The Consumer Financial Protection Bureau (CFPB) recently filed a Statement of Interest in a pending Florida district court case Roberson v. Health Career Institute LLC, in which the plaintiffs are alleging that defendants engaged in discriminatory targeting in violation of the Equal Credit Opportunity Act (ECOA).
ECOA is a civil rights law that prohibits creditors from discriminating against any applicant “with respect to any aspect of a credit transaction” on a prohibited basis, including “race, color, religion, national origin, sex or marital status, or age.” 15 U.S.C. § 1691(a)(1). The CFPB has authority to enforce ECOA and to interpret, and issue rules under, the statute. See 15 U.S.C. §§ 1691b(a), 1691c(a)(9), 1691e(e). The rules implementing ECOA are known as Regulation B. See 12 C.F.R. pt. 1002. One form of discrimination prohibited under ECOA is discriminatory targeting (also called “reverse redlining” or “targeted predatory lending”). Discriminatory targeting is the act of targeting unfair or predatory lending acts or practices to certain groups on a prohibited basis, which may be proven through either intentional targeting or disparate impact.
In Roberson v. Health Career Institute LLC, plaintiffs represent a putative class of Black students who enrolled at a for-profit nursing school. Plaintiffs allege that the school extended and arranged for students to take out credit to pay for the program in the form of federal and private student loans and adopted new policies, while students were enrolled, that increased the amount of time and money it would take students to complete the program. Thus, plaintiffs allege that the school intentionally targeted its program to individuals on the basis of race, with the understanding that they were highly likely to require an extension of credit to pay for the program. However, in its motion to dismiss, the school argues that “[p]laintiffs fail to specify any aspect of any credit transaction that they allege is discriminatory based on race (or any other protected class under the [ECOA]) and fail to identify any specific loan term that they allege was unfair or predatory, let alone unfair or predatory based on race.”
In its Statement of Interest, the CFPB argues that ECOA language prohibits discrimination “with respect to any aspect of a credit transaction.” Based on this language, the CFPB argues that “even where loan terms are not themselves unfair or predatory, a plaintiff may still proceed with a discriminatory targeting claim because, contrary to Defendants’ suggestion otherwise, ECOA covers every aspect of a credit transaction, not just the loan terms in the four corners of the contract.”
The CFPB’s Statement of Interest is part of a recent trend to expand the scope of ECOA language beyond its terms. To view the CFPB’s full Statement of Interest in Roberson v. Health Career Institute LLC, please visit this link.