IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NEW YORK
UNITED STATES OF AMERICA,
Plaintiff,
v.
FIDELITY FEDERAL BANK, FSB
Defendant
_____________________________
COMPLAINT
The United States of America alleges:
- The United States brings this action to enforce
provisions of the Equal Credit Opportunity Act, 15 U.S.C.
§§1691, et seq. ("ECOA"), and its implementing regulations
located at 12 CFR Part 202 ("Regulation B").
- Defendant Fidelity Federal Bank, FSB ("Fidelity") has
engaged in a pattern or practice of discrimination in its
subprime credit card programs in violation of ECOA and
Regulation B.
- This Court has jurisdiction over this action pursuant to
28 U.S.C. § 1345 and 15 U.S.C. § 1691e(h), and venue is appropriate pursuant to 28 U.S.C. § 1391(b) and (c).
- Fidelity is incorporated under the laws of California
with its principal place of business in Glendale, California.
- Fidelity is a wholly-owned subsidiary of First Bank of
Oak Park, a multibank holding company.
- Fidelity is a creditor as defined by section 702(e) of
ECOA, 15 U.S.C. § 1691a(e), and by Regulation B, 12 CFR 202.2(l).
- Fidelity's primary regulator is the Office of Thrift
Supervision ("OTS"). In May 1999, the OTS conducted a compliance examination of Fidelity's subprime credit card lending practices to evaluate compliance with ECOA, Regulation B, and other
consumer protection laws and regulations.
- Based on information gathered in its examination, the
OTS determined that it had reason to believe that Fidelity and
its business partners ("service providers") had engaged in a
pattern or practice of discrimination in violation of ECOA and
Regulation B. On March 2, 2001, the OTS referred the matter to
the United States Attorney General pursuant to 15 U.S.C.
§ 1691e(g).
- Fidelity offers a broad range of financial services
including demand and time deposits, mortgage loans and credit
cards.
- In 1997, Fidelity entered the subprime credit card
market. Fidelity issued and owned subprime credit cards marketed
pursuant to contractual agreements between Fidelity and third-party service providers.
- Fidelity entered into agreements with four service
providers to market its subprime credit cards:
- On or about February 24, 1997, Fidelity entered into an
agreement with First Alliance Corporation and its
affiliates ("FACO") to provide home equity secured
subprime credit cards. Fidelity was the issuer and
owner of the credit cards.
- On or about March 5, 1997, Fidelity entered into an
agreement with American Direct Credit, LLC ("ADC") to
market subprime credit cards through a network of
dealer-distributors conducting in-home sales of various
household products. Fidelity was the issuer and owner
of the credit cards.
- On or about November 21, 1997, Fidelity entered into an
agreement with MMG Direct, Inc. ("MMG") to market
subprime credit cards to members of African-American
and other church groups. On or about December 10,
1997, Fidelity entered into an agreement with MMG to
market subprime credit cards through automobile
dealerships. Fidelity was the issuer and owner of the
credit cards.
- On or about March 31, 1998, Fidelity entered into an
agreement with Direct Furniture, Inc. ("Direct
Furniture") to market subprime credit cards to
Hispanics in the greater New York Metropolitan area
through in-home furniture sales. Fidelity was the
issuer and owner of the credit cards.
- Fidelity, prior to executing these marketing
agreements, failed to perform adequate due diligence on the
service providers and failed to ensure that the service providers
had policies in place which would ensure compliance with fair
lending laws.
- Fidelity, through its relationship with Direct
Furniture, engaged in abusive collection practices in its credit
card program which harassed customers on the basis of their
Hispanic national origin. For example, debt collectors made
threats relating to deportation and immigration-related issues.
This violated ECOA, 15 U.S.C. § 1691(a)(1), and Regulation B, 12 C.F.R. 202.4.
- Fidelity, through its relationship with Direct
Furniture, (a) discouraged applicants who received income from
public assistance from applying for Fidelity credit cards; and
(b) had a policy of offering applicants who received income from
public assistance less favorable terms on Fidelity credit cards
than similarly situated applicants who did not receive public
assistance. This discriminated against applicants on the basis
of their receipt of public assistance in violation of ECOA, 15
U.S.C. § 1691(a)(2), and also violated Regulation B, 12 C.F.R. 202.4, 202.5, and 202.6.
- Fidelity, through its relationship with Direct
Furniture, had a policy of requiring younger applicants living
with their parents and not in charge of paying the bills in the
household to have their parents co-sign an application for a
Fidelity credit card, even where the younger applicants were of
an age to contract. This discriminated against applicants on the
basis of age in violation of ECOA, 15 U.S.C. § 1691(a)(1), and also violated Regulation B, 12 C.F.R. 202.4, 202.5, 202.6, and 202.
- Fidelity, through its relationship with Direct
Furniture, had a policy of requiring all members of a household
to sign an application for a Fidelity credit card. This violated
Regulation B, 12 C.F.R. 202.4, 202.5, 202.6, and 202.7..7.
- Fidelity, through its relationship with Direct
Furniture, failed to adjust applicants' nontaxable income to make
it comparable to taxable income, which disadvantaged applicants
receiving income from nontaxable sources such as child support,
retirement benefits, social security, and disability payments.
This violated Regulation B, 12 C.F.R. 202.4 and 202.6.
- Fidelity, through its relationship with ADC, had a
policy of denying credit to Fidelity credit card applicants
unable to read and understand English. This discriminated
against applicants on the basis of national origin in violation
of ECOA, 15 U.S.C. § 1691(a)(1), and Regulation B, 12 C.F.R. 202.4, 202.5, 202.6, and 202.7.
- Fidelity, through its relationship with ADC, required
that multiple Fidelity credit card applications from persons
listed under the same telephone number be rejected. This
violated Regulation B, 12 C.F.R. 202.4, 202.6, and 202.7.
- Fidelity, through its relationship with Direct
Furniture, on at least one occasion pulled a credit report on a
non-applicant spouse. This violated Regulation B, 12 C.F.R.
202.4 and 202.5.
- Fidelity, through its relationship with ADC and MMG,
failed to provide adverse action notices and failed to provide
timely adverse action notices. This violated ECOA, 15 U.S.C.
§ 1691(d), and Regulation B, 12 C.F.R. 202.9.
- Fidelity, through its relationship with Direct
Furniture, failed to provide complete adverse action notices
containing notification of applicants' rights under ECOA. This
violated ECOA, 15 U.S.C. § 1691(d), and Regulation B, 12 C.F.R. 202.9.
- Fidelity, through its relationships with Direct
Furniture and FACO, failed to provide complete adverse action
notices containing the specific reasons for the adverse action.
This violated ECOA, 15 U.S.C. § 1691(d), and Regulation B, 12
C.F.R. 202.9.
- Fidelity, through its relationship with Direct
Furniture, retained data on applicants' race and sex by retaining
photographic identification in applicant files. This violated
Regulation B, 12 C.F.R. 202.4 and 202.12.
- Fidelity, through its relationship with MMG, collected
data on applicants' age, ethnicity, marital status, and religious
affiliation. This violated Regulation B, 12 C.F.R. 202.4, 202.5,
and 202.12.
- Fedelity, through its relationship with Direct
Furniture, ADC, and MMG failed to retain records from the Direct
Furniture, ADC, and MMG programs. This violated Regulation B, 12
C.F.R. 202.12.
- Fidelity's policies and practices, as described in the
preceding paragraphs, constitute a pattern or practice of
discrimination in violation of ECOA and Regulation B.
- Fidelity's pattern or practice of discrimination
continued from the first quarter of 1997 through at least the
fourth quarter of 1999.
- Persons who have been victims of Fidelity's pattern or
practice of discrimination are aggrieved applicants under ECOA,
15 U.S.C. § 1691e. As a consequence of Fidelity's policies and
practices described herein, these applicants have been denied
their rights under ECOA and have suffered injury and damages.
- The discriminatory policies and practices of Fidelity
as described herein were intentional and willful, and were
implemented with reckless disregard for the rights of credit
applicants.
WHEREFORE, the United States prays that the Court enter an
ORDER that:
- Declares that the policies and practices of Fidelity
set forth above violate the Equal Credit Opportunity Act, 15
U.S.C. §§ 1691, et seq., and Regulation B, 12 C.F.R. Part 202;
- Enjoins Fidelity, its agents, employees and successors,
and all other persons in active concert or participation with
Fidelity, from discriminating in its consumer credit card
operations and in any other aspect of Fidelity's lending
practices;
- Requires Fidelity to take such steps as are necessary
to:
- fully remedy its discriminatory policies and
practices; and
- ensure that future applicants for credit are
treated in a nondiscriminatory manner;
- Awards such damages as would fully compensate the
victims of Fidelity's discriminatory policies and practices for
the injuries caused by Fidelity; and
- Awards punitive damages to the victims of Fidelity's
discriminatory policies and practices.
The United States further prays for such additional relief
as the interests of justice may require.
|
JOHN ASHCROFT Attorney General |
ALAN VINEGRAD United States Attorney Eastern District of New York |
RALPH F. BOYD, JR. Assistant Attorney General Civil Rights Division |
|
JOAN A. MAGAGNA Chief Housing and Civil Enforcement Section Civil Rights Division |
MARLA TEPPER (MT7529) Assistant U.S. Attorney Civil Rights Litigation 1 Pierrepont Plaza, 16th. Fl. Brooklyn, NY 11201 |
JON M. SEWARD Deputy Chief MICHELLE ARONOWITZ KENNETH M. SCOTT (KS0940) Attorneys Housing and Civil Enforcement Section Civil Rights Division U.S. Department of Justice P.O. Box 65998 Washington, D.C. 20035-998 (202) 305-1680 |
Document Filed: July 8, 2002