June 20, 2013

An Update on Disparate Impact and the Fair Housing Act

I've previously written about the use of "disparate impact theory" by the Department of Housing and Urban Development (HUD) under the Fair Housing Act.  This week, the United States Supreme Court has consented to hear the case of Mount Holly, N.J. v. Mt. Holly Gardens Citizens in Action, Inc. regarding whether disparate impact claims are enforceable under the Fair Housing Act. 

By way of reminder, a simplistic way of explaining disparate impact theory is as follows:  Disparate impact theory is a legal argument that allows the government (or a plaintiff) to show discrimination based on differing outcomes for different classes of people, regardless of whether the methods used were themselves discriminatory.  In other words, if the results affect protected classes of people differently, discrimination can be presumed.  No proof of intent to discriminate is required.  Disparate impact theory is controversial because it could allow the government to punish people (or plaintiffs to hold them liable) for discrimination even when those people had no intent to discriminate.

The Court’s decision will be closely watched, because it could affect a number of other disparate impact cases currently in progress as well as the approach of various agencies,  For example, the Consumer Financial Protection Bureau (CFPB) has asserted that disparate impact theory can be used to demonstrate a violation of the Equal Credit Opportunity Act (ECOA) and Reg. B (which applies to lending broadly--not merely mortgage lending).   It is possible that the Supreme Court’s decision could reach beyond the Fair Housing Act and could affect the validity of the CFPB's position on the ECOA.

You can read the briefs filed and follow the case here. (Note that the Court's consent to hear the arguments--called a "writ of certiorari"--is limited to Question 1.)

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