CFPB and DOJ Sue Predatory Mortgage Lender for Reverse Redlining, Exploiting Consumers With Limited English Proficiency 

December 21, 2023 — Press Release

Colony Ridge Accused of Targeting Vulnerable Consumers of Color with Contracts Designed to Fail 

WASHINGTON – The U.S. Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) jointly sued Colony Ridge, a Texas-based developer and lender, for operating an illegal land sales scheme that targeted low-income Hispanic consumers. This case alleges that Colony Ridge violated the Equal Credit Opportunity Act and the Fair Housing Act, among other laws, by seeking out economically disadvantaged Latino consumers and offering them exorbitantly expensive loans that were designed to fail. 

“Targeting Latino consumers with predatory high-cost loans is a pernicious, misleading practice that shatters hardworking families’ dreams of homeownership and financial stability,” said Odette Williamson, senior attorney and director of the Racial Justice and Equal Economic Opportunity Project at the National Consumer Law Center. “This lawsuit shines a light on abusive practices designed to prey on consumers with limited English proficiency. We applaud the DOJ and CFPB for filing this lawsuit and opposing schemes aimed at people who face barriers that limit their access to traditional financing.” 

Colony Ridge targeted Latinos through a series of Spanish-language social media marketing campaigns. The advertisements also heavily featured flags from Latin American countries and alluded to the ethnicities of Colony Ridge employees. These tactics are considered forms of dangerous “affinity marketing,” when a company mirrors a community’s distinctive cultural and linguistic features to lure them into disadvantageous contracts. 

NCLC advocates have warned that consumers with limited English proficiency (“LEP”) frequently fall prey to these misleading marketing tactics. While this susceptibility is caused by many factors, the mainstream mortgage market’s widespread failure to accommodate LEP consumers’ most basic language needs is a leading factor. Consumers blocked from access to the traditional lending market are more easily drawn in by predators that communicate with them in their language. For this reason, NCLC and its allies advocate for a uniform floor of language access in mortgage lending and servicing.

“We are thrilled that the Department of Justice and the CFPB have taken this critical step to protect consumers with limited English proficiency from abuse,” said Nicole Cabañez, Skadden Fellow at the National Consumer Law Center. “However, consumers with limited English proficiency will continue to be vulnerable to these scams so long as mainstream mortgage lenders continue to refuse to accommodate them. The promise of basic understanding should not be unique to scam artists in this market.”

The targeting of abusive seller-financing Colony Ridge engaged in has been the subject of NCLC lawsuits and policy advocacy for years. Like other alternative home financing companies, Colony Ridge emphasized that applicants without access to mainstream credit would be able to qualify for loans. The company advertised that it did not require applicants to provide proof of their income or verify the stated income on the application or to provide a social security number. Colony Ridge then charged an interest rate far above market rates. For instance, standard 20-year fixed rate home loans averaged between 2.35 percent to 4.05 percent between 2017 to 2021, yet Colony Ridge charged between 10.9 percent and 12.9 percent during the same period, according to the government’s complaint. 

This marketing behavior and non-existent underwriting often leads to churning of the properties, in which the seller-lender forecloses on the property, sells the property to another unsuspecting consumer, only to foreclose on the property again. In under four years, the complaint alleges Colony Ridge sold over two thousand lots more than four times. The frequent marketing of unaffordable loans to communities of color leads to home loss and further widens the U.S. racial wealth gap.

In the last year, the Federal Housing Administration and the Federal Housing Finance Agency have both required mortgage lenders to ask mortgage applicants for their preferred language. Both agencies have also published repositories of commonly used mortgage documents, translated into Spanish, Chinese, Vietnamese, Korean, and Tagalog. NCLC recently petitioned the CFPB to require mortgage servicers to provide translated vital documents to mortgage borrowers with limited English proficiency

Related materials:

• Coalition Comments to FHFA on Equitable Housing Finance, Language Access, and Fair Lending Oversight, June 26, 2023
• Coalition Comments to the White House Task Force on New Americans re: Expanding Language Access Within the Financial Services Sector, Feb. 7, 2023
• Group letter to FHA re: strengthening language access, Nov. 15, 2022
• Coalition Comments to the CFPB in Response to RFI on the Equal Credit Opportunity Act and Regulation B (with appendix of survey results on language access in mortgage servicing), Dec. 1, 2020
• Toxic Transactions: How Land Installment Contracts Once Again Threaten Communities of Color, July 14, 2016.
• Barriers to Language Access in the Housing Market: Stories from the Field, May 2016

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Since 1969, the nonprofit National Consumer Law Center has worked for consumer justice and economic security for low-income and other disadvantaged people in the United States through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.