A national bank unlawfully denied student loans and related services to non-citizens and non-permanent residents based solely on their immigration status, according to a lawsuit filed today.

MALDEF (Mexican American Legal Defense and Educational Fund) filed the lawsuit in state court on behalf of a proposed class, represented by two people who are authorized to work under Deferred Action for Childhood Arrivals (DACA). The suit challenges as a violation of California state law Discover Bank’s policy and practice of refusing to consider the loan applications of DACA recipients and others on an equal basis with the applications of citizens.

“California’s economy will reach its greatest potential when credit and loans are made available on an equal basis,” said Thomas A. Saenz, MALDEF president and general counsel.  “The Unruh Act prohibits this kind of discrimination because it harms the state as a whole, as well as those who confront this unfair practice.”

In 2010, Iliana Perez secured a $15,000 student loan with The Student Loan Corporation, which is now a subsidiary of Discover Bank.  When she applied to refinance the loan at a lower rate with Discover Bank in 2018, the company informed her it would not be able to grant her request solely because of her immigration status, according to the lawsuit.

“I am part of this lawsuit because I believe it is unfair to not be able to refinance my student loan as a result of my immigration status,” said Perez, who lives in San Francisco. “I have dutifully made on-time payments for many years and simply wanted to do what anyone else has the right to do: request a lower interest rate to pay off my loan quicker. We are experiencing unprecedented, challenging times and if banks, such as Discover, changed their policies to allow for individuals like me to be able to lower interest rates on loans, it would alleviate a lot of stress on a lot of people.”

Flavio Guzman, of Los Angeles, applied for a $35,500 loan to attend grad school in 2016. Because he is a DACA recipient, Discover Bank required him to apply for his loan as an international student and with a U.S. citizen or permanent resident co-signer, a condition that is not required of U.S. citizen or permanent resident applicants.

In both cases, Discover assessed each plaintiff’s application based on their immigration status and not on their credit-worthiness, which is prohibited by state law.

The lawsuit challenges Discover’s policy as a violation of California’s Unruh Civil Rights Act, which specifically prohibits discrimination by business establishments in California based on sex, race, color, religion, ancestry, national origin, immigration status, age, disability, medical condition, genetic information, marital status, or sexual orientation.

“Immigrant students already face tremendous obstacles in acquiring financial aid and often pay higher tuition than their peers in higher education,” said MALDEF attorney Deylin Thrift-Viveros. “For a private institution to create further obstacles for non-citizen and non-permanent-resident students solely because of their immigration status is not only illegal, but exploitative.”