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TMLG Defeats Motion to Dismiss in Case Alleging Harborstone Violated the Civil Rights Act & FCRA

September 22, 2021

Terrell Marshall Law Group recently defeated a motion to dismiss the claims of a consumer who was denied a loan based solely on his citizenship status in violation of Section 1981 of the Civil Rights Act. The lawsuit claims that Harborstone Credit Union automatically considers consumers who are not United States citizens as ineligible for loans based on their citizenship status instead of evaluating their application based on their creditworthiness. The lawsuit also alleges Harborstone unlawfully obtains non-citizen consumers’ credit reports without a permissible purpose in violation of the Fair Credit Reporting Act (FCRA).

The proposed class action lawsuit seeks to represent two classes of non-U.S. citizens, including “Dreamers,” who are participating in the Deferred Action for Childhood Arrivals (DACA) program. The case is currently being considered in the United States District Court for the Western District of Washington,

Plaintiff Alleges Harborstone Violates the Civil Rights Act & FCRA

The Plaintiff, Mario Paredes Garcia, and his wife already had joint and individual checking and savings accounts and a car loan with Harborstone. To open these accounts and apply for the loan, the couple had previously provided their Social Security numbers and cards, driver’s licenses, and other identification to the credit union.

When Mr. Paredes Garcia and his wife jointly applied for a second car loan with Harborstone, the application was denied. Upon investigating this decision, Harborstone informed them the credit union had a policy to deny loan applications submitted by non-citizen consumers like Mr. Paredes Garcia and that the couple’s first loan should never have been approved.

Harborstone’s decision to deny consumers’ applications based on citizenship status violates Section 1981 of the Civil Rights Act, which states that “all persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts . . . as is enjoyed by white citizens.” By violating Section 1981, Harborstone has harmed Mr. Paredes Garcia and the members of the Section 1981 Class.

Mr. Paredes Garcia also alleges Harborstone violates the FCRA by obtaining consumers’ credit reports without a permissible purpose. Specifically, Mr. Paredes Garcia alleges Harborstone had no reason to obtain non-citizen consumers’ credit reports if the credit union knew of the applicants’ citizenship statuses and had a policy to deny loan applications to non-citizens regardless of creditworthiness. By doing so, Harborstone invaded the privacy and harmed the credit scores of Mr. Paredes Garcia and the members of the FCRA Class.

Harborstone’s Motion to Dismiss Is Denied

In March, Harborstone filed a motion to dismiss Mr. Paredes Garcia’s Section 1981 and FCRA claims, arguing its policies consider immigration status––not citizenship status––when denying loans to non-citizens, and that it permissibly obtains consumer reports in response to applications it receives.

However, United States District Court Judge Benjamin H. Settle rejected both arguments and denied Harborstone’s motion to dismiss earlier this month. Specifically, Judge Settle found Mr. Paredes Garcia adequately pleaded that Harborstone denied his loan based on his citizenship status and that it knew of his citizenship status before impermissibly obtaining his credit report. Thus, the case against Harborstone will move forward and Terrell Marshall Law Group will continue to fight for Mr. Paredes Garcia and other non-citizen consumers Harborstone has harmed.

Representing victims of Civil Rights and FCRA violations is a central focus at Terrell Marshall Law Group. We regularly represent consumers in which a consumer’s financial wellbeing has been harmed by a financial institution’s failure to meet its legal obligations.

If you believe that you may also be a victim of a Civil Rights violation or a credit reporting error, do not hesitate to contact us.