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CFPB’s ECOA disparate impact test finds support in HUD’s FHA “Discriminatory Effects” final rule

Posted in Fair Lending

In April 2102, the CFPB issued a bulletin to confirm that it plans to apply a disparate impact test in exercising its supervisory and enforcement authority under the Equal Credit Opportunity Act (ECOA) and Regulation B.  The CFPB  intends to use a disparate impact test for all types of credit, including mortgage lending, student loans, auto loans and credit cards. 

Last week, the Department of Housing and Urban Development issued a final rule that provides that if a practice has a “discriminatory effect,” HUD or a private plaintiff can establish liability under the Fair Housing Act (FHA), even if there is no discriminatory intent. The rule contains a three-part burden of proof-shifting test for determining when a practice with a “discriminatory effect” violates the FHA. Our legal alert provides more details on the HUD rule.  

On March 27, 2013, from 12 p.m. to 1 p.m. ET, Ballard Spahr will hold a webinar, “HUD’s FHA ‘Discriminatory Effects’ Final Rule–What It Means for Fair Lending Litigation and Enforcement.” More information on the webinar and a link to register can be found here

The U.S. Supreme Court could soon rule on the validity of HUD’s interpretation of the FHA , should the court grant the pending petition for certiorari in Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc.  Such a ruling would have significant implications for the validity of the CFPB’s position, since both the FHA and ECOA lack textual support for use of a disparate impact test.