Lawsuit Filed in California Federal District Court Alleges Unlawful Discrimination Based on Credit Union’s Denial of DACA Recipient’s Loan Application | Ballard Spahr LLP

In a new lawsuit filed in federal district court in California, a beneficiary of Deferred Action for Childhood Arrivals (DACA) alleges that a credit union violated the Civil Rights Act of 1866 ( 42 USC § 1981) and the California Unruh Civil Rights Act (UCRA) in denying his loan application due to his status as a DACA beneficiary.

DACA allows people who arrived in the United States as children a renewable two-year period of deferred action against deportation and makes them eligible for an Employment Authorization Card allowing them to work in the United States. DACA recipients receive a Social Security number with a special number. designation indicating that the holder is not a citizen or permanent resident.

In her putative class action complaint filed against Alliant Credit Union, Yuliana Camacho alleges that she has been a DACA recipient since 2011 and applied to Alliant in 2021 for a loan to purchase a car. According to her complaint, Ms. Camacho submitted her social security number and her application was pre-approved. To complete the application process, Alliant then asked her to upload an additional form if she held a visa, a permanent resident card if she was a permanent resident, or a certificate of naturalization if she was a naturalized citizen. After informing Alliant that she was a DACA beneficiary and not a visa holder, permanent resident, or naturalized citizen, Alliant reportedly informed her that she was not lending on DACA status and sent her a Notice of Adverse Action stating that his credit had been denied due to his residency status.

42 USC § 1981 provides that “[a]All persons under the jurisdiction of the United States shall have the same right in each State and Territory to enter into and perform contracts. . . as white citizens do. ARCU predicts that “[all persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin , disability, medical condition, genetic information, marital status, sexual orientation, citizenship, primary language, or immigration status are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever.”

In her complaint, Ms. Camacho alleges that Alliant violated Section 1981 because it intentionally discriminated against her by interfering with her right to make and enforce contracts for financial products on the basis of alienage.  She alleges that Alliant also violated the UCRA by denying her the opportunity to apply for financial products free of discriminatory conditions imposed on the basis of her immigration status.  In addition to injunctive and declaratory relief, the complaint seeks statutory and compensatory damages.

A large bank’s decision to settle two cases involving Section 1981 claims for alleged discrimination in credit decisions based on DACA status after it did not prevail on motions to dismiss has emboldened plaintiffs’ attorneys to continue to file similar lawsuits.  The new complaint highlights the continued compliance risks for financial institutions in handling credit applications from nonpermanent residents and DACA recipients.  Lenders should take note that in January 2021, HUD reversed its prior policy that prohibited lenders from granting FHA mortgages to DACA recipients to make DACA recipients eligible for FHA mortgages.

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