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Protecting consumers’ right to challenge discrimination

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. Under the law, consumers targeted by race, religion, age, or any other prohibited basis with predatory lending products or practices also have the right to challenge that discrimination by bringing a lawsuit. Yet lenders engaged in discriminatory acts or practices sometimes unfairly try to make consumers sign away that right. Fortunately, many courts have rejected attempts to make people sign away crucial legal rights.

On Friday, the CFPB filed an amicus brief in the United States Court of Appeals for the Second Circuit to protect consumers’ ability to challenge discrimination. In this case, borrowers alleged that Emigrant Mortgage Company and Emigrant Bank targeted Black and Latino homeowners with abusive and predatory mortgage loans. Emigrant directed loans to people whose low credit scores indicated that they were at a relatively high risk of default. Further, unlike most other mortgage loans, once a borrower missed a single payment on Emigrant’s loans, a much higher interest rate kicked in and payments increased dramatically, making it highly unlikely that borrowers could ever catch up. Predictably, the default rate on Emigrant’s loans reached nearly 50 percent, well above industry standards.

A jury found that Emigrant violated the law, and the judge ordered Emigrant to pay compensatory damages. On appeal, Emigrant is now arguing that the borrowers should not have been able to bring their claims at all because too much time had elapsed since they received their mortgage loans. Further, Emigrant is arguing, among other things, that one family that was discriminated against should not be compensated because Emigrant required the family members to sign paperwork saying they “release and forever discharge Emigrant . . . from any and all claims” when the family needed to modify their mortgage.

That’s wrong, as the CFPB’s brief explains. The borrowers were entitled to bring their claims to court when they did because Emigrant concealed their discriminatory and predatory conduct. And the family that modified their mortgage cannot be bound by a contract to sign away their right to challenge Emigrant’s discrimination. Congress’s strong commitment to prohibiting discrimination in the credit markets would be undermined if courts did not allow consumers to challenge harmful conduct in these circumstances.

If you believe you have been affected by discrimination when applying for or modifying your mortgage loan, you can submit a complaint with the CFPB.

The case is Saint-Jean v. Emigrant Mortgage Company, No. 22-3094 (2d Cir.).

Read the CFPB’s amicus brief in Saint-Jean v. Emigrant Mortgage Company.

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