Friday, June 17, 2011

City, County Could Bring Consumer Protection Act Claim for Discriminatory Lending Practices

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

The City of Memphis and Shelby County, Tennessee have standing to assert Tennessee Consumer Protection Act (CPA) claims against Wells Fargo Bank for allegedly discriminatory lending practices that took place in those jurisdictions, according to the federal district court in Memphis.

Between 2000 and 2009, Wells Fargo allegedly steered mostly African-American borrowers into loans they could not afford, resulting in a disproportionately high number of foreclosures in predominantly African-American neighborhoods in Memphis and Shelby County.

Standing to Sue

Wells Fargo argued that the City and County lacked standing to assert the CPA claims because they did not suffer an injury-in-fact as a result of the allegedly unlawful business practices. In order to have standing to assert the CPA claims, a plaintiff must show an injury fairly traceable to the illegal practices.

CPA claims are liberally construed, and Tennessee courts have held that the CPA applies to mortgage transactions, according to the court.

Governmental agencies may bring claims under the CPA, the court held. The CPA does not require the plaintiff to suffer the unfair act; it requires only that the plaintiff suffer damages as a result of the unfair act.
The alleged injury, lost property values and tax revenue, were fairly traceable to the allegedly discriminatory lending practices of Wells Fargo. Thus, the court found that the municipalities had standing to assert the claims.

The decision is City of Memphis v. Wells Fargo Bank, N.A., CCH State Unfair Trade Practices Law ¶32,271.

Further details regarding CCH State Unfair Trade Practices Law appear here.

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