ABA, State Associations: HUD’s Disparate Impact Rule Ignores Supreme Court Precedent

In promulgating its rule implementing the Fair Housing Act’s discriminatory effects standard, the Department of Housing and Urban Development erred in ignoring Supreme Court precedent on determining disparate impact, the American Bankers Association and 52 state bankers associations wrote in a comment letter to HUD today.

“ABA and the [state bankers associations] have significant concerns that the rule adopts standards that are inconsistent with Supreme Court precedent, fails to provide necessary guidance, and is therefore outdated and ineffective,” the groups wrote. They added that “application of an incorrect standard or improper enforcement of the Act would have serious negative implications for lenders and borrowers alike.”

The associations pointed out that the HUD rule stands in direct conflict with the Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project. In that decision, the court ruled established that “disparate impact” analysis to demonstrate discrimination claims is recognized under the Fair Housing Act, but it included key limitations that placed the burden of proof in disparate impact cases with the plaintiffs.

ABA and the state bankers associations called on HUD to amend the rule to include a proper definition of a disparate impact claim; articulate the cautionary standards, safeguards, limitations and other requirements described by the Supreme Court in its Inclusive Communities decision; and provide further guidance to the industry.