The past several months have seen numerous important happenings under fair lending developments, both in the courts, by the DOJ, and by at least one state attorney general.

DOJ Blog Posting

On August 1, Greg Friel, Deputy Assistant Attorney General for Civil Rights Division, U.S. Department of Justice (DOJ), posted a blog entitled “Protecting Borrowers from Credit Discrimination in All Forms,” The Justice Blog, DOJ Aug. 1, 2014. The blog posting pointed out that a number of settlements that the current administration has racked-up, under the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the Servicemembers Civil Relief Act (SCRA), involved more than $1 billion in settlement payments and 73 referrals from HUD or the FTC – more than double those filed under the administration of George W. Bush. The blog posting also trumpeted DOJ’s ongoing success in partnering with state attorneys general, including the recent partnering with the North Carolina AG’s office on reverse redlining in auto lending in January 2014.

Spousal Guaranties

On August 5, the U.S. Court of Appeals for the Eighth Circuit rejected the claims of two spousal guarantors that their guaranties were void and unenforceable because they violated the provisions of the ECOA and its implementing regulation, Regulation B, which generally prohibit lenders from requiring that an applicant provide spousal signatures except in certain specified situations. Hawkins v. Community Bank of Raymore, ___ F.3d ___, 2014 WL 3826820, (8th Cir. August 5, 2014). At issue was the Federal Reserve Board’s regulation expanding the definition of “applicant” under the statute to include a guarantor. The Eighth Circuit rejected the Federal Reserve Board’s interpretation: “Because the text of the ECOA is unambiguous regarding whether a guarantor constitutes an applicant, we will not defer to the Federal Reserve's interpretation of applicant, and we conclude that a guarantor is not protected from marital-status discrimination by the ECOA.” Id. at 3. Accordingly, the court concluded that the plaintiffs “are not applicants under the ECOA, and thus Community did not violate the ECOA by requiring them to execute the guaranties.” Id. at 4.

We note that two months earlier, the Sixth Circuit came to the opposite conclusion and sustained the Regulation B definition of “applicant” as including a guaranty, and permitted a guarantor to raise a violation of ECOA as an affirmative defense and in recoupment. RL BB Acquisition v. Bridgemill Commons Development, 754 F.3d 380 (6th Cir. 2014). This split among the circuits may indicate that the issue is ripe for Supreme Court review.

Redlining Discrimination Claim

On September 2, the New York state attorney general filed a complaint against a national bank and its bank holding company alleging redlining in violation of the FHA, the New York State Human Rights Law, and a Buffalo city ordinance based on discrimination in public accommodations. Complaint and Jury Demand, New York v. Evans Bancorp, N.W., No. 114-cv-00726 (W.D.N.Y. Sept. 2, 2014). New York’s complaint alleges that Evans Bank engaged in intentional racial discrimination by focusing its marketing and residential lending on a defined “trade area” in Buffalo, and that the Buffalo suburbs included white census tracks and excluded African-American neighborhoods. New York also alleges that Evans Bank established branches and ATMs and advertised in white areas, while excluding African-American communities.