Disparate Impact Discrimination Remains in the Spotlight: Insurance Industry Trade Groups Challenge HUD’s Disparate Impact Rule

by Dechert LLP

Two insurance industry trade groups, the American Insurance Association and the National Association of Mutual Insurance Companies, recently filed suit against the U.S. Department of Housing and Urban Development (HUD) challenging HUD’s new rule which codifies disparate impact liability (i.e., no-fault discrimination) under the Fair Housing Act (FHA).1

The plaintiffs allege that liability for discrimination in providing homeowner’s insurance under the FHA should be limited to intentional discrimination.  They argue that HUD’s rule would require insurers to provide and price insurance in a manner that is inconsistent with actuarial practice and applicable state insurance law.  They also allege HUD’s disparate impact rule is inconsistent with the McCarran-Ferguson Act. 

As discussed in our previous OnPoint,2 HUD’s rule makes facially neutral lending policies susceptible to discrimination liability claims under the FHA even when there is no evidence of discriminatory intent in the application of such policies. 

Disparate Impact, an Ongoing Issue

Liability for disparate impact claims under the FHA is an issue that has been in the spotlight recently, but has yet to be resolved by the U.S. Supreme Court (Supreme Court).  The Administration seems intent on avoiding Supreme Court review of the policies that its various agencies have espoused in this area and have asserted claims under.3  That is consistent with the way that standards have been created in this area in the past – by using the settlement process and avoiding judicial determinations.

In that regard, the city of Saint Paul, Minnesota, challenged the use of disparate impact liability used by a group of landlords who were contesting the city’s housing code enforcement policies.  The City’s certiorari petition was granted by the Supreme Court, but Saint Paul later withdrew its appeal in February of 2012, due to a settlement engineered by the Department of Justice. 

In June 2013, the Supreme Court agreed to hear another case challenging the use of disparate impact as a basis of liability brought by the town of Mount Holly, New Jersey.  A news report indicates that the parties in that case have been engaged in settlement talks. 

Issues for Lenders

There are significant disparate impact issues also being presented by lenders’ application of the Consumer Financial Protection Bureau’s (CFPB’s) ability-to-repay (ATR) and qualified mortgage (QM) rules that become effective January 10, 2014.4  Disparate impact issues may be raised by, among other things, a decision by a lender to limit residential mortgage lending to loans that meet the requirements to be treated as qualified mortgages.5

Lenders will want to consider potential disparate impact issues and potential mitigating actions as they evaluate how to structure their mortgage operations under the ATR Rule.  These issues are addressed in A Strategic Guide to the ATR/QM Rules (PDF) that Dechert published together with the American Bankers Association and Dechert’s ATR/QM Legal Stress Test (PDF). 


1. See American Insurance Association and National Association of Mutual Insurance Companies v. U.S. Dep’t of Housing and Urban Development, No. 1:13-cv-00966-RJL, Compl. Filed in D.D.C., (June 26, 2013).

2. See our DechertOnPoint, U.S. Department of Housing and Urban Development Issues Final Rule Affirming Use of Disparate Impact to Establish Liability for Violations of the Fair Housing Act, (Feb. 2013).

3. See our DechertOnPoint, U.S. Department of Justice Turns Spotlight on Disparate Impact Discrimination Claims (PDF), (Sept. 2012).

4. For a more detailed discussion of the QM Rule, see our DechertOnPoint, U.S. Consumer Financial Protection Bureau Issues Rules on Qualified Mortgages and Ability to Repay, (Jan. 2013).

5. For a more detailed discussion of the friction between the CFPB’s fair lending policies and its QM Rule see Thomas P. Vartanian and Robert H. Ledig, Home Lenders’ Fair-Lending Dilemma (PDF), American Banker, (March 4, 2013).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP

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 using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*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.