Class Action Claims Discover Bank Imposed Restrictions on Student Loan Services Based on Immigration Status

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A proposed class action alleges Discover Bank has unlawfully imposed restrictions on access to certain student loan financial services based on a borrower’s immigration status. 

The 26-page lawsuit, filed in San Mateo County, California Superior Court on July 22 on behalf of two plaintiffs by the Mexican American Legal Defense and Educational Fund, claims Discover Bank has denied non-U.S. citizens and non-green card holders, even those with pre-existing loans, full access to their student loans and consolidation and refinancing options. 

The case looks to represent all individuals who applied for or attempted to apply for a financial product from Discover Bank but were denied full and equal consideration by the bank on the basis of their immigration status. 

According to the complaint, one plaintiff, a San Francisco County resident, applied for a $15,000 private student loan with Citibank through its Student Loan Corporation subsidiary to pay for graduate school. Per the suit, the plaintiff’s uncle, a U.S. citizen, co-signed on the loan, the funds from which the plaintiff received in early 2010 and used for education expenses. That same year, Citibank sold the Student Loan Corporation to Discover Bank, the suit says.

In or around October 2012, the plaintiff applied for Deferred Action for Childhood Arrivals—DACA—status, requesting and receiving authorization to work in the United States and a Social Security number, the lawsuit continues. Per the case, the plaintiff informed Discover Bank upon receiving her work authorization documents and Social Security number, and has been diligent in making on-time payments of more than the minimum amount required by the bank. 

The complaint says the plaintiff accessed in July 2018 an application on Discover Bank’s website to apply for what the company calls a “private consolidation loan.” The borrower wished to refinance her loan to pay a lower interest rate, and applied for a $19,000 loan, the suit relays. Among the questions Discover Bank asks online is one concerning an individual’s country of citizenship, according to the case. The plaintiff states in the suit that she did not answer that question on her private consolidation loan application, which she submitted with proof of income and copies of her Social Security and DACA cards. 

In October 2018, the plaintiff received from Discover Bank a letter requesting that she call the bank immediately to provide further information to continue processing her loan application, the lawsuit states. More specifically, Discover Bank requested income verification, proof of identity and a “copy of your passport and valid US Citizenship and Immigration Services (USCIS) documentation,” according to the case. 

When the plaintiff called the defendant and informed the bank she was undocumented and possessed a Social Security number through the DACA program, she was told she could not refinance her student loan and that she should not have been granted the loan in the first place due to being a non-U.S. citizen, the lawsuit alleges. The Discover Bank representative did not ask about a co-signer for the private consolidation loan or whether she would be looking to add one should the refinancing process proceed, the suit says. 

With regard to the second plaintiff, the lawsuit says the man, a DACA recipient since 2013 and possessor of a work authorization card and Social Security number, applied for a loan through Discover Bank’s website to attend college. According to the suit, Discover Bank’s online student loan application asked the plaintiff, a University of Southern California attendee, to identify as either a U.S. citizen, permanent resident or international student, the latter of which the plaintiff ultimately selected. Per the case, the plaintiff’s wife, a U.S. citizen, co-signed on his student loan. 

According to the suit, Discover Bank’s website indicates that only “international students” applying for student loans are required to apply for such with a U.S. citizen or permanent-resident co-signer. 

The plaintiff claims that despite making timely payments since receiving his student loan funds in 2016, he continues to be required to have a U.S. citizen or permanent-resident co-signer. 

The lawsuit was removed to federal court in California’s Northern District on October 2, 2020.

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