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Overview of ECOA discriminatory auto lending

Feb 3rd, 2015 | By | Category: Financial Elder Abuse

Attorney Steve Discusses ECOA & Credit Discrimination LawsuitsCredit discrimination lawyer


What is the Equal Credit Opportunity Act (“ECOA”)?  How does it play out at a predatory car dealership that seeks to gouge certain clients in regard to the financing of cars, trucks, autos, motorcycles and RV’s?  This blog explores a legal topic most people know nothing about.

What is the ECOA?

The ECOA stands for the Equal Credit Opportunity Act.  The general nature of the law is that people should be treated fairly in the credit and financing process.  Originally, the law dealt with discrimination toward women.   In Anderson v. United Fin. Co., 666 F.2d 1274, 1277 (9th Cir. 1982), the federal court held:

“The purpose of the ECOA is to eradicate credit discrimination waged against women, especially married women whom creditors traditionally refused to consider for individual credit. See, Markham v. Colonial Mortgage Service Co., Associates Inc., 605 F.2d 566, 569 (D.C.Cir.1979). Regulation 202.7(d)(1) is a specific rule created by the Federal Reserve Board which is totally consistent with the purpose of the Act. The rationale behind s 202.7(d)(1) is to insure that individual credit is, in reality, available to any credit-worthy married applicant. Maltz & Miller, The Equal Credit Opportunity Act and Regulation B, 31 Okla.L.Rev. 1, 34 n.162 (1978). If the spouse were required to sign the credit instrument, the credit offered would be joint, not individual credit, and this would be discrimination on the basis of marital status.”

 What is the difference between the ECOA and the Fair Housing Act (“FHA”)?

The Northern District Court described it best in Ramirez v. GreenPoint Mortgage Funding, Inc., 633 F. Supp. 2d 922, 925 (N.D. Cal. 2008):

“The ECOA makes it unlawful “for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction-(1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract).” 15 U.S.C. § 1691(a). The FHA makes it unlawful “for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin.” 42 U.S.C. § 3605.”

Thus, one federal law deals with credit transactions and the other with real estate housing.  Discrimination in any form is unacceptable.

Car dealers who sock away minorities

Another protected class under the ECOA is minorities.  Lenders such as Wells Fargo and others have been accused of unfair lending practices that injure minorities.  For examples, In re Wells Fargo Residential Mortgage Lending Discrimination Litig., No. 08-MD-01930 MMC, 2010 WL 4791687, at *1 (N.D. Cal. Nov. 18, 2010) discussed:

“In the operative pleading, the First Consolidated and Amended Class Action Complaint (“FCAC”), plaintiffs, who obtained mortgage loans from Wells Fargo, allege that Wells Fargo’s “credit pricing system” has a “discriminatory impact on minority applicants for home mortgage loans” in violation of two federal statutes, specifically, the Equal Credit Opportunity Act (“ECOA”) and the Fair Housing Act (“FHA”). (See FCAC ¶ 2.) In support thereof, plaintiffs allege that “after a finance rate acceptable to Wells Fargo is determined by objective criteria (e.g., the individual’s credit history, credit score, debt-to-income ratio and loan-to-value ratios), Wells Fargo’s credit pricing policy authorizes additional discretionary interest rate markups, pricing exceptions and finance charges.
Lending practices need to be looked at closely in this modern day and age.

ECOA and Financial elder abuse application to predatory auto lending (“age discrimination”).

Errico v. Pac. Capital Bank, N.A., 753 F. Supp. 2d 1034, 1044 (N.D. Cal. 2010) was one case that discussed the elements needed to prove an ECOA claim in California:
Plaintiffs’ allegations of age discrimination, as currently pled, fail to state a claim under ECOA. To state a discrimination claim under ECOA, Plaintiffs must show that:

(1) they were members of a protected class; (ex. over 65 years of age while at the dealership)
(2) they applied for and were qualified for the loan at issue; (ex. for the “0% financing” the car salesman offered)
(3) the loan was rejected despite Plaintiffs’ qualifications; (meaning rejected or offered a worse interest rate than they were qualified for);

(4) the creditor continued to approve loans for similarly situated applicants or treated members not in the protected class more favorably. (this requires you to prove disparate treatment among others similarly situated).  So that is a taste of what needs to be proven to win an ECOA age discrimination case.

In the credit, financing, and mortgage lending world, the elements of the cause of action are slightly different.  In Errico v. Pac. Capital Bank, N.A., 753 F. Supp. 2d 1034, 1050 (N.D. Cal. 2010) the Northern District Court of California discussed:
Plaintiffs’ eleventh and final cause of action is for elder abuse under California Welfare and Institutions Code § 15610.30. SAC ¶ 122. Section 15610.30(a) provides:
(a) “Financial abuse” of an elder or dependent adult occurs when a person or entity does any of the following:
(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.
(2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.
(3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined in Section 1575 of the Civil Code.
Cal. Welf. & Inst. Code § 15610.30(a). Plaintiffs, who were 78 and 77 at the time of the filing of the SAC on March 5, 2010, allege that Defendants, who had previously acted as “financial advisers” to Plaintiffs, “fraudulently and negligently induced a [sic] plaintiffs to obtain two loans from [Pacific Capital Bank] and, as a result, wrongfully induced plaintiffs: a) to mortgage their Turlock property to defendant [Pacific Capital Bank] and b) to incur interest charges, fees and other expenses associated with the loans and development of the Turlock Property.” SAC ¶ 124.
The elder abuse claim, as Defendants acknowledge, is essentially another fraud-based claim, and, taking all allegations in the SAC as true, does state a claim for the reasons provided above in analyzing Plaintiffs’ fraud and negligent misrepresentation causes of action. See Intrieri, 117 Cal.App.4th at 82–86, 12 Cal.Rptr.3d 97 (finding summary adjudication inappropriate as to plaintiff’s elder abuse, fraud, and negligent misrepresentation causes of action where triable issues of fact existed as to each cause of action).  Accordingly, the Court denies Defendants’ motion to dismiss Plaintiffs’ elder abuse cause of action.
This section of the financial elder abuse laws might apply where, for example, a elderly person takes a trade in to the car dealership and plans to use it as a down payment.  The dealer looks at the car (usually through their used car sales manager) and gives the senior a lowball price for the car (ex. falsely claiming “your car is a wreck and cannot be fixed and is only worth $200“) and then giving the owner only $200 for his trade instead of giving him or her fair market value.  False inspection fees only to learn “this car will never run again.”  Where these statements are false and fraudulent, questions arise over the treatment of the senior citizen.  A California financial elder abuse lawyer should be called in at that point.

Failure to get an “adverse action letter” from the car dealership

Schlegel v. Wells Fargo Bank, NA, 720 F.3d 1204, 1210 (9th Cir. 2013) discussed and defined what an adverse action letter is:

The Schlegels’ complaint also raises a claim under ECOA, which makes it illegal “for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction … on the basis of race, color, religion, national origin, sex or marital status, or age.” 15 U.S.C. § 1691(a)(1). One way that ECOA effectuates this goal is through its notice requirement, which states: “Each applicant against whom adverse action is taken shall be entitled to a statement of reasons for such action from the creditor.Id. § 1691(d)(2). ECOA defines an “adverse action as a:
denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested. Such term does not include a refusal to extend additional credit under an existing credit arrangement where the applicant is delinquent or otherwise in default, or where such additional credit would exceed a previously established credit limit.
Id. § 1691(d)(6).
When a creditor takes an adverse action against an applicant without giving the required notice, the applicant may sue for a violation of ECOA. Id. § 1691e (“Any creditor who fails to comply with any requirement imposed under this subchapter shall be liable to the aggrieved applicant for any actual damages sustained by such applicant”); see also Thompson v. Galles Chevrolet Co., 807 F.2d 163, 166 (10th Cir.1986) (quoting Sayers v. Gen. Motors Acceptance Corp., 522 F.Supp. 835, 840 (W.D.Mo.1981)).

If you were promised credit (ex. zero percent financing) to get you onto the showroom floor at the dealership, and into the “finance box” then you get higher credit terms, you may have a case under the ECOA, and you may be the beneficiary of bait and switch advertising, and false and deceptive practices, and frankly fraud.

Sample ECOA verdicts nationwide

1.  $98 million dollar Ally settlement

2.  $800,000 verdict ECOA case

3.  $14,750,000 Greenpoint Mortgage Lending case

Contact a ECOA, Financial Elder Abuse and Consumer Predatory Lending Law Firm.

If you feel you are being discriminated against in real estate housing or financial lending transactions due to your race, religion, age, or other reason contact one of our civil litigation attorneys to evaluate your case.  We have flexible feee options, which may include contingency fee representation in some cases.  Call us at (877) 276-5084 or fill out the contact form below leaving your best phone number and time to call.  One of our attorneys or other representatives will contact you, usually within the hour.



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