- U.S. Supreme Court Rules Fair Housing Act May Be Violated Without Intent
- January 4, 2016 | Authors: Floyd Boone; Julia A. Chincheck; Sandra M. Murphy
- Law Firm: Bowles Rice LLP - Charleston Office
- On Thursday, June 25, in a decision long-awaited by the banking and financial services community, the United States Supreme Court ruled that the Fair Housing Act ("FHA") may be violated without establishing that a defendant intended or was motivated to discriminate based upon race, color, religion, sex, disability, family status, or national origin.
Under the FHA, "[i]t shall be unlawful for any person or other entity whose business includes engaging in real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin." Many have argued that although the FHA clearly prohibits intentional discrimination motivated by a borrower's race, religion, sex, disability, family status, or national origin, it does not prohibit policies adopted without discriminatory intent that merely have a greater impact on members of minority groups. Today's decision settles once and for all that a plaintiff may establish a FHA violation by showing that a challenged policy has a disparate-impact on minorities and is not justified by a legitimate rationale.
Plaintiffs pursuing a "disparate-impact" theory of discrimination will generally rely upon statistical evidence to show that a challenged policy negatively affects members of a minority group disproportionately. To avoid liability, a defendant must then prove that the challenged policy is necessary to achieve a "valid interest." According to the Court, policies that will violate the FHA will generally be those that create "artificial, arbitrary, and unnecessary barriers."
Following the Court's decision, banks and other financial institutions should carefully examine their home-lending policies to determine their vulnerability to a disparate-impact challenge. Similarly, if it is found that any policies have a disparate-impact upon members of a protected group, banks and financial institutions should carefully examine whether their policies are truly necessary to achieve or satisfy a "valid interest" and whether they can prove a sufficient link between their policies and one or more valid interests.