Attorneys and compliance specialists agreed that while the Supreme Court's June 18 ruling affirming the legality of disparate impact drew some impassioned reactions from critics, it did not fundamentally change the overall regulatory environment for credit unions.

Using disparate impact, plaintiffs in discrimination cases can use statistical data to prove that a lender's policy negatively affects a protected class of consumers, even if the lender did not intend to discriminate.

The court's opinion came in the case Texas Department of Housing v. Inclusive Communities Project and drew largely predictable responses. Individuals and organizations representing people who have faced housing discrimination favored the ruling. Those representing mortgage finance lenders or housing companies criticized it.

Marvin Umholtz, founder of the Olympia, Wash.-based Umholtz Strategic Planning & Consulting, took a dim view of the ruling.

“To the extent that the federal government regulatory agencies, and the Justice Department, ramp up their fair lending enforcement activities, and in doing so leverage the disputed, and probably at its core unconstitutional, statistically-based disparate impact theory, the financial services industry is definitely worse off today, than it was yesterday,” Umholtz told CU Times. But yesterday wasn't so good either, with the CFPB inventing new ways to apply disparate impact, including using discredited statistical methodologies.”

“Also delighted by the SCOTUS majority opinion will be the cottage industry of special-interest community and social justice activist groups that are financially and ideologically dependent on using disparate impact to implement their ethnic-preferential treatment public policy agendas. It's all about divisive identity-driven political power grabbing,” he added.

By contrast, the National Community Reinvestment Coalition's President/CEO John Taylor was more optimistic about the ruling.

“For many years, the application of disparate impact doctrine has helped to expose housing practices that may appear neutral on their face but have discriminatory effects on protected classes. Housing discrimination today often isn't as blatant as it was in the past, so this is a vital tool for enforcing fair housing law. We applaud the Supreme Court for making the right decision today,” he said.

However, attorneys and compliance specialists contended that the ruling did not deserve such a strong reaction from either side.

Walters Kluwor Financial and Compliance Services Senior Director Stephen Cross pointed out that the federal department of Housing and Urban Development, along with banking regulators, conducted a meeting in 1994 and codified disparate lending rules arising from the Federal Housing Act and the Equal Credit Opportunity Act.

Those rules outlined the use of disparate impact tests in evaluating housing programs and the use of a so-called effects test in other lending areas, such as auto loans and credit cards.

“So this has been around for more than 20 years,” Cross said. “But there were always dissenters who challenged the constitutionality of this approach and the Supreme Court ruling reaffirmed that constitutionality.”

Cross explained that a ruling against the doctrine would likely have had a much larger effect on regulations since it would have thrown doubt upon the constitutionality of the effects test.

Ron Glancz, a partner with Washington law firm Venable LLC, agreed and noted the NCUA included disparate impact and the effects test in its March 2013 fair lending manual.

“While not specifically mentioned in the ECOA, the legislative history of the ECOA indicates Congress intended an effects test concept to apply to a credit union's determination of creditworthiness,” the NCUA wrote in the manual. “The effects test refers to a credit practice that appears facially neutral, but has a disproportionately negative effect on a prohibited basis, even though the credit union has no intent to discriminate. This type of practice is discriminatory, in effect, unless the credit union can demonstrate the practice meets a legitimate business need that cannot be reasonably achieved by means less disparate in impact.”

Based on this ruling, Glancz explained, a credit union that has a policy against non-discrimination that it has checked for the possibility of disparate impact should probably not have to make changes. However, it's always a good idea to double check, he noted.

Gina Carter, leader of the credit union team at the Milwaukee, Wis., law firm Whyte Hirschboeck Dudek agreed that the decision reaffirmed the status quo on the use of disparate impact in discrimination cases. She also agreed that a review of policies is probably a good idea.

“I don't expect that credit unions will have anything to worry about from this ruling, at least among the credit unions that we see. But, it's always a good idea to review policies in light a new court decision, especially one that comes down from the Supreme Court,” she said.

In addition, some attorneys pointed out that the decision actually gave credit unions a bit more security about this topic.

Glancz pointed out that the court's ruling actually makes it a little more difficult for plaintiffs to bring a disparate impact case because plantiffs will now have to show a causal relationship between the lender's policy and the alleged discrimination from the very first pleading in the case. This standard will be hard to meet, he said.

Mitchell Pollack, founder of the credit union-centric law firm Mitchell Pollack and Associates, in Tarrytown N.Y., agreed the Supreme Court tightened some of the rules around these cases.

“The Supreme Court made it clear that the district courts will have to turn a very keen eye to whether or not a plaintiff can really show a prima facie case of disparate impact flowing from a given policy,” he said.

However, Cynthia Augello, a partner with the New York-based law firm of Cullen and Dykeman, pointed out these cases would remain a drain on credit unions.

She noted that each case has three steps. The plaintiff has to allege a policy's disparate impact successfully. Then, the lender can argue why that policy is a necessary business practice. In reponse, the plaintiff may assert an alternative, nondiscriminatory policy to use instead.

The process can take months in court, she pointed out. All the while, the media would report the credit union had a discriminatory lending policy.

“These cases have the potential to be very big deal for all financial institutions,” Augello said.