Relman Colfax has filed an amicus brief on behalf of various civil rights, fair housing, and consumer protection organizations in support of the Consumer Financial Protection Bureau (CFPB) in CFPB v. Townstone Financial, Inc., a lending discrimination case challenging Townstone’s practice of redlining Black neighborhoods in Chicago, including by actively discouraging credit applications from those areas.
The district court dismissed the CFPB’s claims, erroneously holding that the Equal Credit Opportunity Act (ECOA) and its implementing regulations do not reach any pre-application discriminatory conduct, including statements that would discourage or prevent consumers from applying for credit at all. The case is now on appeal before the Seventh Circuit.
The amicus brief—filed on behalf of the National Fair Housing Alliance, American Civil Liberties Union, Lawyers’ Committee for Civil Rights Under Law, National Consumer Law Center, Chicago Lawyers’ Committee for Civil Rights, South Suburban Housing Center, Fair Housing Center of Central Indiana, HOPE Fair Housing Center, Open Communities, Metropolitan Milwaukee Fair Housing Council, and American Civil Liberties Union of Illinois—supports the CFPB by explaining why the district court’s position is wrong on the law and by illustrating the severe consequences that this holding would have on traditionally-underserved communities.
As amici explain in their brief, the district court’s position would upend core antidiscrimination protections that have been in place for nearly fifty years. ECOA—the federal law designed to eradicate credit discrimination—would have no application, for example, to a creditor posting a “Whites Only” sign in its window or on its website. Lenders could freely discriminate as long as they successfully deter people from applying in the first place. The district court’s holding is contrary to the text and purposes of ECOA, as well as Supreme Court and Seventh Circuit jurisprudence in analogous employment discrimination cases. Limiting ECOA in this way would have significant consequences for communities affected by redlining and other forms of credit discrimination, which have fueled a racial wealth gap and disproportionately low rates of homeownership among Black and Latino households. The brief highlights significant evidence that widespread credit discrimination persists and is often effectuated through pre-application discouragement. The district court’s holding would also disrupt a system of uniform regulatory fair lending supervision for banks and nonbanks, limiting transparency into nonbank lenders—the most significant entities in the mortgage market today. These limitations would come at a time when targeted digital marketing technologies increasingly allow lenders to screen and discourage consumers because of their protected characteristics, long before they can apply.
The amicus brief can be found here.
The Relman Colfax case team is led by Stephen Hayes and Valerie Comenencia Ortiz, with paralegal assistance from Mariana Boully Perez.