Disparate Impact Theory Is Factor In ECOA Lawsuits
The law firm of Stroock & Stroock & Lavan has noted a new wave of class-action lawsuits under the Equal Credit Opportunity Act alleging that nationwide, minority classes of consumers pay higher overall interest rates than similarly situated non-minority borrowers.
The plaintiffs in the suits do not allege intentional discrimination, according to Stroock, but instead rely upon a controversial legal premise known as "disparate impact" theory.
In an article authored by Stroock attorneys Julia Strickland and Lisa Simonetti, the law firm said the issue of assignee liability under ECOA is a point of contention. Generally, assignees can avoid liability if they did not participate in the credit decision or if the assignee did not know or have reasonable notice of the violation prior to becoming involved in the transaction.
They noted that civil liability under ECOA includes actual damages, punitive damages of up to $10,000, equitable and declarative relief, and attorney fees. Punitive damages in class actions, however, are limited to the lesser of $500,000 or 1% of the net worth of the creditor.
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