IBD: ‘About Time’ for Regulators to Clarify Disparate Impact

The financial regulators should move quickly to implement the Supreme Court’s guidance on using disparate impact to enforce fair lending rules, according to an editorial in Investor’s Business Daily today. IBD cited ABA’s recent letter to federal departments and regulators asking for the regulators to include the court’s reasoning in Texas Department of Housing and Community Affairs v. Inclusive Communities Project in its formal guidance and exam procedures.

The editorial noted that courts are already employing the Supreme Court’s directives narrowing the use of disparate impact, including a case last month in California in which a disparate impact claim by the city of Los Angeles against Wells Fargo was rejected because L.A. failed to point to a specific policy on the bank’s part that caused a disparity.

“We expect other cases will be dismissed as well. But before more defendants are put through the legal wringer and suffer reputational damage, the Obama administration should rein in bank examiners so that they follow the court’s framework,” IBD said. “That way future unfounded cases of racism can be avoided entirely.”