ICBA to HUD: Disparate-impact rule must conform to court ruling

ICBA and other groups expressed opposition to a Department of Housing and Urban Development proposal to re-implement its 2013 rule on discriminatory effects.

Proposal: HUD in June proposed rescinding its 2020 rule interpreting the Fair Housing Act’s "disparate impact" standard and restoring the 2013 rule.

2013 Rule: Under HUD's 2013 rule, lenders could be held liable for neutral practices that have a disparate impact on certain classes of borrowers, even if the lenders had no intent to discriminate.

Court Case: The 2020 rule was designed to conform with a 2015 Supreme Court ruling. In Texas Department of Housing and Community Affairs v. Inclusive Communities Project, the high court upheld the disparate-impact approach while ruling that such cases must demonstrate a robust causal link between practices and alleged discriminatory impact.

2020 Rule: In response to the Supreme Court ruling, HUD's Comment Letter on Implementation of Fair Housing Act 2020 final rule required plaintiffs to meet a five-step framework that established legal liability for facially neutral practices that have unintended discriminatory effects. The rule was blocked by a Massachusetts district court before taking effect

Joint Letter: In Tuesday’s letter, ICBA and other groups said the 2013 rule is inconsistent with the Inclusive Communities decision, which requires plaintiffs to demonstrate “robust causality” and “direct” proximate cause between the defendant’s challenged conduct and the plaintiff’s asserted injury. Therefore, the rule must be updated, they said.

More: The groups also said:

• The updated rule should specify that disparate-impact claims may not be based solely on a statistical disparity.
• Disparate-impact claims require plaintiffs to plead facts supporting their claims at the pleading stage, which isn’t addressed in HUD’s proposed rule.
• Remedies in disparate-impact cases should focus on the elimination of the offending practice, which isn’t provided for in the 2013 rule.