Florida cities can sue banks for targeting minorities for predatory loans



A federal appeals court Tuesday said the city of Miami can pursue lawsuits alleging that three major banks violated the Fair Housing Act by targeting minorities for predatory loans.

A three-judge panel of the 11th U.S. Circuit Court of Appeals overturned lower-court decisions that dismissed the city’s lawsuits against Bank of America, Citigroup and Wells Fargo. The appeals court did not rule on whether the banks violated the Fair Housing Act — only on whether the city should be able to pursue the cases.

The lawsuits alleged that the banks used discriminatory lending practices that, ultimately, led to home foreclosures, lower property-tax revenues and increased costs for such things as police and fire services. That allegations involved types of borrowing including subprime loans and interest-only loans.

“The city claims that the bank targeted black and Latino customers in Miami for predatory loans that carried more risk, steeper fees, and higher costs than those offered to identically situated white customers, and created internal incentive structures that encouraged employees to provide these types of loans,” the appeals court said Tuesday in the Bank of America case.

But in a document filed in February, Bank of America argued that a federal district judge correctly dismissed the city’s claims. Bank of America also said that many of the allegations against it were related to the mortgage company Countrywide Financial, which Bank of America bought in 2008.

“The FHA is a civil rights statute, principally intended to provide remedies for direct victims of discrimination and to combat actions that create or support segregation,” Bank of America argued. “The city’s suit, in contrast, sought to vindicate purely monetary losses to the public treasury, in the form of decreased tax revenues and increased costs for local services, and fell outside the zone of interests the FHA protects.”

The appeals court rulings — a 57-page opinion in the Bank of America case that was heavily cited in shorter Citigroup and Wells Fargo opinions — focused on issues such as whether the city had legal standing to file the lawsuits and whether it had met a statute of limitations.

The three-judge panel said Miami had done enough to allege injuries that gave it standing in the case.

“Of course, the city has limited its claim only to those damages arising from foreclosures caused by the bank’s lending practices,” said the Bank of America ruling, written by Judge Stanley Marcus and joined by judges Charles Wilson and Harvey Schlesinger. “At a subsequent stage in the litigation it may well be difficult to prove which foreclosures resulted from discriminatory lending, how much tax revenue was actually lost as a result of the bank’s behavior, etc. But at this early stage, the claim is plausible and sufficient.”

The appeals court sided with the banks on one issue — the dismissal of what is known as an “unjust enrichment” claim raised by the city. But it sent the rest of the cases back to a federal district court for further litigation.

“Nothing we have said in this opinion should be taken to pass judgment on the ultimate success of the city’s claims,” the ruling said. “We hold only that the city has constitutional standing to bring its FHA claims, and that the district court erred in dismissing those claims … .”