Credit union groups were quick Thursday to respond to a letter from Sen. Elizabeth Warren to the NCUA, FDIC and other regulators demanding a return of the "disparate impact" rule that President Trump ordered to be dropped in April.
The rule was designed to allow easier enforcement of fair housing and employment laws passed in the 1960s by removing the need to prove an agency or other entity intended to discriminate. Instead, plaintiffs and regulators had to show that an action resulted in an impact disparately harming women or a minority group.
The U.S. Department of Housing and Urban Development first established the disparate impact rule in 2013. In 2015 the U.S. Supreme Court upheld the rule, but required guardrails to ensure that a direct cause be established between an act and an impact.
On Wednesday, Sen. Elizabeth Warren (D-Mass.) sent a four-page letter to NCUA Chair Kyle Hauptman, FDIC Chair Travis Hill and Comptroller of the Currency Jonathan Gould. The letter from Warren, who is the ranking member of the Senate Banking Committee, was also signed by six other Democratic committee members and Senate Minority Leader Cory Booker.
The Democrats demanded the agencies "immediately reinstate the use of disparate impact analysis." The NCUA dropped the rule last September, following similar moves by the FDIC and OCC.
"Removing disparate impact ties examiners' hands and makes it much harder to uncover discrimination by banks, credit unions, mortgage originators and other lenders," they wrote. They said its removal "will significantly weaken longstanding civil rights safeguards and make it easier for financial institutions to discriminate against borrowers."
Before the rule was abandoned last year, Warren wrote that the disparate impact rule "had required lenders to thoroughly review policies and procedures for disparate outcomes. These requirements have been responsible for the identification of most cases of discriminatory conduct brought under the Equal Credit Opportunity Act."
The American Bankers Association wrote to HUD Feb. 13 in support of removing the disparate impact rule, in part because it said HUD had not revised the rule to incorporate the Supreme Court's 2015 requirements to prove causation.
On Thursday, Scott Simpson, president/CEO America's Credit Unions, replied to Warren's letter with a statement that AmCU members "share concerns about discriminatory practices."
"But too often these policies miss the mark and end up punishing the very institutions doing the most to close access gaps," Simpson wrote. "Instead of adding layers of unnecessary burdens that harm the people they intend to protect, policymakers should focus on solutions that actually expand access, streamline processes and support the organizations, such as credit unions, that are truly serving underserved Americans."
Jason Stverak, chief advocacy officer for the Defense Credit Union Council, issued a statement that did not take a position on "disparate impact," but called on the NCUA to provide clear guidance.
"Strong consumer protections and clear, stable regulatory standards are not mutually exclusive," Stverak said. "Both are essential to ensuring that credit unions remain safe, sound and focused on their mission."
Odette Williamson, director of racial justice advocacy for the National Consumer Law Center, said the disparate impact rule still remains under law and the Supreme Court ruling, but she said it would be a difficult case to bring by a private party.
Instead, she said that work needs to be done by financial regulators.
"Most forms of discrimination are subtle or hidden," she said. "We need robust supervision and oversight to make sure there is no discrimination."
Contact Jim DuPlessis at Jim.DuPlessis@arc-network.com.
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