CFPB Pushes the ECOA Coverage Envelope Again

The CFPB has filed a Statement of Interest in a case pending before a Florida federal district court in which the plaintiffs allege that the defendant engaged in discriminatory targeting in violation of the Equal Credit Opportunity Act (ECOA).

In Roberson v. Health Career Institute LLC, the plaintiffs are students at a for-profit nursing school who allege that the school engaged in various unfair and deceptive practices and other unlawful conduct in connection with enrolling students in and operating its “functionally valueless” nursing program.  A subclass of Black students allege that the school “intentionally used marketing, advertising, and recruiting techniques to target their nursing program to individuals on the basis of their race, with the understanding that such individuals were highly likely to require an extension of credit in order to pay for HCI’s nursing program.”  They allege that the school caused students to apply for and take out credit in the form of federal and private student loans, including retail installment contracts.”  According to the plaintiffs, the school engaged in “reverse redlining” by targeting the subclass for “an illusory program.”  

In its motion to dismiss, the school argues that “[p]laintiffs fail to specify any aspect of any credit transaction that they allege is discriminatory based on race (or any other protected class under the [ECOA]) and fail to identify any specific loan term that they allege was unfair or predatory, let alone unfair or predatory based on race.”

In challenging the school’s argument in its Statement of Interest, the CFPB points to the ECOA language that prohibits discrimination “with respect to any aspect of a credit transaction.”  Based on this language, the CFPB argues that “even where loan terms are not themselves unfair or predatory, a plaintiff may still proceed with a discriminatory targeting claim because, contrary to Defendants’ suggestion otherwise, ECOA covers every aspect of a credit transaction, not just the loan terms in the four corners of the contract.”  According to the CFPB, by alleging “that HIS misrepresented program requirements-and consequently, the length, and therefore the cost of the program-to convince students to take out credit to pay for tuition for the nursing program,” the plaintiffs had identified ‘an aspect of a credit transaction’ with respect to which HCI discriminatorily targeted them and have accordingly stated a claim under the ECOA.”

The CFPB’s attempt to extend the ECOA to redlining was recently rejected by a federal district court in Townstone Mortgage, with the court holding that ECOA protections only apply to “applicants.”  The CFPB has appealed that decision to the U.S. Court of Appeals for the Seventh Circuit.  The CFPB’s Statement of Interest represents another attempt by the CFPB to extend the ECOA beyond its terms, in this case through an expansive reading of what is “any aspect of a credit transaction.”