreted in two different ways.

First, it can refer to repeated discriminatory acts committed against the consumer within the same or successive transactions, particularly if the defendant has been confronted with evidence of its unlawful actions.

Credit Discrimination: 11.8.4.3.3.4 Creditor’s resources

Another factor in determining the amount of punitive damages is the resources of the creditor.415 The statute does not define resources, which could refer to the creditor’s net worth, assets, income stream, profits, or some other measure of resources.416 Congress probably intended resources to mean something other than the net worth of the creditor, as this standard—not “resources”—is used in the very same statute to set the upper limit on awards of punitive damages in class actions.

Credit Discrimination: 11.8.4.3.3.7 Other relevant factors

The ECOA provides that a court shall also consider “other relevant factors,” along with the specific factors discussed above,422 in determining the amount of punitive damages.423 Nothing in the statute, the legislative history, or case law under the ECOA indicates what might constitute other relevant factors, but other potential factors include the parties’ relative bargaining power; the sophistication of the parties, particularly if the client’s primary language is not English; the unavailabili

Credit Discrimination: 11.8.5.1 Prospective Relief

Equitable relief can be an effective way to quickly stop a creditor’s illegal practice on an individual basis and on behalf of all other potential applicants. Equitable and declaratory relief are available under all of the federal credit discrimination statutes and the federal Civil Rights Acts.

Credit Discrimination: 11.8.5.2 Restitution and Disgorgement

Absent a clear command by Congress that a statute providing for equitable relief excludes certain forms of relief, a court should presume that it has the full scope of equitable powers available for the proper and complete vindication of the statutory purpose.437 Congress, cognizant of the scope of equity, knows what it is doing when it provides for general equitable relief in a regulatory statute and can, if it so chooses, clearly and explicitly limit the scope of a court’s equitable powers under any particular regulatory structure in which

Credit Discrimination: 11.8.5.3 Voiding an Individual’s Obligation Under a Note or Security Agreement

When creditors require co-signers or guarantors to sign a note or security agreement in violation of the ECOA, it is often desirable to seek to void the co-signer or guarantor’s liability. The most common instance in which the situation arises is when a creditor, in violation of the ECOA, requires a husband to obtain his wife’s signature for a loan even though the husband was creditworthy on his own.448

Credit Discrimination: 11.8.5.4 Outcome-Based Injunctive Relief

In some kinds of credit discrimination cases—especially reverse redlining cases—the most visible, provable harm from the discrimination is repossession, foreclosure, or some other consequence that occurs when the harsh terms of the transaction cause the consumer to default. One approach to prospective relief for a class of consumers is to focus not on the terms of the transaction but on these outcomes.