(CN) – The 11th Circuit revived Miami’s claims that Bank of America, Wells Fargo and Citigroup made predatory loans to black and Hispanic borrowers for a decade.
Miami filed separate lawsuits claiming the banks targeted black and Latino homebuyers for predatory loans with steeper fees and interest rates than they offered to similarly situated white customers, a practice called reverse redlining.
The city claimed the banks created incentives to encourage employees to sell the high-cost loans even when they were not justified by an applicant’s creditworthiness.
By steering minorities into predatory loans, the banks share responsibility for the unnecessary foreclosures of minority-owned properties, depriving the city of tax revenue, and contributing to urban blight, Miami claimed.
A federal judge dismissed the complaints, finding that the city had not shown the banks’ practices caused it actual harm. But the 11th Circuit reversed and remanded Tuesday, finding the city had standing under the Fair Housing Act.
“The city claims that the bank’s discriminatory lending caused property owned by minorities to enter premature foreclosure, costing the city tax revenue and municipal expenditures. Although there are several links in that causal chain, none are unforeseeable,” Judge Stanley Marcus wrote for the three-judge panel. “And the city has provided the results of regression analyses that purport to draw the connection between the bank’s conduct toward minority borrowers, foreclosure, and lost tax revenue. This empirical data is sufficient to ‘raise the pleadings above the speculative level.'”
Marcus said it’s an open question whether the city will be able to prove its claims, but they are plausible enough to survive the banks’ requests for dismissal.
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