A novel legal argument is at the heart of a federal lawsuit against the sprawling Colony Ridge housing development in Liberty County that could prove a test case for similar claims around the country, experts say.
The lawsuit filed by the U.S. Justice Department and the Consumer Financial Protection Bureau in December is one of two initiated against Colony Ridge that claim the developers misled property buyers.
The federal government’s case may pose a more serious threat to Colony Ridge than the action brought by Texas Attorney General Ken Paxton in March because of its argument that the developers use language barriers as a tool to deceive customers and aim that deception at a protected class of people.
“In this case, it was very clear that they were targeting and identifying immigrants that come from specific countries and speak specific languages, so it shows an intent to target a particular group,” said Nicole Cabañez, a Skadden Fellow at the National Consumer Law Center who studies market access for those with limited English proficiency.
The federal government is attempting to interpret federal laws for housing and credit access to prove a theory of “reverse redlining” that argues Colony Ridge is harming a protected group by offering credit under unfavorable terms.
The two, separate lawsuits represent the best opportunity for restitution for the former Colony Ridge residents who say they were duped into buying property at sky-high interest rates that have caused thousands to default on their loans, experts say.
On their face, the lawsuits are similar. Both were filed in federal court. Both accuse the developers of lying to consumers about the land they were buying. Both spell out a business model built around flipping foreclosed lots of land at a profit for Colony Ridge, and both seek restitution for victims.
Lying to consumers about a product is illegal, no matter who is being lied to. But there are additional penalties written into the law against targeting people based on their race or national origin, Cabañez said.
Details about Colony Ridge’s business model and marketing scheme included in both lawsuits have convinced Cabañez the federal government’s additional argument is a “slam dunk.”
Colony Ridge marketing material frequently featured flags from Latin American nations, encouraging potential customers to “achieve the American dream here” in Spanish-language advertisements.
“You can’t get clearer on national origin than flags,” Cabañez said.
By accusing the developers of violating the Equal Credit Opportunity Act and the Fair Housing Act, which the state lawsuit does not do, the federal government hopes to prove discrimination against Spanish speakers is baked into Colony Ridge’s business model.
See here, here, and here for some background. As noted, this is a new argument, so it remains to be seen how it will play out in court. Which will likely take years, as that’s usually the speed at which federal lawsuits move. If this one proves successful, we’ll likely see the feds use it in other places. Read the rest to find out more.
Could it be that the Colony Ridge officers went to the same school as
Don Hankey*, the chairman of Knight Specialty Insurance, the company that supplied the $175 million bond required by Trump’s New York civil fraud trial?
* According to Axios, Hankey is “described as the “little-known king of subprime car loans”. https://www.axios.com/2024/04/03/trump-ny-civil-fraud-case-bond-billionare