Sixth Circuit Affirms Dismissal of ECOA Discrimination Claims

Discrimination

On August 14, the U.S. Court of Appeals for the Sixth Circuit affirmed a district court’s dismissal of claims by a borrower of Iraqi origin that a bank violated ECOA when it refused to restructure the borrower’s loan. 16630 Southfield L.P. v. Flagstar Bank, F.S.B., No. 12-2620, 2013 WL 4081909 (6th Cir. Aug. 14, 2013). In this case, a naturalized citizen of Iraqi origin obtained a loan from the bank for use in real estate ventures. When the borrower did not repay the loan in full when it came due, the bank agreed to restructure the loan, but later refused a second request to restructure when the borrower again could not repay on time. The borrower claimed the bank did so without explanation and despite new collateral and a guarantee from the borrower’s wife.  The borrower then sued the bank, alleging that the bank discriminated against him and his family based on their national origin. The court held that the borrower’s national origin does not itself establish the requisite inference of discrimination and the borrower failed to allege other facts sufficient to support that inference. The court explained that despite the borrower’s new collateral and guarantee, “banks often refuse to provide secured loans,” and in this case common sense suggests the bank did so not based on discrimination but because the borrower failed to pay the initial loan on time. Further, the court held that the bank’s refusal to explain its decision does not itself suggest discrimination and the borrower failed to identify any similarly situated individuals whom the bank treated better. The court affirmed the district court’s dismissal.