HUD updates disparate impact rule

Department of Housing and Urban Development

The Fair Housing Act prohibits practices that lead to discriminatory effects, or disparate impacts, not just practices that include overt or intentional discrimination. However, it is not always clear when a practice or policy may lead to a disparate impact in violation of the Fair Housing Act. This is why the Department of Housing and Urban Development (HUD) is issuing a final rule to clarify these standards and align its regulation to Supreme Court rulings. In 2019, HUD issued a proposed rule to amend its interpretation of the disparate impact standard to better reflect the Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. For a comprehensive discussion on the Fair Housing Act’s disparate impact standard and the litigation that led to these changes, see this NAFCU Compliance Monitor article.

In short, a disparate impact lawsuit consists of three main steps:

Step 1. A member sues a credit union and alleges a violation under the Act on the basis of disparate impact, claiming that a credit union policy or practice led to a discriminatory effect against a protected group;

Step 2. The credit union attempts to prove the policy or practice furthers a legitimate, nondiscriminatory business purpose;


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