NAFCU sees opportunity in HUD disparate impact updates
In response to the Department of Housing and Urban Development’s (HUD) proposed rule on its implementation of the Fair Housing Act's (FHA) disparate impact standard, NAFCU on Friday sent a letter in support of several amendments while also offering up potential additions and suggestions to the rule.
NAFCU wrote that “credit unions strongly support laws and regulations aimed at detecting and preventing discrimination, as well as the legal mechanisms used to protect fundamental consumer interests.”
HUD’s objective in updating the disparate impact standard is to better align it with the Supreme Court's 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project.
Andrew Morris, NAFCU’s senior counsel for research and policy, stated that, “The proposed changes to the legal framework used for evaluating disparate impact claims are reasonably tailored to ensure that only artificial, arbitrary, and unnecessary practices are targets of disparate impact liability. They also affirm the Court’s view that “disparate-impact liability must be limited so employers and other regulated entities are able to make the practical business choices and profit-related decisions that sustain a vibrant and dynamic free-enterprise system.”
In the letter, Morris detailed areas where NAFCU agreed and disagreed with HUD’s approach:
- New Burden Shifting Framework: NAFCU is supportive of the burden shifting aspect of the amendment as it supports the Supreme Court's 2015 decision, which recognized the need for plaintiffs to meet a “robust causality requirement.”
- Defenses for Algorithmic Models: The proposal introduces defenses that may be used to rebut an assertion that the cause of a discriminatory effect is an algorithmic model used by the defendant. NAFCU shared concerns regarding the lack of proposed definitions, including for 'algorithmic model,’ and recommended further clarification.
- Burdens of Proof for Discriminatory Effect: HUD has yet to create a definition for evidence that is not remote or speculative. The association believes that an appropriate definition must show measurable harm and be responsive to any unique legal or regulatory restrictions that are imposed on the lender.
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