ACLU: Morgan Stanley targeted African-American borrowers for risky loans

On the heels of a discriminatory lending case that cost Wells Fargo $175 million, the American Civil Liberties Union is taking on Morgan Stanley. According to the New York Times, the ACLU will file a class-action suit in federal court in New York today — alleging that Morgan Stanley violated the Fair Housing Act and the Equal Credit Opportunity Act by targeting risky and expensive loans at African-American borrowers from 2004 to 2007.

“Morgan Stanley actively encouraged lending tactics that increased the levels of risk associated with individual loans,” the ACLU said in its complaint.

The loans were made through New Century Financial Corporation, a now-defunct subprime lender to which Morgan Stanley lent billions of dollars. New Century is responsible for the greatest share of loans in foreclosure in all 10 of the metro areas with the highest number of defaults, according to the Office of the Comptroller of the Currency research cited by the suit.

Bank of America holds the record for the largest settlement paid in a fair-lending violation case. The bank paid the Justice Department $335 million in a discrimination in December 2011. [NYT] — Christopher Cameron