An unpublished opinion from the Sixth Circuit provides a useful application of the statute of limitations to bar a debtor’s claims under the Equal Credit Opportunity Act, 15 U.S.C. § 1691e (“ECOA”). In Guy v. Mercantile Bank Mortg. Co., 2017 U.S. App. LEXIS 19329 (6th Cir. 2017), the Guys, a married African-American couple, owned and operated separate businesses. Id. at *1-2. Each business received a loan from Mercantile Bank Mortgage Company (“Mercantile”) through one loan officer, Pat Julien, in 2000 and 2006, respectively. Each loan was subsequently refinanced at least once through Julien. Id. at *2.

When Julien left Mercantile in 2006, the Guy’s accounts were transferred to a different loan officer. The Guys alleged that they began receiving different treatment after their loans were transferred, and Paula Guy, one of the plaintiffs, wrote a letter to Mercantile expressing her concern that black clients were “being treated differently” than they had been under Julien. Id. Mercantile changed its policies between 2006 and 2009, and began to “aggressively enforce standards it had ignored for years” with the goal, the Guys alleged, of “eliminat[ing] minority business borrowers.” Id. at *2-3.

In January 2008, Mercantile “pulled the funding” on the Guys’ projects and accelerated the debt, citing alleged payment delinquencies and past-due real-property taxes. While the bank previously accepted late payments during a “grace period,” Mercantile did not accept any late payments from the Guys after January 2008, and Mercantile eventually seized the Guys’ real property, foreclosed on other collateral, garnished their wages, and obtained a deficiency judgment against them. Id. at *3.

The Guys initially sought legal representation in 2008, but did not retain counsel. The Guys did not pursue their claims against Mercantile until 2015, when they filed suit alleging Mercantile’s adverse loan actions “were pretextual and that Mercantile terminated its lending relationship with them, at least in part, because of their race.” Id. at *4. The district court noted that Mercantile disclosed emails though discovery which “arguably show racial animus,” but dismissed the Guys’ complaint as barred by the statute of limitations. Id. The Guys appealed, arguing that the statute of limitations was extended by the discovery rule or by the doctrine of fraudulent concealment.

The Sixth Circuit disagreed with the Guys on each issue, and affirmed the judgment of the district court. The court began by noting that while the discovery rule will generally toll the running of a statute of limitations until a plaintiff discovers or should have discovered his or her injury, the US Supreme Court has “been at pains to explain that discovery of the injury, not discovery of the other elements of a claim, is what starts the clock.” Rotella v. Wood, 528 U.S. 549, 555, 120 S. Ct. 1075, 145 L. Ed. 2d 1047 (2000). The Guys were injured, and knew they were injured, when Mercantile took adverse lending actions against them. Those injuries took place in 2008 and 2009, making the Guys’ claims barred by the statute of limitations. The court went on to hold that even if the discovery rule applied to the ECOA, the Guys sought legal representation in 2008, shortly after the adverse lending actions occurred, which indicated they “were not only aware of their injuries but also that legal recourse might be available.” Id. at *7.

The court also found that the Guys’ claims could not survive under the doctrine of fraudulent concealment. In order to toll the statute of limitations based on fraudulent concealment, a plaintiff must prove that: “(1) [the] defendant[] concealed the conduct that constitutes the cause of action; (2) defendant['s] concealment prevented plaintiffs from discovering the cause of action within the limitations period; and (3) until discovery, plaintiffs exercised due diligence in trying to find out about the cause of action.” Id. at *7 (citations omitted). While false statements that conceal facts respecting the merits of a plaintiff’s claims may serve as a basis for equitable tolling, “such relief is warranted only when the defendant's allegedly fraudulent statements constituted a plausible explanation that lulled the plaintiffs into not filing their claims sooner.” Id. at *8. Here, the Guys admitted in their complaint that they immediately doubted the veracity of Mercantile’s stated reasons for calling their loans, which demonstrated that they were not “lulled” into not filling their complaint sooner.

As this case makes evident, a debtor’s actions immediately after an adverse lending decision can have decisive implications for his or her claims. If a debtor files a lawsuit under ECOA for actions which took place years earlier, seeking discovery into his or her actions immediately after the adverse lending decision may prove useful.