On February 14, a divided Second Circuit panel upheld a 2016 jury verdict which found that a mortgage lender violated, among other laws, the Equal Credit Opportunity Act (“ECOA”) by engaging in “reverse redlining” when it allegedly targeted Black and Latino homeowners with predatory loans.

The majority held that the district court did not abuse its discretion by applying equitable tolling to the plaintiff’s claims, and rejected the mortgage lender’s argument that the statute of limitations began running at loan origination. Instead, the statute of limitations began to run when the plaintiffs discovered that they were the alleged victims of discrimination in connection with their predatory loans.

The majority also rejected the mortgage lender’s challenges to the district court’s jury instructions finding they sufficiently conveyed the requirement for proving disparate impact.

Putting It Into Practice: While we will likely see a pullback in ECOA enforcement under the Trump administration, financial institutions are reminded that many statutes, including ECOA, have an independent right of action. As such, we expect the plaintiffs’ bar to continue to remain busy in bringing lawsuits. Accordingly, lenders should continue to review their own fair lending protocols to ensure they maintain appropriate compliance practices.

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