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Lenders Fight Allegations of Discrimination

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Alleged violations of the Fair Housing Act have landed multiple lenders in court to defend themselves against claims of discrimination. One discrimination case was de-certified as a class action following a recent Supreme Court ruling. Meanwhile, bankers are urging federal regulators to abandon the use of a legal theory recently borrowed from employment law cases for finding fault in cases alleging lender discrimination.

The American Banking Association has urged federal agencies to stop using disparate impact analysis in fair lending cases, claiming that its use is based on unsupported legal theory, yet carries real consequences for banks and consumers that detract from legitimate fair lending efforts.

ABA provided officials at the Consumer Financial Protection Bureau, the banking agencies, the Department of Housing and Urban Development and Justice Department with a white paper presenting the legal arguments that disparate impact has no valid statutory foundation.

“ABA members are strong advocates for fair lending and fully support enforcement against practices that intentionally discriminate,” Frank Keating, ABA president and chief executive officer, said in a written statement “However, disparate impact asserts fair lending violations occurred based only on statistical differences, where neither intent nor discrimination can be proven.”

Keating explained that disparate impact relies on a legal theory that have been found to be invalid by the Supreme Court in more recent cases.

“Using disparate impact creates unnecessary compliance risk, limiting credit availability and driving up the cost of borrowing.” Keating continued. “We urge our regulators to refocus their fair lending supervision on reforming policies that intentionally discriminate and have no place in the banking industry.”

Massachusetts recently made a distribution from a settlement with the company formerly known as Option One Mortgage Corp. Attorney General Martha Coakley announced on Aug. 24 that more than 2,100 checks had been sent out as part of a settlement with Sand Canyon. The state distributed more than $1.75 million in payments to minority borrowers affected by the company’s alleged discriminatory lending practices. Borrowers received checks ranging from $100 to $5,000, with the average payment being approximately $816.

“Option One made loans that it knew were likely to fail and it discriminated against African-American and Latino borrowers,” Coakley said in a statement.

In Barrett et al v. Option One Mortgage Corporation, et al., a federal trial judge decertified the class of African-American mortgage borrowers on Sept. 18, finding that, although the plaintiffs presented evidence of higher payments, that wasn’t enough under Wal-Mart Stores, Inc. v. Dukes — a 2011 Supreme Court case — to maintain class action status.

The lawsuit had earlier been certified as a class action of African-American borrowers who obtained a mortgage loan from one of the defendants in 2011. However, three months after obtaining class action status, the Supreme Court, in a decision written by Justice Antonin Scalia, ruled in the Wal-Mart case that the plaintiffs in that class action — more than 1 million female current and former workers — failed to prove a company-wide policy of discrimination. Scalia found that evidence of such a policy was necessary for the plaintiffs to show the commonality needed to certify a class under the federal rules of procedure, according to a story in the National Law Journal.

The borrowers in Barrett sued H&R Block Mortgage Corp. and several subsidiaries, claiming that the defendants’ loan pricing policy gave brokers discretion to add charges allegedly unrelated to a borrower’s creditworthiness that had a disparate impact on African-American borrowers. .

Provident Funding filed a Rule 26(f) report on Sept. 18 as required by the rules of the federal court in Moore v. Provident Funding Associates, LP d/b/a Provident Funding Group. The rule requires parties in litigation to confer as soon as practicable and to state the parties’ views and proposals on any issues about disclosure or discovery.

Jody Moore, who worked in Provident’s Pittsburgh wholesale division branch, filed a complaint in federal trial court in Pennsylvania on June 27 alleging that she was subjected to sexual harassment, a hostile work environment and retaliation from a supervisor.

A status conference was held on Sept. 5 in the case Ohio Civil Rights Commission v. Wells Fargo Bank, N.A. Wells Fargo’s attempt to have the case thrown out of court was unsuccessful; although the five reverse redlining claims were whittled down.

Attorney General Michael DeWine filed a lawsuit against Wells Fargo in 2011 on behalf of the Ohio Civil Rights Commission alleging that the lender used reverse redlining to herd black borrowers into more expensive loans. Named as plaintiff in the lawsuit is Warrensville Heights, Ohio, resident Latonya Sykes-Jackson, who borrowed $122,700 in February 2007.

Randy McWhorter and Jim Donnelly said they’ve been trying to refinance their 7.25 percent mortgage since 2008, but Bank of America won’t consider both of their incomes because they aren’t married and can’t get married, according to 10News. The lender reportedly told 10News that it is committed to fair and equal treatment of all of its customers and that it is reviewing the couple’s file.

Steve Haskins, the attorney who filed the lawsuit, did not respond to requests for more information.

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