Foreseeable Damages Not Enough for Fair Housing Cases Against Banks, SCOTUS Says

Foreseeable Damages Not Enough for Fair Housing Cases Against Banks, SCOTUS Says

A recent United States Supreme Court decision rendered earlier this summer held that courts must determine if there is a direct relationship between the alleged conduct and actual harm when deciding if a municipality meets the definition of an “aggrieved person” under the Fair Housing Act, according to an ABA Journal report.


Details of the SCOTUS Decision

 Florida’s city of Miami filed consolidated cases which alleged that Bank of America and Wells Fargo engaged in predatory lending targeted at latinos and blacks. The municipality argued the banks used more predatory conditions on borrowers of color including overstating refinance opportunities, excessively high interest rates, and unjustifiably refusing to finance or modify loans with large minority populations.

At the lower court level, the banks moved to dismiss the cases, which the district court granted. The basis for the dismissal included that the economic harms alleged fell outside of the zone of the FHA protections, and that complaints failed to sufficiently show a causal connection between the injuries and the discriminatory acts. The Atlanta-based U.S. Court of Appeals for the Eleventh Circuit reversed.

These predatory lending practices lead to higher foreclosure rates in neighborhoods with larger minority populations, according to the Eleventh Circuit’s opinion. This increased the need for city services such as fire and building code agencies including law enforcement. The Court of Appeals held the city of Miami met the statute’s definition of an “aggrieved party” based on the allegations that the banks’ predatory lending caused foreseeable damages regarding the municipality’s services.


Other FHA Claims

 Under the Fair Housing Act (FHA), foreseeability is not enough to establish proximate cause. Rather, the SCOTUS held, a direct relationship between the conduct and the injury must be shown. The SCOTUS decision in in Bank of America Corp. v. City of Miami, found THAT (1) city of Miami had standing to sue and that its injuries fell under the interests protected by the Act, but (2) in order to establish proximate cause a municipality must do more than show its injuries were foreseeable from the statutory violation.

 Big banks are being hit with lawsuits initiated by municipalities across the country.

Two SCOTUS terms ago, the court ruled 5-4 that disparate-impact claims can be brought under the FHA in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The question posed in this case was different than that in the consolidated Bank of America and Wells Fargo case.


Discrimination Attorney

If you or someone you know believes he or she has been the victim of discriminatory lending practices, contact a knowledgeable attorney right away to preserve your rights under the law.



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