On May 3, a California resident filed a class action lawsuit in federal court accusing a Los Angeles-based credit union of discriminatory practices, and raised a civil rights claim under 42 U.S.C. § 1981, and violations of the California’s Unruh Civil Rights Act. In the complaint, the plaintiff alleges his automobile loan application was unfairly denied because of his immigration status as a Deferred Action for Childhood Arrivals (DACA) recipient.

DACA, a federal immigration program, provides temporary work permits and protection from deportation for certain undocumented immigrants who arrived in the United States as children. According to the complaint, despite initially receiving approval for the loan, the credit union later requested additional documentation and ultimately rejected his application because he is not a permanent resident and does not possess an individual taxpayer identification number.

Putting It Into Practice: The lawsuit, filed by the Mexican American Legal Defense and Education Fund on the resident’s behalf, is the latest in a series of legal challenges against financial institutions by the advocacy group on behalf of DACA recipients. Recent settlements in similar cases underscore the importance of lenders adhering to anti-discrimination laws and fair lending practices. (See our other blog posts addressing discriminatory lending here, here, and here). While ECOA allows a creditor to consider an applicant’s immigration status when necessary to determine the creditor’s rights regarding repayment, the CFPB and DOJ’s view is that “unnecessary or overbroad reliance on immigration status, including when that reliance is based on bias, may run afoul of the law.” Accordingly, lenders must exercise extreme care if they use DACA status in their underwriting practices.

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Skylar Stoudt also contributed to this article.