ABA Staff Analysis Explores Disparate Impact Ruling

ABA yesterday released a bank members-only staff analysis of the Supreme Court’s ruling in Texas v. Inclusive Communities Project, which found that “disparate impact” analysis to demonstrate discrimination claims is recognized under the Fair Housing Act. The analysis explores the ruling and the limits it places on the use of disparate impact, as well as the use of disparate impact in rules from the Department of Housing and Urban Development and in the Equal Credit Opportunity Act.

“While the decision affirms a fair lending standard that bankers have struggled to meet for more than two decades, the court also placed important limitations on its application,” the analysis says. “The decision also leaves open the question whether the same rationale supports disparate impact liability under [ECOA].”

The analysis includes several tips for compliance officers, including using ABA’s Fair Lending Toolbox (which is being updated to reflect the Supreme Court decision), reviewing policies and procedures to ensure they clearly state a business rationale for a policy or procedure that may cause a disparity and scheduling regular audits for disparities in loan portfolios. For more information, contact ABA’s Rob Rowe.