Credit Discrimination: 11.2.2.2 Individual Liability
Individuals may also be liable as long as they meet the threshold requirements for actors covered by the various discrimination laws.
Individuals may also be liable as long as they meet the threshold requirements for actors covered by the various discrimination laws.
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.
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
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.
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
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. . . .
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
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.
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.
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
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
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.
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
There are two ways to make a claim under the Fair Housing Act (FHA). The aggrieved party may file an administrative complaint with the Department of Housing and Urban Development (HUD) or commence a private civil action in state or federal court.158 These two procedures are not mutually exclusive and may be pursued contemporaneously or sequentially.
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.
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:
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.
The Truth in Lending Act (TILA) restricts forced arbitration and similar procedures in connection with residential mortgage loans and open-end consumer credit plans secured by the consumer’s dwelling.184 The corresponding TILA Regulation Z provision makes clear that, to be covered by this provision, only open-end credit must be secured by the consumer’s principal dwelling.
The Military Lending Act (MLA) prohibits arbitration clauses in consumer credit agreements with military personnel or their dependents or the enforcement of such a consumer credit agreement.203 An arbitration requirement is unenforceable even after the consumer is no longer a servicemember or a dependent of a servicemember so long as the consumer was covered by the MLA when the credit was originated.204
The Consumer Financial Protection Bureau (CFPB) has authority to issue a rule limiting consumer arbitration agreements involving consumer financial products and services after it conducts a study of arbitration agreements.228 The CFPB completed its study in 2015 and submitted a lengthy report to Congress.229
It is axiomatic that an arbitration agreement is not binding if there is no agreement with the consumer to submit disputes to arbitration.235 The defendant in an Equal Credit Opportunity Act (ECOA), Fair Housing Act (FHA), or other credit discrimination case cannot force arbitration if the defendant cannot produce an agreement between the parties to arbitrate their disputes.
An arbitration agreement is a contract and, like any other contract, is subject to standard contract defenses—for example, that the contract was not consummated, not properly formed, not applicable to the parties, superseded by another contract, unconscionable, or not enforceable according to its terms. For example, if a creditor’s standard form contract includes an arbitration clause, that clause should not apply to an applicant who was denied credit and who never entered into that contract.
Arbitration clauses can be challenged as either unconscionable or preventing vindication of federal statutory rights. When the consumer’s claim is pursuant to a federal statute, an arbitration clause can often be challenged under both theories. For example, an arbitration agreement that limits the right to punitive damages can be unconscionable and interfere with a consumer’s rights under the ECOA.
The ECOA and FHA explicitly provide a right to recover punitive damages for statutory violations.255 An arbitration agreement that prohibits a consumer from obtaining relief explicitly granted by federal statute is unenforceable because it conflicts with the legislature’s purpose in enacting the statute. In Mitsubishi Motors Corp. v.