Federal Court Dismisses Disparate Treatment and Disparate Impact Class Claim

An Illinois federal district court recently dismissed with prejudice a proposed class action complaint against a mortgage lender alleging disparate treatment and disparate impact discrimination in violation of ECOA, the Fair Housing Act, 42 U.S.C. § 1981 & 1982, and state law.  The court previously had dismissed the plaintiff’s claims, and the plaintiff filed this amended complaint. 

The plaintiff alleged that the mortgage lender had lending and refinancing policies and practices that led to discrimination against black or African American applicants.  The court found that the plaintiff failed to provide enough detail to support her class allegations that the mortgage lender had a “pattern and practice” of racial discrimination.  Specifically, it compared the factual allegations needed to survive a motion to dismiss on an individual claim of discrimination against the more detailed factual allegations that are needed on a more complicated claim, like the plaintiff’s “pattern and practice” claim.  The court further stated that the complaint failed to include any allegations of discriminatory animus by loan officers when they, by policy, exercised discretion to set rates, costs, and fees, so it dismissed the disparate treatment claims. 

Regarding the disparate impact claims, the court stated that the claim must have both statistical disparities and provide allegations including a policy or practice causing the disparities, citing the U.S. Supreme Court case Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc., among others.  While the plaintiff alleged a statistical disparity based on HMDA data, she was unable to point to the mortgage lender’s policy that caused that disparity, so the court dismissed the disparate impact claims.  After dismissing all federal claims, the court declined to exercise supplemental jurisdiction over the remaining state law claims, dismissing those as well.