By now, you’ve probably heard of the other decision recently handed down by the US Supreme Court. The Court ruled the theory of “disparate impact” may be applied under the Fair Housing Act in determining potential fair lending violations.
What is “disparate Impact”? It’s the adverse effect of a practice or standard that is neutral and non-discriminatory in its intention but, nonetheless, disproportionately affects individuals having a disability or belonging to a particular group based on their age, ethnicity, race, or sex. Disparate impact was established under the Civil Rights Act and had to do with employment practices. This clarified unintentional discriminatory practice versus an intentional act to discriminate. That would be “disparate treatment.”
The term and theory is now associated and used in connection with potential acts or practices which may be deemed as discriminatory under fair housing rules, albeit not intended to be so. Lenders need to be aware and very careful when creating programs intended to assist more people to finance homes to ensure that such programs may not adversely affect some protected class.
I’m not a lawyer, nor have I ever played one on TV, but I strongly suggest that before you create or implement any such programs that include specific, special criteria, which could possibly result in a disparate impact, you check with counsel. Better be safe than sorry.
The fact that your intentions are good has no bearing on whether you can be sued and/or fined. The road to hell is paved with good intentions.
This is just one more thing that may have lenders a little leery about lending to those who may need the help the most.
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This disparate impact ruling may have a disparate impact on those who desperately need some help.