The U.S. Court of Appeals for the Seventh Circuit held that the plaintiffs failed to prove a violation of the federal Equal Credit Opportunity Act ("ECOA") under a disparate treatment theory where their only evidence was a vague statement from one of the defendant's employees.
Accordingly, the Seventh Circuit affirmed the ruling of the trial court granting summary judgment in favor of the defendant.
A copy of the opinion is available at: Link to Opinion
The plaintiffs ("Plaintiffs"), an African-American couple, purchased a home from the seller ("Seller") in October 2008 for $185,000. Plaintiffs made a down payment of $12,000, and monthly payments of $1,400 to the Seller for about one year.
In December 2009, the lender ("Lender") informed the Plaintiffs there was a mortgage on their home and that it was foreclosing. Plaintiffs were unaware of the mortgage when they purchased the property.
To avoid foreclosure, the Plaintiffs attempted to assume the Seller's debt and mortgage. Over four years, the Plaintiffs attempted to assume the Seller's mortgage, but the servicer at the time never advised them of what information it needed to evaluate their application.
In 2012, the Plaintiffs acquired a quitclaim deed for the property from the Seller, and in 2013 the Lender foreclosed on the home, and scheduled a foreclosure sale.
The defendant servicer ("Servicer") began servicing the loan in March 2014. Nine months later, the Servicer informed the Plaintiffs of what information they needed to provide in order to apply to assume the loan. The Servicer also agreed to postpone the foreclosure sale.
Over the next several months, the Plaintiffs attempted to apply for the loan without success. The Plaintiffs alleged that they sent the required financial records to the Servicer three times, but according to an affidavit from the Servicer, the Plaintiffs never submitted an application that the Servicer deemed complete enough to warrant review.
The Servicer also informed the Plaintiffs in March 2015 that they needed to bring the loan current before they could assume it. However, without the Seller's written consent to discuss the status of his loan with a third party (i.e. the Plaintiffs), the Servicer refused to disclose information about his missed payments.
Thus, the Plaintiffs alleged they could not bring the loan current because they did not know how much it would cost to do so.
The Plaintiffs further alleged that they believed the Servicer had not permitted them to assume the loan because they are African-American.
In support of their claim, the Plaintiffs asserted that the Servicer would sometimes hand up on them when they called or sent them to voicemail and would not call back.
The Plaintiffs also alleged that they eventually got through to an employee ("Employee") of the Servicer who they believed to be African-American, who told them, "These people, you know how they treat us."
Based on these allegations, the Plaintiffs filed a lawsuit asserting a number of claims, including a violation of ECOA.
The trial court dismissed most of the claims, but permitted the Plaintiffs to proceed with their ECOA claim.
As you will recall, ECOA makes it "unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race…"
After discovery, summary judgment was entered in favor of the Servicer. The trial court determined that the Plaintiffs "probably were not 'applicants'" under ECOA because they were seeking to assume a line of credit, rather than to "exten[d], renew[], or continu[e]" one.
Moreover, the trial court ruled that even if ECOA applied, the Plaintiffs failed to present evidence of discrimination under either a disparate impact or disparate treatment theory.
The Plaintiffs appealed, and argued that they presented enough evidence to withstand summary judgment.
Specifically, the Plaintiffs advanced a disparate treatment theory and asserted that the Employee's uncontroverted statement showed that the Servicer discriminated against them based on race by delaying the assumption process and requiring them to bring the loan current before assuming it.
The Seventh Circuit disagreed, holding that "[t]he district court correctly entered summary judgment for the defendants because no reasonable jury could find that [the Servicer] discriminated against the [Plaintiffs] based on their race."
The Court further noted that the Plaintiff's only evidence was the Employee's testimony, "which is vague and requires too much speculation to conclude that their race motivated [the Servicer] to require them to satisfy [the Seller's] outstanding loan payments."
Instead, "that requirement is consistent with the loan agreement, which conditions assumption on [the Servicer's] determination that its security would not be impaired."
Further, the Plaintiffs "do not point to any evidence countering the [Servicer's] representative's statement that they never produced a complete application."
Accordingly, the Seventh Circuit affirmed the ruling of the trial court.
Having decided that the Plaintiffs did not show discrimination, the Seventh Circuit did not reach the issue of whether they were "applicants" under ECOA.
Ralph T. Wutscher
Maurice Wutscher LLP
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