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'Disparate impact' ruling garners praise and scorn

Thursday’s U.S. Supreme Court decision on “disparate impact” was a big victory for the Obama Administration and fair housing advocates, but conservatives and members of the banking industry say it could end up hurting the minorities whom it intends to help.

The Court ruled 5-4 that federal agencies and fair-housing groups could continue the longstanding use of disparate impact theory as a basis for bringing lawsuits against lenders and other housing industry participants when their policies and practices, however color blind on the surface, produce discriminatory outcomes.

The Obama Administration was swift to praise the ruling. U.S. Housing and Urban Development Secretary Julian Castro called it a “critical tool to eliminate the unfair barriers” to equal housing rights for all.

“Working with our partners on the ground, we will continue to do all we can to build a housing market that treats all Americans with basic dignity and respect,” Castro said in a statement.

Conservatives, however, panned the decision.

“America is based on equal opportunity, not equal results,” said House Financial Services Committee Chairman Jeb Hensarling, R-Texas. “The dubious legal theory of disparate impact and the Supreme Court’s ruling pervert this founding principle.”

Hensarling said the use of disparate impact theory hurts minorities by creating “a less competitive and more expensive market for housing and credit.”

The American Bankers Association (ABA) said aggressive use of disparate theory could cause lenders to “shrink their operations” rather than risk litigation.

“ABA and our members are strong advocates for fair lending and enforcement of the Fair Housing Act,” ABA President Frank Keating said in a release. “Disparate impact theory, however, is not the right tool to achieve fairness and prevent discrimination in lending.”

Attorneys told Scotsman Guide News after the ruling, however, that it was unlikely the ruling would lead to more disparate impact claims against lenders. Federal agencies have used disparate impact theory in so-called redlining and discretionary pricing cases, where minorities have been denied home loans in higher numbers than whites, or paid higher interest rates and fees.

“Those of us in the fair housing world, we have been using disparate impact  theory for over 40 years,” said Stephen Dane, a Washington, D.C. attorney who specializes in fair housing litigation. “It doesn’t add any new ammunition to fair housing enforcement. It just approves a tool or a theory that has been used for over 40 years.” 


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