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On May 3, the U.S. Court of Appeals for the 11th Circuit held that the City of Miami plausibly alleged that two national banks’ lending practices violated the Fair Housing Act (FHA) and led to defaults, foreclosures, and vacancies, and eventually reduced property values and corresponding property tax revenues. The court did so by finding “some direct relation” between the City’s tax revenue injuries and the Bank’s alleged violations of the FHA. The case returned to the 11th Circuit after having been appealed to and resolved in part in the U.S. Supreme Court in 2017, where the Court held that municipal plaintiffs may be “aggrieved persons” authorized to bring suit under the FHA against lenders for injuries allegedly flowing from discriminatory lending practices (previously covered by a Buckley Special Alert). According to the appellate court opinion, the Court “declined to ‘draw the precise boundaries of proximate cause under the FHA and to determine on which side of the line the City’s financial injuries fall,’” leaving to the lower courts the issue of how the principles of proximate cause function when applied to the FHA and the facts of the complaints.
The appellate court concluded that the district court erred in dismissing the City’s claims against the banks in their entirety, with the 11th Circuit finding “a logical and direct bond between discriminatory lending as a pattern and practice applied to neighborhoods throughout the City and the reduction in property values.” However, the appellate court concluded that the City’s allegations fell short of establishing a direct relationship between the alleged misconduct and the City’s purported increase in its municipal services expenditures, noting that the U.S. Supreme Court “has told us that foreseeability alone is not enough.” The appellate court emphasized that at the motion to dismiss stage it was only addressing the plausibility that the alleged conduct violated the FHA, and remanded the case back to the district court.
On March 28, HUD announced that it charged a world-wide social media platform with violating the Fair Housing Act (FHA) by allowing advertisers to exclude certain protected classes from viewing housing-related ads. According to the charges, the social media platform collects information about its users and sells advertisers the ability to target housing-related advertisements to people who “share certain personal attributes and/or are likely to respond to a particular ad.” Specifically, HUD alleges that the platform first allows advertisers to use tools to select attributes of users who they would like to include or exclude from viewing their advertisements. These attributes include attributes such as, “women in the workforce,” “foreigners,” “Puerto Rico Islanders,” or “Christian.” HUD also alleges that the platform allows advertisers to draw a “red line” around specific areas on a map to exclude people who live there from seeing a particular ad. In a subsequent phase, HUD alleges that the platform groups users by shared attributes to create a target audience most likely to engage with the ad, even if the advertiser would prefer a broader audience, which, according to HUD, inevitably creates “groupings defined by their protected class.” HUD alleges that the data collection and targeted ad processes function “just like an advertiser who intentionally targets or excludes users based on their protected class” in violation of the FHA. HUD is seeking an injunction, damages for any aggrieved persons, and civil money penalties against the platform.
On March 19, the OCC announced that a national bank has agreed to pay a $25 million civil money penalty to resolve alleged violations of the Fair Housing Act. According to the OCC’s consent order, (i) from August 2011 to April 2015, the bank did not properly train loan officers about available mortgage discounts under its Relationship Loan Program (RLP); (ii) from August 2011 to November 2014, the bank failed to provide explicit instructions within their written guidelines that employees should offer those discounts to all eligible customers; and (iii) from August 2011 to November 2014, the bank did not require loan officers to document the reason for a customer’s rejection. Moreover, according to the OCC, the bank did not require loan officers to inform customers about potential mortgage discounts from August 2011 to January 2015. As a result, the OCC stated that certain borrowers allegedly did not receive RLP benefits for which they were eligible and were adversely affected on the basis of their race, color, national origin, and/or sex. The bank—which did not admit nor deny the allegations and self-reported the problems in 2015—initiated and has nearly completed a reimbursement plan, which will deliver roughly $24 million in restitution to the approximately 24,000 borrowers who may have missed out on the appropriate RLP benefit.
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