May 31, 2023

By: Stephanie Shea

The California Unruh Act (specifically, California Civil Code § 51) prohibits “all business establishments of every kind whatsoever” from discriminating based on citizenship or immigration status, among other things. That protection applies to all persons within the jurisdiction of California. At the federal level, (simply put,) the federal civil rights statute (specifically, 42 U.S.C. § 1981), prohibits alienage discrimination.

As early as 2017, we began to see citizenship discrimination class actions filed against creditors. For example, see Perez v. Wells Fargo & Co., 2017 U.S. Dist. LEXIS 122722 (N.D. Cal. Aug. 3, 2017). A few years later, these cases evolved to be about non-credit products, such as failing to open a deposit account due to the applicants’ citizenship. For example, see Chattopadhyay v. BBVA Compass Bancshares, Inc., 2019 U.S. Dist. LEXIS 241400 (N.D. Cal. Nov. 25, 2019).

On May 26, 2023, the Eastern District of California approved a settlement, settling another class action involving non-credit products. In this case, the plaintiffs alleged that the institution denied their checking and saving account applications because they were not U.S. citizens or legal permanent residents. The settlement includes a settlement fund of between $280,000 and $325,000, and the bank paying $25,000 in administrative costs and $60,000 for the plaintiffs’ attorneys’ fees and costs. Velazquez v. Ally Bank, 2023 U.S. Dist. LEXIS 92671 (E.D. Cal. May 26, 2023).

Institutions should remember that settlements for these types of lawsuits can be far more costly. For example, the Perez v. Wells Fargo case mentioned above settled for up to roughly $20 million. Buchalter’s regulatory compliance team regularly advises companies, including depository institutions, on fair banking, including avoiding claims of citizenship discrimination.

Buchalter is a leading nationally recognized financial services and consumer financial services/mortgage regulatory law firm, having served large, medium and small institutions for over 90 years. Our Consumer Financial Services and Mortgage Regulatory Industry Group provides counseling and analysis across the wide range of regulatory and compliance issues facing such institutions, such as those raised by this development. Creditors can reach out to any members of the Consumer Financial Services and Mortgage Regulatory Industry Group for assistance.

Stephanie Shea

Michael Flynn

Melissa Richards

Anna Crivelli

This communication is not intended to create or constitute, nor does it create or constitute, an attorney-client or any other legal relationship. No statement in this communication constitutes legal advice nor should any communication herein be construed, relied upon, or interpreted as legal advice. This communication is for general information purposes only regarding recent legal developments of interest, and is not a substitute for legal counsel on any subject matter. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal advice on the particular facts and circumstances affecting that reader. For more information, visit www.buchalter.com.