Associations Challenge HUD’s Disparate Impact Rule

ABA and other financial services trade associations last week filed a friend of the court brief in the case of American Insurance Association v. HUD supporting AIA’s challenge to the Department of Housing and Urban Development’s disparate impact rule. The associations pointed out that in promulgating the rule, HUD disregarded binding Supreme Court precedent in existence at the time by attempting to apply certain standards under the Fair Housing Act that only Congress has the authority to change.

The groups further argued that last summer’s decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project imposed additional restrictions that were inconsistent with the HUD rule. While the decision upheld the use of disparate impact theory, it included a key limitation that statistical disparities only impose liability if plaintiffs can connect it to a defendant’s policy causing the disparity.

In a letter following the Inclusive Communities decision, ABA urged HUD and the regulatory agencies to confirm in interagency guidance, updated exam procedures and where appropriate, amended regulations, that the burden-shifting framework announced by the Supreme Court will govern the analysis of disparate impact claims in both the supervisory and enforcement context. However, HUD responded that “[N]othing in the Court’s opinion casts any doubt on the validity of HUD’s final rule.” The current case will provide the District Court for the District of Columbia the opportunity to settle that question.