DACA Debate Likely to Impact Lenders

President Trump’s announcement that he was ending the Delayed Action for Childhood Arrivals (DACA) in six months unless Congress passes legislation addressing the issue has important implications for lenders as individuals affected by the President’s announcement turn to the courts for protection.

The DACA program was instituted by President Obama in 2012. It allows qualified individuals who are illegal aliens who entered the country as minors to receive renewable two-year periods of deferred deportation. They are also eligible to receive work permits.

When I heard about the President’s announcement, I figured that now would be a good time to update you on the status of a case which has important potential implications for lenders. In Perez v. Wells Fargo & Co., Case No.: 17-cv-00454-MMC, DACA recipients are suing Wells Fargo claiming that the bank’s lending policies violate federal civil rights law. Each of the highlighted plaintiffs applied to the bank for a loan. Nonetheless, they argue that they were denied loans ranging from student loan applications to a loan for commercial equipment. Each claims that they have a U.S. citizen as a willing co-signer but that the bank categorically refused their applications.

Here’s why I think the case is potentially so significant: In its motion to dismiss, Wells Fargo argued correctly that under the Equal Credit Opportunity Act (ECOA), it is not prohibited from discriminating against the person on the basis of alienage. In other words, the ECOA prohibits discrimination against someone because they are Hispanic but does not prohibit basing a lending decision on a Hispanic person’s immigration status. Conversely, the plaintiffs in this case argued that the ECOA should be interpreted in conjunction with 42 U.S.C. § 1981. “42 U.S.C. § 1981, which provides, in relevant part, that “[a]ll persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts . . . as is enjoyed by white citizens.” This federal law has been interpreted to not only prohibit racial discrimination but discrimination on the basis of immigration status.

On August 3^rd, the court sided with the plaintiffs. It ruled that § 1981 could be read as complementing the ECOA rather than conflicting with it. Specifically, the court concluded that it is appropriate to interpret federal law as barring not only discrimination in lending decisions under the ECOA but also discrimination against persons on the basis of their immigration status under § 1981. This expansive ruling, if upheld on appeal – and I’m assuming there will be an appeal – represents an extremely significant expansion of lending anti-discrimination law.

Cordray For Governor?

Strike up the Pretender’s music: It looks like CFPB Director, Richard Cordray is going back to Ohio.

On Monday, he did nothing to quiet down speculation that he is going to run for Governor of Ohio when he quits his job as the head of the CFPB. He gave a speech in Cincinnati to a gathering of the AFLCIO in which sounded an awful lot like a populist campaign speech. For example, in his speech he stated that “We need to be able to see that wherever we start in life, we can advance through our own merit and hard work. We need a marketplace, and a justice system, and other key pieces of our society to operate more effectively and truly reflect the principle that every one of us counts” This sounds a lot more exciting than talk about overdraft fees.