By Greg Stohr | Bloomberg Businessweek
The U.S. Supreme Court will decide whether people who file housing discrimination suits must show they were victims of intentional bias, accepting a case that may undercut the Obama administration’s crackdown on the lending industry.
The justices Monday agreed to consider an appeal by Mount Holly, New Jersey, which is fighting a U.S. Fair Housing Act lawsuit filed by residents over the demolition of a predominantly minority neighborhood. The town says the residents must prove an intent to discriminate, not just that the project has a disproportionate effect on racial minorities.
The case will test a legal theory, known as “disparate impact,” that the Obama administration has repeatedly invoked in lawsuits against banks over housing and auto loans. Bank of America Corp. (BAC), Wells Fargo & Co. (WFC) and SunTrust Banks Inc. (STI) have agreed to pay at least $480 million to settle claims since December 2011.
“Defending allegations of disparate impact — even if proven to be meritless — is typically very expensive,” five lender trade groups, led by the American Financial Services Association, argued in papers urging the justices to intervene.
A decision favoring the banking industry would mark a major change in the enforcement of the 1968 fair-housing law. Eleven courts of appeals have ruled on the issue, and all have said the statute allows disparate-impact claims.
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