Matter of Dane’s Estate
390 N.Y.S.2d 249 (N.Y.A.D. 1976)
On December 17, 1968, after repeated requests by decedent [Leland Dane] that appellant [James Rossi] loan him $10,500 [about $64,000 in 2010 dollars] the latter drew a demand note in that amount and with decedent’s consent fixed the interest rate at 7 1/2% Per annum, the then maximum annual interest permitted being 7 1/4%. Decedent executed the note and appellant gave him the full amount of the note in cash.…[The estate] moved for summary judgment voiding the note on the ground that it was a usurious loan, the note having been previously rejected as a claim against the estate. The [lower court] granted the motion, voided the note and enjoined any prosecution on it thereafter. Appellant’s cross motion to enforce the claim was denied.
New York’s usury laws are harsh, and courts have been reluctant to extend them beyond cases that fall squarely under the statutes [Citation]. [New York law] makes any note for which more than the legal rate of interests is ‘reserved or taken’ or ‘agreed to be reserved or taken’ void. [The law] commands cancellation of a note in violation of [its provisions]. Here, since both sides concede that the note evidences the complete agreement between the parties, we cannot aid appellant by reliance upon the presumption that he did not make the loan at a usurious rate [Citation]. The terms of the loan are not in dispute. Thus, the note itself establishes, on its face, clear evidence of usury. There is no requirement of a specific intent to violate the usury statute. A general intent to charge more than the legal rate as evidenced by the note, is all that is needed. If the lender intends to take and receive a rate in excess of the legal percentage at the time the note is made, the statute condemns the act and mandates its cancellation [Citation]. The showing, as here, that the note reserves to the lender an illegal rate of interest satisfies respondents’ burden of proving a usurious loan.
Next, where the rate of interest on the face of a note is in excess of the legal rate, it cannot be argued that such a loan may be saved because the borrower prompted the loan or even set the rate. The usury statutes are for the protection of the borrower and [their] purpose would be thwarted if the lender could avoid its consequences by asking the borrower to set the rate. Since the respondents herein asserted the defense of usury, it cannot be said that the decedent waived the defense by setting or agreeing to the 7 1/2% Rate of interest.
Finally, equitable considerations cannot be indulged when, as here, a statute specifically condemns an act. The statute fixes the law, and it must be followed.
The order should be affirmed, without costs.
- What is the consequence to the lender of charging usurious rates in New York?
- The rate charged here was one-half of one percent in excess of the allowable limit. Who made the note, the borrower or the lender? That makes no difference, but should it?
- What “equitable considerations” were apparently raised by the creditor?
Discrimination under the ECOA
Rosa v. Park West Bank & Trust Co.
214 F.3d 213, C.A.1 (Mass. 2000)
Lucas Rosa sued the Park West Bank & Trust Co. under the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691–1691f, and various state laws. He alleged that the Bank refused to provide him with a loan application because he did not come dressed in masculine attire and that the Bank’s refusal amounted to sex discrimination under the Act. The district court granted the Bank’s motion to dismiss the ECOA claim…
According to the complaint, which we take to be true for the purpose of this appeal, on July 21, 1998, Mr. Lucas Rosa came to the Bank to apply for a loan. A biological male, he was dressed in traditionally feminine attire. He requested a loan application from Norma Brunelle, a bank employee. Brunelle asked Rosa for identification. Rosa produced three forms of photo identification: (1) a Massachusetts Department of Public Welfare Card; (2) a Massachusetts Identification Card; and (3) a Money Stop Check Cashing ID Card. Brunelle looked at the identification cards and told Rosa that she would not provide him with a loan application until he “went home and changed.” She said that he had to be dressed like one of the identification cards in which he appeared in more traditionally male attire before she would provide him with a loan application and process his loan request.
Rosa sued the Bank for violations of the ECOA and various Massachusetts antidiscrimination statutes. Rosa charged that “[b]y requiring [him] to conform to sex stereotypes before proceeding with the credit transaction, [the Bank] unlawfully discriminated against [him] with respect to an aspect of a credit transaction on the basis of sex.” He claims to have suffered emotional distress, including anxiety, depression, humiliation, and extreme embarrassment. Rosa seeks damages, attorney’s fees, and injunctive relief.
Without filing an answer to the complaint, the Bank moved to dismiss.… The district court granted the Bank’s motion. The court stated:
[T]he issue in this case is not [Rosa’s] sex, but rather how he chose to dress when applying for a loan. Because the Act does not prohibit discrimination based on the manner in which someone dresses, Park West’s requirement that Rosa change his clothes does not give rise to claims of illegal discrimination. Further, even if Park West’s statement or action were based upon Rosa’s sexual orientation or perceived sexual orientation, the Act does not prohibit such discrimination.
Price Waterhouse v. Hopkins (U.S. Supreme Court, 1988), which Rosa relied on, was not to the contrary, according to the district court, because that case “neither holds, nor even suggests, that discrimination based merely on a person’s attire is impermissible.”
On appeal, Rosa says that the district court “fundamentally misconceived the law as applicable to the Plaintiff’s claim by concluding that there may be no relationship, as a matter of law, between telling a bank customer what to wear and sex discrimination.” …The Bank says that Rosa loses for two reasons. First, citing cases pertaining to gays and transsexuals, it says that the ECOA does not apply to crossdressers. Second, the Bank says that its employee genuinely could not identify Rosa, which is why she asked him to go home and change.
…In interpreting the ECOA, this court looks to Title VII case law, that is, to federal employment discrimination law.…The Bank itself refers us to Title VII case law to interpret the ECOA.
The ECOA prohibits discrimination, “with respect to any aspect of a credit transaction[,] on the basis of race, color, religion, national origin, sex or marital status, or age.” 15 U.S.C. § 1691(a). Thus to prevail, the alleged discrimination against Rosa must have been “on the basis of…sex.” See [Citation.] The ECOA’s sex discrimination prohibition “protects men as well as women.”
While the district court was correct in saying that the prohibited bases of discrimination under the ECOA do not include style of dress or sexual orientation, that is not the discrimination alleged. It is alleged that the Bank’s actions were taken, in whole or in part, “on the basis of… [the appellant’s] sex.” The Bank, by seeking dismissal under Rule 12(b)(6), subjected itself to rigorous standards. We may affirm dismissal “only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.” [Citations] Whatever facts emerge, and they may turn out to have nothing to do with sex-based discrimination, we cannot say at this point that the plaintiff has no viable theory of sex discrimination consistent with the facts alleged.
The evidence is not yet developed, and thus it is not yet clear why Brunelle told Rosa to go home and change. It may be that this case involves an instance of disparate treatment based on sex in the denial of credit. See [Citation]; (“‘Disparate treatment’…is the most easily understood type of discrimination. The employer simply treats some people less favorably than others because of their…sex.”); [Citation] (invalidating airline’s policy of weight limitations for female “flight hostesses” but not for similarly situated male “directors of passenger services” as impermissible disparate treatment); [Citation] (invalidating policy that female employees wear uniforms but that similarly situated male employees need wear only business dress as impermissible disparate treatment); [Citation] (invalidating rule requiring abandonment upon marriage of surname that was applied to women, but not to men). It is reasonable to infer that Brunelle told Rosa to go home and change because she thought that Rosa’s attire did not accord with his male gender: in other words, that Rosa did not receive the loan application because he was a man, whereas a similarly situated woman would have received the loan application. That is, the Bank may treat, for credit purposes, a woman who dresses like a man differently than a man who dresses like a woman. If so, the Bank concedes, Rosa may have a claim. Indeed, under Price Waterhouse, “stereotyped remarks [including statements about dressing more ‘femininely’] can certainly be evidence that gender played a part.” [Citation.] It is also reasonable to infer, though, that Brunelle refused to give Rosa the loan application because she thought he was gay, confusing sexual orientation with cross-dressing. If so, Rosa concedes, our precedents dictate that he would have no recourse under the federal Act. See [Citation]. It is reasonable to infer, as well, that Brunelle simply could not ascertain whether the person shown in the identification card photographs was the same person that appeared before her that day. If this were the case, Rosa again would be out of luck. It is reasonable to infer, finally, that Brunelle may have had mixed motives, some of which fall into the prohibited category.
It is too early to say what the facts will show; it is apparent, however, that, under some set of facts within the bounds of the allegations and non-conclusory facts in the complaint, Rosa may be able to prove a claim under the ECOA.…
We reverse and remand for further proceedings in accordance with this opinion.
- Could the bank have denied Mr. Rosa a loan because he was gay?
- If a woman had applied for loan materials dressed in traditionally masculine attire, could the bank have denied her the materials?
- The Court offers up at least three possible reasons why Rosa was denied the loan application. What were those possible reasons, and which of them would have been valid reasons to deny him the application?
- To what federal law does the court look in interpreting the application of the ECOA?
- Why did the court rule in Mr. Rosa’s favor when the facts as to why he was denied the loan application could have been interpreted in several different ways?
Uses of Credit Reports under the FCRA
Rodgers v. McCullough
296 F.Supp.2d 895 (W.D. Tenn. 2003)
This case concerns Defendants’ receipt and use of Christine Rodgers’ consumer report. The material facts do not seem to be disputed. The parties agree that Ms. Rodgers gave birth to a daughter, Meghan, on May 4, 2001. Meghan’s father is Raymond Anthony. Barbara McCullough, an attorney, represented Mr. Anthony in a child custody suit against Ms. Rodgers in which Mr. Anthony sought to obtain custody and child support from Ms. Rodgers. Ms. McCullough received, reviewed, and used Ms. Rodgers’ consumer report in connection with the child custody case.
On September 25, 2001, Ms. McCullough instructed Gloria Christian, her secretary, to obtain Ms. Rodgers’ consumer report. Ms. McCullough received the report on September 27 or 28 of 2001. She reviewed the report in preparation for her examination of Ms. Rodgers during a hearing to be held in juvenile court on October 23, 2001. She also used the report during the hearing, including attempting to move the document into evidence and possibly handing it to the presiding judge.
The dispute in this case centers around whether Ms. McCullough obtained and used Ms. Rodgers’ consumer report for a purpose permitted under the Fair Credit Reporting Act (the “FCRA”). Plaintiff contends that Ms. McCullough, as well as her law firm, Wilkes, McCullough & Wagner, a partnership, and her partners, Calvin J. McCullough and John C. Wagner, are liable for the unlawful receipt and use of Ms. Rodgers’ consumer report in violation 15 U.S.C. §§ 1681 o (negligent failure to comply with the FCRA) and 1681n (willful failure to comply with the FCRA or obtaining a consumer report under false pretenses). Plaintiff has also sued Defendants for the state law tort of unlawful invasion of privacy.…
Plaintiff has moved for summary judgment on the questions of whether Defendants failed to comply with the FCRA (i.e. whether Defendants had a permissible purpose to obtain Ms. Rodgers’ credit report), whether Defendants’ alleged failure to comply was willful, and whether Defendants’ actions constituted unlawful invasion of privacy. The Court will address the FCRA claims followed by the state law claim for unlawful invasion of privacy.
A. Permissible Purpose under the FCRA
Pursuant to the FCRA, “A person shall not use or obtain a consumer report for any purpose unless (1) the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished under this section.…” [Citation.] Defendants do not dispute that Ms. McCullough obtained and used Ms. Rodgers’ consumer report.
[The act] provides a list of permissible purposes for the receipt and use of a consumer report, of which the following subsection is at issue in this case:
[A]ny consumer reporting agency may furnish a consumer report under the following circumstances and no other:…
(3) To a person which it has reason to believe-
(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer…
[Citation.] Defendants concede that Ms. McCullough’s receipt and use of Ms. Rodgers’ consumer report does not fall within any of the other permissible purposes enumerated in [the act].
Ms. Rodgers requests summary judgment in her favor on this point, relying on the plain text of the statute, because she was not in arrears on any child support obligation at the time Ms. McCullough requested the consumer report, nor did she owe Ms. McCullough’s client any debt. She notes that Mr. Anthony did not have custody of Meghan Rodgers and that an award of child support had not even been set at the time Ms. McCullough obtained her consumer report.
Defendants maintain that Ms. McCullough obtained Ms. Rodgers’ consumer report for a permissible purpose, namely to locate Ms. Rodgers’ residence and set and collect child support obligations. Defendants argue that 15 U.S.C. § 1681b(a)(3)(A) permits the use of a credit report in connection with “collection of an account” and, therefore, Ms. McCullough was permitted to use Ms. Rodgers’ credit report in connection with the collection of child support. Defendants also admit that Ms. McCullough used the credit report to portray Ms. Rodgers as irresponsible, financially unstable, and untruthful about her residence and employment history to the Juvenile Court. Defendants do not allege that these constitute permissible purposes under the FCRA.
The cases Defendants have cited in response to the motion for summary judgment are inapplicable to the present facts. In each case cited by Defendants, the person who obtained a credit report did so in order to collect on an outstanding judgment or an outstanding debt. See, e.g., [Citation] (finding that collection of a judgment of arrears in child support is a permissible purpose under [the act]; [Citation] (holding that defendant had a permissible purpose for obtaining a consumer report where plaintiff owed an outstanding debt to the company).
However, no such outstanding debt or judgment existed in this case. At the time Ms. McCullough obtained Ms. Rodgers’ consumer report, Ms. Rodgers’ did not owe money to either Ms. McCullough or her client, Mr. Anthony. Defendants have provided no evidence showing that Ms. McCullough believed Ms. Rodgers owed money to Mr. Anthony at the time she requested the credit report. Indeed, Mr. Anthony had not even been awarded custody of Meghan Rodgers at the time Ms. McCullough obtained and used the credit report. Ms. McCullough acknowledged each of the facts during her deposition. Moreover, in response to Plaintiff’s request for admissions, Ms. McCullough admitted that she did not receive the credit report for the purpose of collecting on an account from Ms. Rodgers.
The evidence before the Court makes clear that Ms. McCullough was actually attempting, on behalf of Mr. Anthony, to secure custody of Meghan Rodgers and obtain a future award of child support payments from Ms. Rodgers by portraying Ms. Rodgers as irresponsible to the court. These are not listed as permissible purposes under [FCRA]. Defendants have offered the Court no reason to depart from the plain language of the statute, which clearly does not permit an individual to obtain a consumer report for the purposes of obtaining child custody and instituting child support payments. Moreover, the fact that the Juvenile Court later awarded custody and child support to Mr. Anthony does not retroactively provide Ms. McCullough with a permissible purpose for obtaining Ms. Rodgers’ consumer report. Therefore, the Court GRANTS Plaintiff’s motion for partial summary judgment on the question of whether Defendants had a permissible purpose to obtain Ms. Rodgers’ credit report.
B. Willful Failure to Comply with the FCRA
Pursuant to [the FCRA], “Any person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer” for the specified damages.
“To show willful noncompliance with the FCRA, [the plaintiff] must show that [the defendant] ‘knowingly and intentionally committed an act in conscious disregard for the rights of others,’ but need not show ‘malice or evil motive.’” [Citation.] “Under this formulation the defendant must commit the act that violates the Fair Credit Reporting Act with knowledge that he is committing the act and with intent to do so, and he must also be conscious that his act impinges on the rights of others.” “The statute’s use of the word ‘willfully’ imports the requirement that the defendant know his or her conduct is unlawful.” [Citation.] A defendant can not be held civilly liable under [the act] if he or she obtained the plaintiff’s credit report “under what is believed to be a proper purpose under the statute but which a court…later rules to be impermissible legally under [Citation].
Ms. McCullough is an attorney who signed multiple service contracts with Memphis Consumer Credit Association indicating that the primary purpose for which credit information would be ordered was “to collect judgments.” Ms. McCullough also agreed in these service contracts to comply with the FCRA. Her deposition testimony indicates that she had never previously ordered a consumer report for purposes of calculating child support. This evidence may give rise to an inference that Ms. McCullough was aware that she did not order Ms. Rodgers’ consumer report for a purpose permitted under the FCRA.
Defendants argue in their responsive memorandum that if Ms. McCullough had suspected that she had obtained Ms. Rodgers’ credit report in violation of the FCRA, it is unlikely that she would have attempted to present the report to the Juvenile Court as evidence during the custody hearing for Meghan Rodgers. Ms. McCullough also testified that she believed she had a permissible purpose for obtaining Ms. Rodgers’ consumer report (i.e. to set and collect child support obligations).
Viewing the evidence in the light most favorable to the nonmoving party, Defendants have made a sufficient showing that Ms. McCullough may not have understood that she lacked a permissible purpose under the FCRA to obtain and use Ms. Rodgers’ credit report.
If Ms. McCullough was not aware that her actions might violate the FCRA at the time she obtained and used Ms. Rodgers’ credit report, she would not have willfully failed to comply with the FCRA. The question of Ms. McCullough’s state of mind at the time she obtained and used Ms. Rodgers’ credit report is an issue best left to a jury. [Citation] (“state of mind is typically not a proper issue for resolution on summary judgment”). The Court DENIES Plaintiff’s motion for summary judgment on the question of willfulness under [the act].
C. Obtaining a Consumer Report under False Pretenses or Knowingly without a Permissible Purpose
…For the same reasons the Court denied Plaintiff’s motion for summary judgment on the question of willfulness, the Court also DENIES Plaintiff’s motion for summary judgment on the question of whether Ms. McCullough obtained and used Ms. Rodgers’ credit report under false pretenses or knowingly without a permissible purpose.
[Discussion of the invasion of privacy claim omitted.]
For the foregoing reasons, the Court GRANTS Plaintiff’s Motion for Partial Summary Judgment Regarding Defendants’ Failure to Comply with the Fair Credit Reporting Act [having no permissible purpose]. The Court DENIES Plaintiff’s remaining motions for partial summary judgment.
- Why did the defendant, McCullough, order her secretary to obtain Ms. Rodgers’s credit report? If Ms. McCullough is found liable, why would her law firm partners also be liable?
- What “permissible purpose” did the defendants contend they had for obtaining the credit report? Why did the court determine that purpose was not permissible?
- Why did the court deny the plaintiff’s motion for summary judgment on the question of whether the defendant “willfully” failed to comply with the act? Is the plaintiff out of luck on that question, or can it be litigated further?