CBA Comment Letter re HUD’s ANPR Reconsideration of HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard

August 20, 2018


VIA Electronic Submission


Regulations Division

Office of General Counsel

Department of Housing and Urban Development

451 7th Street SW

Room 10276

Washington, DC 20410                                                                         


Re:      Reconsideration of HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard; Advance Notice of Prosed Rulemaking; Docket No. FR-6111-A-01 RIN 2529-ZA01


Dear Sir or Madam:

The Consumer Bankers Association (“CBA” or “the Association”) appreciates the opportunity to offer our views on the advance notice of proposed rulemaking (“ANPR”) recently submitted by the Department of Housing and Urban Development (“HUD” or “the Department”).  The ANPR seeks comment on possible amendments to HUD’s 2013 final rule implementing the Fair Housing Act’s disparate impact standard (“the Disparate Impact Rule”).

CBA and its members devote substantial resources to the advancement of fair lending and seek to ensure that credit decisions are made without regard to any prohibited basis identified under Title VIII of the Civil Rights Act of 1968, as amended (“Fair Housing Act,” “FHA” or “the Act”).  CBA supports the vital purpose of the Fair Housing Act and the anti-discrimination protections it offers to individual borrowers and communities.  However, inconsistent interpretations of the Act, caused by conflicts between the Disparate Impact Rule and controlling case law, have serious negative implications for lenders, borrowers, litigants, and public policy decision makers. 

Accordingly, the Association welcomes the Department’s efforts to revise the Disparate Impact Rule.  As discussed in detail below, CBA presents the following comments for the Department’s consideration and urges HUD to align the Disparate Impact Rule with the standards established by the United States Supreme Court in Wards Cove Packing Co. v. Atonio (“Wards Cove”),

Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (“Inclusive Communities”) and Bank of America Corp. v. City of Miami, Florida (“Bank of America”).  Such changes are necessary to ensure that the Disparate Impact Rule comports with established legal precedent, facilitates fair lending practices that benefit American consumers, and ensures that credit decisions are made without regard to race or other prohibited basis.


The Fair Housing Act prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status, or national origin.  HUD, the federal agency with the authority and responsibility for administering and enforcing the Act, has interpreted the Fair Housing Act to create liability for practices with an unjustified discriminatory effect, even if those practices are not motivated by a discriminatory intent (“disparate-impact liability”).  The Disparate Impact Rule sets forth HUD’s test for analyzing disparate impact liability under the FHA; a burden-shifting approach for analyzing policies and practices that are neutral on their face but that may, on a prohibited basis, disproportionately and adversely affect a person’s access to credit.

Under the Department’s burden-shifting approach, disparate impact liability is determined as follows: (1) the plaintiff must first bear the burden of proving its prima facie case of either disparate impact or perpetuation of segregation; (2) next, the burden shifts to the respondent to prove that the challenged practice is necessary to achieve one or more of the respondent’s substantial legitimate, nondiscriminatory interests, and that the justification that is offered is supported by evidence and not speculative; and (3) if the respondent satisfies its burden, the plaintiff may still establish liability by demonstrating that these substantial, legitimate, nondiscriminatory interests could be served by a practice that has a less discriminatory effect.

In 2015, the United States Supreme Court decided Inclusive Communities and held that disparate impact claims are cognizable under the Fair Housing Act.  Importantly, the Inclusive Communities court also identified the following constitutional limits or safeguards that apply to disparate impact liability under the FHA:


  1. Disparate-impact claims that rely on a statistical disparity must fail if the plaintiff cannot point to a respondent’s policy or policies causing that disparity.


  1. A plaintiff who fails to allege facts at the pleading stage or produce statistical evidence demonstrating a causal connection cannot make out a prima facie case of disparate impact.


  1. A robust causality requirement ensures that racial imbalance does not, without more, establish a prima facie case of disparate impact and thus protects respondents from being held liable for racial disparities they did not create.


  1. Governmental or private policies are not contrary to the disparate-impact requirement unless they are ‘artificial, arbitrary, and unnecessary barriers.


  1. Remedial orders in disparate impact cases should concentrate on the elimination of the offending practice that “arbitrar[ily] . . . operate[s] invidiously to discriminate on the basis of rac[e].”  If additional measures are adopted, courts should strive to design them to eliminate racial disparities through race-neutral means.

Click here to read full comment letter.