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Elyse S. Moyer

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On June 20, the U.S. Department of Housing and Urban Development (“HUD”) published an advance notice of proposed rulemaking (“ANPR”) that seeks public comment on whether and how to amend its 2013 rule under the Fair Housing Act (“FHA”). The ANPR follows HUD’s May 10 announcement of its intention to formally seek public comment on the rule in light of the Supreme Court’s 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., in which the Court recognized disparate impact as a cognizable theory under the FHA, but imposed meaningful limitations on the application of the theory.

The ANPR, together with the statement of Bureau of Consumer Financial Protection Acting Director Mick Mulvaney this spring that the Bureau would be “reexamining the requirements of ECOA” in light of “a recent Supreme Court decision” (i.e., Inclusive Communities), signals that the Trump administration is likely seeking to retreat from the Obama administration’s enthusiastic use of disparate impact liability in lending discrimination cases.

The Disparate Impact Rule and Inclusive Communities

HUD finalized its disparate impact rule in February 2013. The rule codified HUD’s Obama-era view that disparate impact is cognizable under the FHA. In contrast to disparate treatment claims, in which a plaintiff must establish a discriminatory motive, a disparate impact claim challenges practices that have a disproportionately adverse effect on a protected class that is not justified by a legitimate business rationale. The rule states that a practice has a “discriminatory effect” where “it actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin.” HUD explained that it had “consistently concluded” that facially neutral policies that resulted in a discriminatory effect on the basis of a protected characteristic violated the FHA, and that the rule merely “formalize[d] its longstanding view.” The rule also formalized a three-part burden-shifting test for determining whether a practice had an unjustified discriminatory effect.

At the time HUD issued the rule, the nonprofit Inclusive Communities Project, Inc. was embroiled in a lawsuit against the Texas Department of Housing and Community Affairs, in which it brought a disparate impact claim under the FHA. After HUD issued the disparate impact rule, the Texas Department filed a petition for a writ of certiorari to the Supreme Court on whether the FHA recognized disparate impact claims. In its 2015 decision, the Supreme Court held that disparate impact claims are cognizable under the FHA, but the Court articulated a rigorous standard for a successful claim. The Court did not explicitly address the merits of HUD’s rule, nor did the rule form the basis of its holding. 
Continue Reading HUD Seeks Public Comment on Disparate Impact Rule

On May 8, 2018, the House of Representatives used the Congressional Review Act (“CRA”) to vote to repeal the Consumer Financial Protection Bureau’s (CFPB’s) March 2013 bulletin addressing indirect auto lending and compliance with the Equal Credit Opportunity Act (“ECOA”). That vote follows the Senate’s April 18 CRA vote to repeal the bulletin. President Trump…

On March 8, the Consumer Financial Protection Bureau (“CFPB”) finalized the amendment to its 2016 Mortgage Servicing Final Rule (“2016 Final Rule”) to clarify the transition timing for mortgage servicers to provide periodic statements and coupon books when a consumer enters or exits bankruptcy.

Under the 2016 Final Rule, mortgage servicers will be required (as…

On October 4, the Consumer Financial Protection Bureau (“CFPB”) issued an interim final rule and a proposed rule related to the 2016 Mortgage Servicing Final Rule to clarify the timing of and facilitate the provision of certain required communications with borrowers.

The CFPB amended its mortgage servicing rules in August 2016, to go into effect in large part on October 19, 2017 (the “2016 Final Rule”). One provision of the 2016 Final Rule requires mortgage servicers to send certain delinquent borrowers early intervention notices, modified for use with a borrower who has requested a cease in communication under the Fair Debt Collection Practices Act (“FDCPA”). The FDCPA allows borrowers to request that servicers and other companies refrain from contacting them except in certain circumstances, such as when a borrower becomes delinquent. The 2016 Final Rule exempts servicers from sending the early intervention notices only in situations where the borrower does not have a loss mitigation option available or where the borrower is a debtor in bankruptcy.

Under the 2016 Final Rule, mortgage servicers, when communicating with consumers who have invoked the FDCPA’s cease communication right, were required to provide the consumers modified early intervention notices, but only once every 180 days.
Continue Reading It’s All in the Timing: CFPB Addresses Timing Challenges in 2016 Mortgage Servicing Rules

On January 31, 2017, the CFPB released its Prepaid Rule Small Entity Compliance Guide to facilitate comprehension of and the implementation of the new prepaid rule on October 1, 2017. As described in our prior Legal Update, the CFPB issued the final prepaid rule in October 2016 which amends Regulation E to cover prepaid…

On Friday, January 13, the Department of Justice (“DOJ”) filed a lawsuit against a Minnesota bank in which it alleged that the bank violated the Fair Housing Act and the Equal Credit Opportunity Act by unlawfully redlining in the Minneapolis-St. Paul-Bloomington metropolitan statistical area (“Minneapolis MSA”).  The complaint, filed in the U.S. District Court for the District of Minnesota, claims that from 2010 to at least 2015, the bank purposely avoided serving the credit needs of residents in majority-minority neighborhoods while meeting the credit needs of residents in majority-white neighborhoods.  The DOJ is seeking damages for aggrieved persons, civil money penalties, and injunctive relief. The bank has chosen to litigate, rather than settle, as it believes the DOJ’s claim is baseless.
Continue Reading Redlining Revelations: DOJ Lawsuit Alleges Discriminatory Practices by Bank

On June 27, 2016, a New York federal jury found that a bank and its affiliated mortgage company violated the Fair Housing Act, the Equal Credit Opportunity Act, and the New York City Human Rights Law by intentionally marketing to African-American and Hispanic homeowners predatory loans with default interest rates of 18 percent.

In 2011,…

*Mrs. Moyer is not admitted in the District of Columbia. She is practicing under the supervision of firm principals.

On June 29, 2016, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) jointly filed a complaint against a regional bank alleging that the bank discriminated against African-American borrowers in many aspects of its mortgage lending services. The agencies alleged that the bank’s discriminatory practices violated both the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act. Below we outline the primary allegations in the complaint, the main terms of the consent order, and the key takeaways from this recent action. This is the CFPB’s first use of mystery shoppers to identify discrimination in a fair lending enforcement action and may offer a sign of what’s to come.
Continue Reading Mystery Shopping Revelations: CFPB, DOJ, Bring Action Against Regional Bank for Discriminatory Lending Practices Confirmed by Testers*

*Mrs. Moyer is not admitted in the District of Columbia. She is practicing under the supervision of firm principals.

On June 8, 2016, the U.S. Department of Housing and Urban Development (HUD) announced a conciliation agreement with a bank, resolving allegations that the bank engaged in discrimination by denying the mortgage applications of African-American and Hispanic applicants at a disproportionally higher rate than white applicants.  The complaint, filed on December 23, 2011, resulted from a HUD review of the bank’s 2010 Home Mortgage Disclosure Act (HMDA) data.  During its investigation, HUD analyzed mortgages that were first denied by an automated underwriting system (AUS), and then manually underwritten, and determined that white applicants received unjustified preferential treatment in the manual underwriting process in violation of the Fair Housing Act.

Although neither the conciliation agreement nor HUD’s press release on the settlement mentioned redlining, the settlement terms included provisions typically associated with resolving redlining claims. 
Continue Reading The Devil’s In the Data: HUD Settles Complaint Arising From HMDA Data*

*Mrs. Schoenfeld is not admitted in the District of Columbia. She is practicing under the supervision of firm principals

On April 29, 2016, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued its fourth Fair Lending Report, which reviews the activities of the Office of Fair Lending and Equal Opportunity for the 2015 calendar year.  Last year, the CFPB’s fair lending supervisory and public enforcement actions led to $108 million in restitution to consumers and other monetary payments.  The Bureau referred eight matters to the Department of Justice (“DOJ”), and DOJ declined to independently investigate two of these matters.

The Report focuses on the following fair lending highlights:
Continue Reading The CFPB Issues its 2015 Fair Lending Report