## Facts

- A.B. & S. Auto Service, Inc. (AB & S) operated an automobile-repair shop in Chicago.
- Jerry L. Bonner, AB & S’s owner and president, is a Black man and had a criminal record.
- AB & S applied to South Shore Bank of Chicago (South Shore) for a business loan.
- South Shore participated in a Small Business Administration (SBA) business-loan program that required applicants to complete SBA Form 912 (Statement of Personal History) and disclose criminal history.
- Under the SBA program, participating banks were expected to evaluate an applicant’s criminal history when assessing the applicant’s character and deciding whether to proceed with the loan request.
- Bonner disclosed multiple prior incidents on Form 912, including arrests and criminal charges (such as domestic-related matters, controlled-substance charges, and disorderly conduct-type charges).
- South Shore denied AB & S’s loan application after concluding that Bonner’s criminal history reflected negatively on his character.
- Before this denial, South Shore had not denied a loan application solely because of an applicant’s criminal history.
- South Shore had previously accepted applications from applicants with criminal records, including at least one Black applicant.
- AB & S and Bonner sued South Shore under the Equal Credit Opportunity Act (ECOA), claiming race discrimination. They also argued that using criminal history in lending decisions harms Black men at higher rates because Black men are statistically more likely to have criminal records.

## Issues

1. Did South Shore violate the ECOA by denying AB & S’s loan application based on Bonner’s disclosed criminal history, allegedly as a proxy for race?
2. Under an intent-based ECOA theory, did plaintiffs present enough evidence that South Shore’s stated reason (character concerns based on criminal history) was a pretext for race discrimination?
3. Could plaintiffs avoid summary judgment by relying on a disparate-impact theory based on general statistics about criminal records and race, without proof tied to South Shore’s lending decisions?

## Decision

- The court denied plaintiffs’ motion for summary judgment and granted South Shore’s motion for summary judgment.
- The court held that plaintiffs failed to present evidence from which a reasonable factfinder could conclude that South Shore denied credit because of race.
- The court accepted South Shore’s explanation as a legitimate, non-race-based reason for the denial: within the SBA program, the bank could weigh an applicant’s criminal history and concluded Bonner’s record raised character concerns.
- The court found plaintiffs’ generalized statistical argument insufficient to show that South Shore’s decision in this transaction was racially motivated or unlawfully discriminatory under the ECOA.

## Legal Principles

- The ECOA forbids a creditor from discriminating against an applicant with respect to any aspect of a credit transaction on the basis of race.
- ECOA discrimination claims based on intent may be evaluated using a burden-shifting approach: the plaintiff must establish a prima facie case; the creditor must articulate a legitimate, non-discriminatory reason; and the plaintiff must show that reason is a pretext for discrimination.
- A creditor may rely on non-race-based factors connected to credit evaluation, including character-related concerns the creditor is expected to assess under an SBA loan program.
- To show pretext, a plaintiff must present evidence that the stated reason is not the real reason for the adverse action, such as inconsistent explanations or proof that similarly situated applicants of a different race received better treatment.
- Broad statistical claims about arrest or conviction rates, without evidence tied to the creditor’s actual practices or decisionmaking in comparable transactions, are not enough to defeat summary judgment.

## Conclusion

The court entered judgment for South Shore Bank because the record showed the bank denied the SBA-program business loan based on its assessment of Bonner’s disclosed criminal history and related character concerns, and plaintiffs did not produce evidence that race caused the denial or that any claimed impact from considering criminal history established an ECOA violation on these facts.


A.B. & S. Auto Service, Inc. v. South Shore Bank of Chicago, 962 F. Supp. 1056 (1997)