ABA to Agencies: Put Court’s Disparate Impact Framework into Guidance

ABA today asked the financial regulators and law enforcement agencies to include in their guidance, exam procedures and appropriate regulations the Supreme Court’s framework for using disparate impact analysis to enforce the Fair Housing Act.

The court’s decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project included a key limitation that statistical disparities only impose liability if plaintiffs can connect it to a defendant’s policy causing the disparity in order to “protect defendants against abusive disparate-impact claims.” In effect, the court’s decision places the burden of proof with plaintiffs. ABA asked the agencies to incorporate the court’s framework into their practices and procedures.

To help banks lend without fear of abusive claims, ABA urged the agencies to state their reliance on the court’s framework by focusing initially on enforcing fair lending requirements under a disparate treatment paradigm and using disparate impact analysis “only where there is demonstrable evidence that the lender is applying an artificial, arbitrary and unnecessary barrier in its credit granting process.”

“The banking industry supports equal housing opportunity and strives to make housing credit available to all qualified borrowers and to treat all similarly situated applicants alike,” ABA said, urging the agencies to incorporate the court’s framework now rather than have it embodied in case law through in enforcement actions over several years. The sooner the agencies issue clear guidance, ABA added, “the more positive the impact will be on the promotion of the availability of finance to creditworthy borrowers.” For more information, contact ABA’s Wayne Abernathy.