Auto Finance Industry Monitors Supreme Court for Ruling on Disparate Impact

The outcome of a mortgage case being heard by the Supreme Court could ease the burden of disparate impact violations imposed on auto lenders by the Consumer Financial Protection Bureau.

Like mortgage lenders bound by the Fair Housing Act, “the CFPB has been saying that even if you have no intention of wanting to discriminate, if you’re engaged in supposedly neutral activities — like buying paper that’s the result of an automobile financing negotiation, which includes a dealer mark-up — and regulators can conduct statistical analysis to show that racially protected group pay higher markups than non-protected groups, that has a disparate impact,” said Mark Kenney, chairman of law firm Severson & Werson, at the American Financial Services Association’s Vehicle Finance Conference last week. During the session, Kenney monitored live updates from the oral arguments that took place in front of the Supreme Court.

The language in the FHA is similar to that used in Equal Credit Opportunity Act, so the hope, Kenney said, is that if the court rules that there is no disparate impact analysis in the FHA, the same would apply to ECOA. The Supreme Court is expected to rule on the case — Texas Department of Housing and Community Affairs vs. the Inclusive Communities Project — sometime before its current decision-making session ends in June.