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Continuing the Fight to Protect Borrowers from Credit Discrimination

In the past year, the Department of Justice has continued to achieve significant results in its fair lending enforcement efforts, including negotiating groundbreaking relief for victims of credit discrimination.  The Civil Rights Division’s Housing and Civil Enforcement Section and its Fair Lending Unit enforce the federal fair lending laws, including the Equal Credit Opportunity Act (ECOA), Fair Housing Act (FHA) and Servicemembers Civil Relief Act (SCRA).  On April 13, 2015, we submitted our annual report to Congress reporting on our work in 2014 to address credit discrimination all its forms.  In the five years since the Fair Lending Unit was established, the division has filed or resolved 37 lending matters under ECOA, FHA and SCRA.  This year’s enforcement actions bring the total amount for the settlements in these matters to over $1.2 billion in monetary relief for impacted communities and individual borrowers.

Highlights of that work include:

Addressing discrimination in automobile lending: Working with the state of North Carolina, we filed the federal government’s first-ever discrimination lawsuit involving “buy here, pay here” auto lending.  In our complaint against Auto Fare Inc., we alleged that the owners and operators of two “buy here, pay here” used car dealerships violated ECOA by engaging in a pattern or practice of reverse redlining – intentionally targeting African American customers for unfair and predatory credit practices – in the financing of used car purchases.  The state of North Carolina also alleged the defendants violated the state’s Unfair and Deceptive Trade Practices Act.  The 2015 consent order requires the defendants to establish a $225,000 settlement fund to compensate victims for their past discrimination and to make significant changes to the terms of their loans and their repossession practices.

Addressing discrimination in credit cards: Partnering with the Consumer Financial Protection Bureau, we filed and resolved the federal government’s largest credit card discrimination settlement in history.  In our complaint in United States v. Synchrony Bank, f/k/a GE Capital Retail Bank (D. Utah), we alleged that the bank engaged in a nationwide pattern or practice of discrimination in violation of ECOA on the basis of national origin by excluding Hispanic borrowers from two of its credit card debt-repayment programs if they had a mailing address in Puerto Rico or denoted Spanish as their preferred language for various communications.  As part of the settlement, the lender will pay at least $169 million to compensate more than 108,000 borrowers.

Addressing discrimination based on disability and receipt of public assistance: Based on a matter initially investigated by the Department of Housing and Urban Development and referred to the department, we filed a case against Fifth Third Mortgage Co. (M.D. Ga.) alleging that the lender and Cranbrook Mortgage Corporation engaged in a pattern or practice of discrimination by requiring credit applicants with disabilities to provide an official letter from their medical doctor to substantiate that their disability income would continue, but did not impose a documentation burden on applicants without disabilities to prove their income would continue.  As part of the settlement , the defendants must pay $1.52 million to compensate victims and implement other injunctive relief.

Enforcing the rights of members of the military: In 2014, the department filed its first ever lawsuit alleging discrimination against service members by servicers and owners of student loans in United States v. Sallie Mae, Inc., et al. (D. Del.).  The complaint alleges that the defendants violated Section 527 of the SCRA when they failed to reduce to six percent the interest rates on pre-service loans held by approximately 60,000 service members.  The consent order requires the defendants to pay $60 million to compensate aggrieved service members.  In addition, the defendants must streamline the process by which service members may obtain SCRA interest rate benefits.

We encourage you to read our ECOA report for a more detailed discussion of these and other achievements in the past year.

Updated March 3, 2017

Topic
Servicemembers Initiative