Compliance Center: Federal Court Rejects HUD Disparate Impact Rule

On Monday November 3, 2014, the U.S. District Court for the District of Columbia issued an opinion which vacates the U.S. Department of Housing and Urban Development’s (HUD’s) disparate impact rule. The disparate impact rule, also referred to as a “discriminatory effects standard,” establishes liability under the Fair Housing Act (FHA) for the discriminatory effect of a housing practice, even if the practice was not motivated by discriminatory intent.

The case, American Insurance Association v. U.S. Department of Housing and Urban Development, was brought by two industry trade associations whose members sell homeowners’ insurance.

The court vacated the HUD’s Disparate Impact Rule on the grounds that “the FHA prohibits disparate treatment only, and that the defendants, therefore, exceeded their authority” under the Administrative Procedure Act (APA).

U.S. District Judge Richard Leon continued the admonition with:

“This is yet another example of an Administrative Agency trying desperately to write into law that which Congress never intended to sanction… It is nothing less than an artful misrepresentation of Congress’s intent that is, frankly, too clever by half…”

The opinion goes on to mention that the Supreme Court has agreed to hear Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc.  Most likely the hearing will be in the early part of 2015.

While this opinion does not expressly address the Equal Credit Opportunity Act (ECOA) and the federal enforcement agencies that have taken the stance that the ECOA permits disparate impact claims, it should be noted that, like the FHA, the ECOA does not contain any effects-based language. Only the Equal Employment Opportunity Act contains any effects-based language that allows for disparate impact claims.

Compliance Question of the Week

Is the credit union required to send a monthly statement if no share drafts have cleared an account and no EFT transactions have occurred during the monthly cycle?

No, a monthly statement would not be required in this situation. The Electronic Fund Transfer Act (EFTA) and Section 1005.9(b) of Regulation E require the credit union to deliver periodic statements for each monthly cycle in which an electronic fund transfer (EFT) has occurred, or at least quarterly if no transfer has occurred.

Share and share draft account disclosures are governed by the Truth in Savings Act (TISA), not the EFTA. TISA, as implemented by NCUA’s Part 707, does not require the credit union to deliver periodic statements at all. However, if the credit union does deliver periodic statements, the disclosures must also comply with TISA’s requirements (e.g., properly disclose annual percentage yield earned, amount of dividends, fees imposed, and length of the statement period).

So, if there is no EFT activity, quarterly statements will suffice, regardless of share draft activity. However, if the credit union usually delivers monthly statements on a regular basis, its members may expect to receive them regardless of transaction activity. So, member notification, as well as some reeducation, may be necessary.

Related Links:

Legal Briefs 

National Credit Union Administration (NCUA)

The NCUA announced a new tool that assists credit unions in finding service providers.

The NCUA has issued a proposed rule aimed at clarifying certain regulatory provisions that apply directly to corporate credit unions.

Consumer Financial Protection Bureau (CFPB)

The CFPB has issued a blog posting discussing how older Americans can handle debt collection problems.

Financial Crimes Enforcement Network (FinCEN)

FinCEN issued a Statement on Providing Banking Services to Money Service Businesses.

Federal Reserve Board (FRB)

FRB Chair Janet Yellen delivered remarks at the “Central Banking: The Way Forward?”, International Symposium of the Banque De France, Paris, France.

The FRB has released its G.19 Consumer Credit Report for September 2014.

The FRB’s November Edition of FedFocus is now available.

The FRB has issued a final rule on concentration limits on large financial companies.

The FRB announced that it will host a part 4 of its webinar series on the new TILA-RESPA Integrated Disclosures. The webinar will be held on Tuesday, November 18, 2014 at 11am.

The FRB has announced the approved fee schedules for 2015.

Federal Financial Institutions Examination Council (FFIEC)

The FFIEC released its Cybersecurity Assessment: General Observations and Cybersecurity Threat and Vulnerability Monitoring and Sharing Statement.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of November 10, 2014. The last update prior to this was November 06, 2014.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, Federal, NCUA.