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Protecting people from discriminatory targeting

April 16, 2023 / Source: CFPB

The Consumer Financial Protection Bureau (CFPB) is committed to ensuring fair, equitable, and nondiscriminatory access to credit for individuals and communities. The CFPB administers and enforces federal laws such as the Equal Credit Opportunity Act, a landmark civil rights law that protects people against discrimination in all aspects of credit transactions.

Today, the CFPB filed a Statement of Interest in the United States District Court for the Southern District of Florida to help protect consumers from discriminatory targeting. As courts have recognized for decades, discriminatory targeting is the act of directing predatory or otherwise harmful products or practices at certain groups, neighborhoods, or parts of a community. While “redlining” is the practice of financial institutions not lending to certain groups, neighborhoods, or parts of a community, discriminatory targeting involves targeting predatory products or practices to those communities. Discriminatory targeting has also been called “reverse redlining,” often where the targeting is on the basis of geography.

In this case, the Plaintiffs allege that Health Career Institute, a for-profit nursing school, extended and arranged for students to take out loans for a nursing program. The Plaintiffs allege that Health Career Institute intentionally targeted its program on the basis of race, and that Health Career Institute expected that students were highly likely to need to take out loans to pay for the program. The Plaintiffs also allege that Health Career Institute imposed new grading policies and graduation requirements while students were enrolled in the program, increasing the time and corresponding cost to complete the program beyond what Health Career Institute advertised. The Plaintiffs claim that Health Career Institute’s conduct constituted discriminatory targeting in violation of the Equal Credit Opportunity Act.

Health Career Institute has moved to dismiss the Plaintiffs’ Complaint, arguing that “Plaintiffs fail to specify any aspect of any credit transaction that they allege is discriminatory based on race (or any other protected class under the [Equal Credit Opportunity Act]) and fail to identify any specific loan term that they allege was unfair or predatory, let alone unfair or predatory based on race.”

As the CFPB’s brief explains, that’s wrong. The Equal Credit Opportunity Act’s prohibition on discrimination applies “with respect to any aspect of a credit transaction” and so covers every aspect of an applicant’s dealings with a creditor, not just the specific terms of a loan (like the interest rate or fees). Accordingly, discriminatory targeting violates the Equal Credit Opportunity Act where, as alleged here, students are targeted on a prohibited basis with unfair or predatory lending practices, such as misrepresenting the cost of the program when students take out loans to enroll or other predatory conduct relating to the performance of goods and services obtained with credit. The plain text of the law as well as relevant precedent make clear that this conduct violates the Equal Credit Opportunity Act.

The case is Roberson v. Health Career Institute LLC, No. 9:22-cv-81883 (S.D. Fl.).

Read CFPB’s Statement of Interest.

If you believe you have been discriminated against by a creditor, you can submit a complaint with the CFPB.