On August 19, 2019, the Housing and Urban Development Department (HUD) issued a proposal to amend its interpretation of the disparate impact standard considering a Supreme Court ruling. In 2015, the Supreme Court issued a ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. In that case, the Supreme Court did not rely on HUDâ€™s disparate impact standard, but rather used its own analysis regarding disparate claims. HUD is now proposing to replace its current discriminatory effects standard with a new standard more in line with the 2015 Supreme Court ruling. The proposal provides a new burden-shifting framework that a plaintiffâ€™s allegations for a specific, identifiable policy or practice has a discriminatory effect must plead facts supporting the following five elements:
1. The challenged policy or practice is arbitrary, artificial and unnecessary to achieve a valid interest or legitimate objective.
2. Allege a robust causal link between the challenged policy or practice and a disparate impact on members of a protected class.
3. Allege that the challenged policy or practice has an adverse effect on members of a protected class.
4. Allege that the disparity caused by the policy or practice is significant.
5. Allege that the complaining party’s alleged injury is directly caused by the challenge policy or practice.
Comments on the proposed rule are due to HUD by October 18, 2019.
John Zasada, JD, CAMS â€“ Compliance Consulting Director, Financial Institutions Group. John can be reached at email@example.com.