The House Financial Services Subcommittee on Oversight and Investigations held a November 19 hearing on disparate impact theory and whether the practice meets its goal of protecting against discrimination. A legal precedent, the disparate impact standard holds that the Fair Housing Act prohibits practices resulting in discrimination, regardless whether there was intent to discriminate.
The hearing featured testimony covering diverse perspectives on civil rights. Subcommittee Chair Patrick McHenry (R-NC) stated that fundamental fairness is critical to the success of the lending system, that discrimination is intolerable, but that it is important to have honest conversations about the effectiveness of safeguards.
Peter Kirsanow, with the law firm of Benesch, Friedlander, Coplan & Aronoff, testified that HUD’s codification of disparate impact in February was ill conceived (see Memo, 2/8). “Despite others’ protestations, it simply is not the case that Congress intended the Fair Housing Act to include disparate impact,” Mr. Kirsanow said, adding that HUD’s proposed rule on Affirmatively Furthering Fair Housing is “built on sand.”
Kenneth Marcus of the Louis D. Brandeis Center for Human Rights Under Law testified that extending the Fair Housing Act to judge disparate impact is unwarranted. “In the fair housing context, the most obvious problem is that the applicable statute does not explicitly authorize it,” he said. “The disparate impact doctrine can be used to identify intentional discrimination that is hard to demonstrate under the doctrine of differential treatment. Used judiciously, disparate impact can be a useful enforcement tool for identifying intentional or unconscious discrimination in circumstances where the discriminators’ motivations are otherwise difficult to ascertain. Used improperly, however, it creates real problems of law and public policy and may entail violations of the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution.”
Both Mr. Marcus and Mr. Kirsanow expressed concern that disparate impact policy is vague and would not survive a review by the current Supreme Court. They claimed that the standard forces housing lenders to make decisions that restrict loans to underserved communities, and that enforcing it diverts limited resources from investigating organizations that deliberately discriminate against protected classes.
Dennis Parker of the American Civil Liberties Union’s Racial Justice Program disagreed, testifying that fair housing violations committed during the recent mortgage lending crisis would not have been identified without the disparate impact standard. Mr. Parker disputed claims about its vagueness, characterizing it as very clear and the basis for many successful Fair Housing violation prosecutions. Continuing the standard is critical to ensuring that mortgage lending is available to all communities, especially protected classes, he said
Despite the varied opinions, all subcommittee members and those providing testimony agreed that protections against discrimination are critical to a healthy lending environment.
View the hearing webcast and documents: http://1.usa.gov/1iuVS4a