United States District Court, E.D. New York
E. REYES, JR. United States Magistrate Judge
Cydney Gilmore (hereinafter “Plaintiff” or
“Gilmore”) filed a putative class action against
Defendants Ally Financial Inc., and Ally Bank (collectively
“Ally” or “Defendants”) pursuant to:
the Equal Credit Opportunity Act (“ECOA”), 15
U.S.C. § 1691-1691(f); New York General Business Law
(“GBL”) Art 22-A, § 349; and New York common
law. (Dkt No. 9, Complaint, (“Compl.”)).
Plaintiff alleges that Defendants, who are engaged in the
business of purchasing retail finance contracts from car
dealers, maintain a policy or practice of allowing these
dealers to mark up the financing rate they offer consumers
based on subjective criteria unrelated to creditworthiness.
(Compl. ¶¶ 1, 6, 24, 35-37).
to Plaintiff, Defendants' policy or practice has a
disparate impact on African-American customers, which results
in their paying more to finance vehicles with Defendants than
similarly situated white borrowers. (Id. ¶ 17).
To remedy this alleged disparate impact, Plaintiff seeks,
inter alia, an order certifying the class pursuant
to Fed.R.Civ.P. 23; actual, statutory, and punitive damages;
pre-judgment and post-judgment interest; reasonable
attorney's fees and costs; and injunctive relief.
(Id. ¶¶ 3, 58).
have moved to dismiss the Complaint, primarily arguing that:
1) Plaintiff's claim is moot in light of the monetary
relief that she was offered pursuant to two 2013 Consent
Orders; 2) Plaintiff has no standing to bring this action
because she has not pleaded a cognizable injury that is
fairly traceable to Defendants' conduct; and 3) Plaintiff
has failed to adequately plead a prima facie ECOA claim.
(Dkt. No. 13, Memorandum of law in Support of Defendants'
Motion to Dismiss (“Def. Mem.”), at 7-19).
discussed more fully below, Defendants' motion to dismiss
is GRANTED without prejudice as Plaintiff has not established
Article III standing.
assessing the present motion to dismiss, the Court accepts
the following well-plead facts as true. Goldstein v.
Pataki, 516 F.3d 50, 53 (2d Cir. 2008). The parties have
consented to my jurisdiction pursuant to 28 U.S.C. 636(c)
(Dkt. Nos. 15-17).
September 18, 2015, Gilmore commenced this action by filing a
Summons with Notice in New York State Supreme Court, Kings
County. (Dkt No. 1, Exhibit A). On October 30, 2015,
Defendants removed the case to this Court. (Dkt. No. 1). On
November 30, 2015, Plaintiff filed a Complaint on behalf of
herself and a putative class of similarly situated consumers.
January 15, 2016, Defendants filed a Notice of a Motion to
Dismiss the Complaint accompanied with a Memorandum in
Support of the Motion to Dismiss. (Dkt. No. 12, Notice of
Motion to Dismiss, (“Notice Mem.”); Dkt. No. 13,
Defendants' Memorandum in Support of their Motion to
Dismiss, (“Def. Mem.”)). On January 21, 2016, I
held a hearing on the Defendants' Motion to Dismiss and
the underlying lawsuit. (See Dkt. No. 16, Transcript
of Proceedings held on January 19, 2016). Following the
hearing, Plaintiff filed a letter in opposition to
Defendants' Motion to Dismiss. (Dkt. No. 18). On
September 27, 2016, Plaintiff filed a Memorandum Opposing the
Defendants' Motion to Dismiss, (Dkt. No. 21, (“Pl.
Mem.”), and Defendants' filed a second Memorandum
in Support of their Motion to Dismiss. (Dkt. No. 22).
The Parties and Transaction
Ally, formerly GMAC, Inc., is a Delaware financial services
corporation, with a principal place of business in Michigan
(Compl. ¶ 5). Ally finances auto loans to consumers
throughout the United States. (Id.). As one of the
largest banks and leading automobile lenders in the nation,
Ally has funded millions of loans to automobile dealers
nationwide. (Id. ¶ 6).
regularly participates in the decision to extend credit to
consumers by employing an underwriting process that helps
establish consumers' loan interest rates. (Id.
¶ 22). First, Ally assigns one of six credit tiers to
each loan applicant. (Id.). Next, based on the
credit tier for which an applicant qualifies, Ally sets a
“buy rate” for each loan. (Id. ¶
23) The buy rate is a minimum interest rate for a loan that
Ally will fund and is based on Ally's current cost of
funds, adjustments that reflect the borrower's
creditworthiness, and other objective criteria related to the
borrower risk. (Id.). Ally then communicates the buy
rates to automobile lenders who incorporate them into their
“retail installment contracts.” (Id.).
Ally also indicates to dealers whether or not they will
purchase these contracts. (Id. ¶ 7).
its agreements with dealers, Ally allows dealers to
“mark up” a consumer's interest rate above
Ally's established buy rate. (Id. ¶ 24).
Plaintiff alleges that because Ally compensates dealers for
part of the increased revenue that the dealers derive from
their mark-up, Ally's arrangement indirectly creates
financial incentives for dealers to mark up borrowers'
interest rates above the buy rates that Ally sets.
(Id. ¶¶ 17, 24).
resides in Brooklyn, New York. (Id. ¶ 4). On or
around July 22, 2013, Plaintiff went to Kristal Auto Mall in
Brooklyn to “purchase and finance a vehicle for her
personal use.” (Id. ¶ 12). There, she
discussed the purchase of her car with a salesman and finance
manager. (Id.). Plaintiff then agreed to purchase
and finance a used 2012 Cadillac. (Id.). Upon
deciding to purchase the Cadillac, Plaintiff sat with the
finance representative and was presented with a retail
installment contract. (Id. ¶ 13). When the
contract was presented, Plaintiff “voiced concern over
the high rate of 9.54% being offered” to her.
(Id.). The finance representative indicated that the
rate presented was the rate for which Plaintiff
“qualified” and added that she could
“refinance the loan later to attempt to lower the
rate.” (Id.). Plaintiff then signed the
contract and began to pay her loan. (Id.).
The Underlying Investigation
September 2012, the Consumer Finance Protection Bureau
(“CFPB”) began examining Ally's indirect
automobile lending program and its compliance with fair
lending laws and regulations from April 1, 2011 to March 31,
2012. (Id. ¶ 18). The examination concluded
that during the examined period, Ally's system caused
African-Americans borrowers “to pay higher interest
rates for their automobile loans than non-white borrowers
because of their race or national origin and not based on
their creditworthiness or other objective criteria related to
borrower risk.” (Id. ¶¶ 16-18). It
further concluded that Ally had engaged in a pattern and
practice of lending discrimination in violation of the ECOA
§ 1691(a)(1). (Id. ¶ 19). The CFPB then
referred the case to the Department of Justice
similarly investigated Ally's indirect lending practices
and reviewed loan-level data for more than 1.21 million
automobile loans that Ally funded. (Id. ¶ 19).
The investigation revealed that Ally's relationship with
its dealers allowed dealers to mark up a consumer's
interest rate above Ally's established buy rate, and it
further concluded that Ally charged African-American
borrowers more than white borrowers in interest rate mark-ups
for reasons not based on creditworthiness or objective
criteria related to borrower risk. (Id. ¶¶
24-26). In December 2013, the DOJ sued Ally in the U.S.
District Court for the Eastern District of Michigan for
“discriminating against thousands of inter
alia African-American consumer borrowers across the
United States who obtained loans from Ally to finance
automobiles.” (Id. ¶ 15). That case
settled, and Defendants entered into Consent Agreements with
the DOJ and CFPB for injunctive, compensatory, and punitive
damages owed to the government and consumers the government
identified as affected by the alleged practices.
(See Consent Order, United States v. Ally
Financial Inc. and Ally Bank, No. 13-cv-15180, Dkt. No.
5 (E.D. Mich. 2013) (hereinafter “DOJ Consent
Order”); Consent Order, Ally Financial Inc.,
No. 2013-CFPB-0010, (hereinafter “CFPB Consent
about June 2015, Gilmore received a joint letter of notice
from the DOJ and the CFPB informing her that she was
identified as a member of a class of African American and/or
Black consumers to receive a payment pursuant to an $80
million settlement between those governmental entities and
Defendants. (Id. ¶ 14).