The American Civil Liberties Union has joined with other groups to file a class action lawsuit against Morgan Stanley (NYSE:MS), alleging predatory and discriminatory subprime lending practices .

"Relying on landmark Civil Rights Law, the Fair Housing Act and the Equal Credit Opportunity Act, this lawsuit intends to hold Morgan Stanley accountable for the destructive impact on communities of color in Detroit," according to a posting on the ACLU website.

A Reuters report quotes a Morgan Stanley spokeswoman as saying the claims are without  merit.

The suit, filed Monday in a New York court, alleges that New Century Mortgage Company -- which has since gone bankrupt -- targeted, between 2004 and 2007, its lending toward African-American borrowers in the Detroit area. New Century did so at Morgan Stanley's behest, the suit alleges, because Morgan Stanley was eager to purchase more consumer loans that could then be bundled and sold off as a larger unit.

"Although by no means the only institution that engaged in predatory practices, Morgan Stanley was the architect of a volatile and discriminatory structure of mortgage-backed securities, whose consequences are still being felt in Detroit’s hardest-hit neighborhoods," said the ACLU on its website.

John Divine has no positions in the stocks mentioned above. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.