U.S. Department of Justice Turns Spotlight on Disparate Impact Discrimination Claims


Fair lending is back with a giant thud!

In addition to the regulatory burdens imposed by the Dodd-Frank Act, financial institutions must now adjust to the potential of a new round of discrimination claims that are likely to be based on the effects that statistics suggest, rather than an actual intent to discriminate. Most recently, this was underscored by the U.S. Department of Justice’s (DOJ) settlement this month with Luther Burbank Savings (Burbank) to resolve discrimination claims under the FHA and ECOA. The DOJ alleged that Burbank’s general $400,000 minimum loan amount for single family mortgage loans had a disparate impact on African American and Hispanic borrowers that was not justified by business necessity or legitimate business considerations. As demonstrated in this case, the reluctance of institutions to litigate with the DOJ in these types of cases allows broad de facto discrimination liability principles to be established by the DOJ through settlements, rather than as a result of a fully developed case ruled on by a court.

This enforcement policy is made all the more treacherous to navigate with (i) financial institutions under pressure from regulators to strictly underwrite loans and (ii) pending qualified mortgage and risk retention regulations, which will tend to standardize mortgage lending products.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:


Dechert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.