HUD Proposes Update to Disparate-Impact Rule

The Department of Housing and Urban Development issued a proposed rule to amend its interpretation of the Fair Housing Act’s "disparate impact" standard.

The proposal is designed to conform to the U.S. Supreme Court's 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project that disparate-impact cases must demonstrate a causal connection between practices and alleged discriminatory impact.

Under HUD's 2013 rule, lenders may be held liable for neutral practices that have a disparate impact on certain classes of borrowers, even if the lenders have no intent to discriminate. HUD's proposed update requires plaintiffs to meet a five-step framework that establishes legal liability for facially neutral practices that have unintended discriminatory effects.

ICBA has submitted comments and led a grassroots campaign encouraging community bankers to advocate updates to the disparate-impact standard to meet the Supreme Court's limitations.