Skip to main content

Search

Credit Discrimination: 11.8.6.1 General Standards

All of the federal discrimination and civil rights laws provide for attorney fees for prevailing plaintiffs. Although the language of the various statutes’ attorney fee provisions differ somewhat in that some refer to prevailing plaintiffs and some refer to plaintiffs in a successful action, all apply the same set of standards for determining awards of reasonable attorney fees and costs to plaintiffs. Some also allow awards to successful defendants, but under a much stricter standard, and some do not even authorize such awards.

Credit Discrimination: 11.8.6.2 When Is an Action Successful?

Like several titles of the Consumer Credit Protection Act, the Equal Credit Opportunity Act (ECOA) awards fees in a “successful action,” while the Civil Rights Act standard is that fees are awarded when the aggrieved party “prevails.” This is a distinction without a difference.463

Credit Discrimination: 11.8.6.3 Fees for Legal Services and Pro Bono Attorneys and Pro Se Litigants

Attorney fees should be awarded to legal services attorneys or other pro bono attorneys, even though the client is not obligated to pay the attorney or even though a fee is not actually charged.505 Legal services attorneys are generally entitled to market rates in fee-shifting cases.506 Most circuits, though, refuse to provide attorney fees to pro se litigants, irrespective of whether that litigant is an attorney.507

Credit Discrimination: 11.8.6.4 Calculating the Award

The different circuit courts have adopted somewhat different approaches to calculating attorney fee awards and some Supreme Court decisions have further complicated the issue. This subsection will only briefly cover the general approach used by the federal courts, known as the “lodestar” method. The lodestar is the number of allowable hours multiplied by a reasonable hourly rate. Allowable hours must be actually documented and reasonably expended.508 Duplicative or excessive time will not be compensated.

Credit Discrimination: 11.8.6.5 Fee Applications

The Federal Rules of Civil Procedure require motions for attorney fees and expenses to be filed and served no later than fourteen days after judgment.522 However, all that is required in this time period is notice to the court and to the opposite side that fees will be sought and a fair estimate of the total fees and expenses claimed.

Credit Discrimination: 11.8.6.6 Costs and Witness Fees

A successful plaintiff should recover costs as well as reasonable expenses as part of attorney fees under an Equal Credit Opportunity Act (ECOA), Fair Housing Act (FHA), or federal Civil Rights Act claim.529 Costs generally include filing fees, transcripts, deposition costs for at least some depositions, fees and disbursements for witnesses, and other court and litigation expenses not otherwise claimed as attorney fees.530 Reasonable expenses may be awarded in addition to costs.

Credit Discrimination: 11.8.6.8 Tax Consequences of Attorney Fees Award

Although awards of attorney fees in many types of consumer cases may be taxable to the client, Internal Revenue Code (I.R.C.) § 62 provides favorable treatment of such awards in certain “civil rights” cases if the fees relate to the causes of action delineated in this Code section. I.R.C.

Credit Discrimination: 11.8.6.9 Appeals of Attorney Fees Awards

If the action is successful but the attorney fees award is inadequate, this issue alone may be appealed.536 Even if the client does not wish to pursue the appeal, the attorney has standing to do so.537 If the appeal is successful, fees for time spent on it are likewise recoverable.538 If the appeal is unsuccessful but the consumer ultimately prevails on remand or thereafter, hours spent on the unsuccessful appeal may be compensable.

Credit Discrimination: 11.8.6.10 Interim Fees

In protracted litigation, creditors may slowly deplete the resources of the consumer’s attorney by requiring the expenditure of numerous hours that may not be compensated, if at all, until after the termination of the litigation. In some cases interim fees may be awarded, which may support the litigation or place additional pressure upon the lender to settle. In order to qualify for an interim award of fees, the applicant must have prevailed at least to some degree on the merits of their claim.540

Credit Discrimination: 11.8.6.11 Apportionment of Award Among Defendants

Courts may apportion the fee award among several unsuccessful defendants to ensure that a single defendant is not liable for fees greater than those incurred to litigate the case against that defendant. If some but not all the defendants settle, the total award may be reduced by the amount allocated to attorney fees by any settlement.541

Credit Discrimination: 11.9.1 General

This section focuses on the most common creditor defense, the alleged expiration of the statute of limitations, and on additional defenses unique to Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA) claims. Another frequent defense argument is that false statements in the plaintiff’s loan application constitute unclean hands that bar recovery.

Credit Discrimination: 11.9.2.1.1.2 When the statute begins to run

In some circumstances, there may be some question as to the actual violation date. The date will vary depending on what the violation involves—application procedures, notice of adverse action, post-default collection procedures, and so forth. The violation date may be before or significantly after the application and loan dates. For example, if the violation occurs when a loan is renewed, the two-year period starts from that renewal date, not the date of the original loan.558

Credit Discrimination: 11.9.2.1.1.3 Extending the time period—continuing violation doctrine

Broadly speaking, the continuing violation doctrine allows plaintiffs to recover for incidents outside of the statutory time limit if at least one instance of the alleged practice occurred within the period and the earlier acts are part of a continuing pattern of discrimination.571 Lingering effects of the past discrimination are not sufficient.572 Nor does a refusal to grant a loan modification or communicate with a borrower serve to extend the limitations period on a claim of reverse redlining

Credit Discrimination: 11.9.2.1.2 Federal Civil Rights Acts claims

The limitations period for the federal Civil Rights Acts are somewhat complicated. The limitations period for a cause of action that could be brought under provisions of the Acts that existed prior to the 1991 amendments is determined by state law, so the period may be longer or shorter than the Fair Housing Act (FHA) and the Equal Credit Opportunity Act’s (ECOA) limitations periods.

Credit Discrimination: 11.9.2.1.3 State law claims

State credit discrimination acts often have short limitations periods, typically one year but sometimes two or three years.621 Just as commonly, the statute will not specify a limitations period. In these circumstances, states take varying approaches toward selecting an appropriate limitations period, some using the limitations period for statutory actions, some using those for tort actions, or some using those for specialty actions. These other limitations periods may be as short as one year but may be as long as four years or more.

Credit Discrimination: 11.9.3 Business Justification Defense

In most credit discrimination cases, the creditor will offer a purportedly legitimate business justification for its actions. Whether a business justification may be raised as a defense depends on the type of action being brought. For example, a business justification is not a defense to a creditor’s violation of a specific ECOA requirement, such as failing to send notice of an adverse action or seeking information not permitted to be inquired about.

Credit Discrimination: 11.9.4.1 Good Faith Compliance

The ECOA states that a creditor is not liable for any act done or omitted “in good faith in conformity” with Regulation B or with the official interpretations, even if the regulation or official interpretations are amended or determined to be invalid.635 The conduct must not only conform to the regulation but must have been in good faith conformity. Regulation B defines good faith as actions based on “honesty in fact” in the conduct or transaction.636

Credit Discrimination: 11.9.4.4 Special Defenses by FDIC and RTC

When a governmental agency such as the Federal Deposit Insurance Corporation (FDIC) or the Resolution Trust Corporation (RTC) takes over a bank, the ECOA still applies to the bank’s pre-takeover transactions. An ECOA violation is normally apparent on the face of the bank’s records—for example, requirement of a spouse’s signature when the credit application shows the applicant is creditworthy.

Credit Discrimination: 11.9.5 Special Defenses to Fair Housing Act and Civil Rights Acts Claims

The Fair Housing Act (FHA) and the federal Civil Rights Acts do not provide for any special defenses. The FHA regulations provide a defense when an entity purchases loans. Such an entity may consider factors justified by business necessity, such as considerations employed in normal and prudent transactions.654 As noted earlier, business justification is an issue in any disparate treatment or disparate impact case as well.655