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HUD says social media platform's advertising violates FHA
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.
OCC fines national bank $25 million for violating Fair Housing Act
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.
City of Philadelphia’s discriminatory lending lawsuit moves forward
On January 16, a federal judge in the U.S. District Court for the Eastern District of Pennsylvania denied a national bank’s motion to dismiss the City of Philadelphia’s (City) claims that the bank engaged in alleged discriminatory lending practices in violation of the Fair Housing Act (FHA). As previously covered in InfoBytes, the City filed a complaint in May of last year against the bank alleging discrimination under both the disparate treatment and disparate impact theories. The City asserted that the bank’s practice of offering better terms to similarly-situated, non-minority borrowers or refusing to make loans in minority neighborhoods has led to foreclosures and vacant homes, which in turn, has resulted in a suppression of property tax revenue and increased cost of providing services such as police, fire fighting, and other municipal services. In support of its motion to dismiss, the bank argued, among other things, that the City’s claim (i) is time barred; (ii) improperly alleges the disparate impact theory; and (iii) fails to allege proximate cause as required by a recent U.S. Supreme Court ruling (see previous Special Alert here).
While the court expressed “serious concerns about the viability of the economic injury aspect of the City’s claim with regard to proximate cause,” the court found that the bank “has not met its burden to show why the City’s entire FHA claim should be dismissed.” Consequently, the court held that the case may proceed to discovery beyond the two-year statute of limitations period for FHA violations in order to provide the City an opportunity to prove whether the bank’s policy caused a racial disparity that constituted a violation continuing into the limitations period.