Discover Bank Agrees to Settlement Providing For $979,500 in Compensation to DACA Recipients and Policy Changes Making Them Eligible for Loans on Terms Comparable to U.S. Citizens

San Francisco, CA – After nearly four years, a proposed nationwide class of Deferred Action for Childhood Arrivals (DACA) recipients have settled claims that Discover Bank unlawfully denied them student, personal, and home equity loans, solely because of their immigration status. Specifically, their lawsuit, which was filed by the Mexican American Legal Defense and Educational Fund (MALDEF) and Outten & Golden, alleged that Discover Bank’s denials violated federal and state civil rights laws, including the California Civil Rights Act, which prohibits discrimination based on alienage and immigration status. Discover agreed to the settlement but disputes the claims in the lawsuit and maintains that it complied with the law.

Discover, a major U.S. lender, has agreed to change its lending policies to make DACA recipients eligible for loans on terms comparable to U.S. citizens. It has also agreed to create a settlement fund of $979,500 (excluding administration costs and attorneys’ fees) to compensate impacted DACA recipients, which was preliminarily approved by the U.S. District Court for the Northern District of California on February 29, 2024.

“This settlement ensures that DACA recipients who seek to access loans and credit with Discover Bank are treated no differently than other qualified applicants, and that those DACA recipients who were previously denied loans and credit are made whole,” said Ernest I. Herrera, Regional Counsel, Western Region Mexican American Legal Defense and Educational Fund.

“There are nearly 600,000 DACA recipients in the U.S,” said Ossai Miazad, counsel for the plaintiffs and partner at Outten & Golden LLP, “Many of them came to the U.S. as young children, and the denial of access to credit seriously restricts their ability to pay for college, buy homes, and otherwise promote their financial stability. We’re very pleased to have helped our clients seek justice, and make a positive impact on the consumer lending industry.”

The case was initially filed by plaintiffs Iliana Perez and Flavio Guzman Magaña who were subsequently joined by Josue Jimenez Magaña and Emiliano Galicia Felix.

In 2010, San Francisco resident Iliana Perez received a $15,000 student loan from a Citibank subsidiary (the Student Loan Corporation) to pay for graduate school at The New School. In December of that year, The Student Loan Corporation and all of their loans were sold to Discover. In 2018, Ms. Perez applied for a “Private Consolidation Loan” in an attempt to refinance, but after being asked about her citizenship status she was told that Discover would not be able to move forward with her loan, and she should not have been granted the loan in the first place.

Flavio Guzman Magaña has been a DACA recipient since 2013 and since then has continuously possessed a work authorization and SSN card. In August 2016, Mr. Guzman Magaña applied for a $35,000 loan to attend Graduate school at the University of Southern California. During the application process, Mr. Guzman Magaña was prompted to identify as either a U.S. citizen, a Permanent Resident, or an International Student and chose to apply under the International Student. The application then informed Mr. Guzman Magaña that he would need to apply with a co-signer who is either a U.S. citizen or an LPR. To date, Mr. Guzman Magaña has been making his payments on time, but is still required to have a co-signer on his loan.

Plaintiffs are represented by Thomas A. Saenz and Ernest I. Herrera of the Mexican American Legal Defense and Educational Fund and Ossai Miazad, Chauniqua Young and Rebecca Pattiz of Outten & Golden LLP.