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D’Argenzio v. Bank of America Corporation

2011 WL 5873032 (U.S. Dist. Ct. D. N.J. 2011) (Unpublished)

EQUAL CREDIT OPPORTUNITY ACT —The Equal Credit Opportunity Act requires lenders to give borrowers written notice of the specific reasons for adverse actions taken against them and this is intended to offer broad protection to all consumer borrowers not just members of a certain protected class.

A borrower sued a bank for violations of New Jersey’s Consumer Fraud Act (CFA) and of the federal Equal Credit Opportunity Act (ECOA). The borrower had an adjustable rate, negative amortization loan. He then went to a bank to refinance the loan. The borrower claimed that he was induced to enter into a high interest rate loan, with the promise that he would be able to refinance into a lower interest rate loan several months later after his credit improved. He also claimed that, based on those oral representations, he entered into the refinance loan and took out an additional $50,000, in part to pay the prepayment premium for his prior loan. The rest was used to pay off debts in order to improve his credit. The next year, the borrower tried reaching out to the loan officer to refinance into a lower interest rate as promised, but his calls were not returned. The borrower then applied to the bank to refinance, but the application was never approved. The borrower then defaulted on his loan and the bank filed foreclosure proceedings. The borrower then sued for violations of the CFA and ECOA. The bank moved for summary judgment, arguing that the borrower had no cause of action under either statute. The Court disagreed.

The Court noted that in order to prevail on his CFA claim, the borrower needed to prove unlawful conduct, ascertainable loss, and a causal relationship between the unlawful conduct and the loss. The Court found that there was a genuine issue of material fact as to whether the bank had violated the CFA. There was evidence that the borrower was induced to enter into the loan with the understanding that he could refinance to a lower interest rate several months later once his credit scores improved. A rational jury could find that the bank made a misrepresentation regarding the later refinancing in order to induce the borrower to enter into the high interest loan. The Court rejected the bank’s argument that any oral statements by a bank employee regarding the loan terms ware inadmissible because they were barred by the statute of frauds. The Court disagreed, finding that the borrower’s testimony was not being offered to change the meaning of the loan commitment letter, but as proof of the bank’s unlawful conduct in fraudulently inducing the borrower to enter into the high interest loan. Therefore, the parole evidence rule did not bar the introduction of oral testimony.

The Court also disagreed with the bank’s claim that the borrower did not have an ECOA claim because he was not a member of a protected class under the statute. Originally the statute was enacted to prohibit discrimination in loan transactions and applied to certain protected classes. However, the ECOA was later amended to require lenders, within thirty days, to give borrowers written notice of the specific reasons for adverse actions taken against them. The amendment was intended to provide broad protection to all consumer borrowers, and not just those who were members of a certain protected class. In this case, the bank was required to provide the borrower with written notice within thirty days after his loan application was denied. The failure to provide notice within the required time was a violation of ECOA.


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