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Gilmore v. Ally Financial Inc.

United States District Court, E.D. New York

April 24, 2017

Cydney Gilmore, Plaintiff,
Ally Financial Inc. and Ally Bank, Defendants.


          RAMON E. REYES, JR. United States Magistrate Judge

         Plaintiff 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).

         According 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).

         Defendants 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).

         As discussed more fully below, Defendants' motion to dismiss is GRANTED without prejudice as Plaintiff has not established Article III standing.


         In 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).

         I. Procedural History

         On 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. (See Compl.).

         On 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).

         II. 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).

         Ally 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).

         Through 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).

         Plaintiff 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.).

         III. The Underlying Investigation

         In 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 (“DOJ”). (Id.).

         The DOJ 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 Order”)).[1]

         In or 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).

         IV. ...

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