On the Docket: Recent Federal Court Opinions
FAIR HOUSING ACT (FHA) — 24 C.F.R. Part 100
U.S. Supreme Court agrees to hear FHA disparate impact case. Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 
135 S.CT. 46 (2014). The plaintiff community group sued the Texas Department of Housing and Community Affairs, alleging that the defendant agency’s allocation of low-income housing tax credits for affordable housing developments violated the FHA. In particular, the plaintiff alleged that the defendant disproportionately approved tax credits for developments in minority census tracts and disproportionately denied tax credits for developments in nonminority census tracts, perpetuating segregated housing patterns. The complaint included claims for both disparate treatment (i.e., intentional discrimination) and disparate impact (i.e., facially neutral practice with discriminatory effect). After a bench trial, the district court denied the disparate treatment claim but ruled in favor of the plaintiff on the disparate impact claim. The Fifth Circuit 747 F.3d 275 
(5th Cir. 2014) reversed and remanded the case back to the lower court in light of a U.S. Department of Housing and Urban Development (HUD) regulation issued after the trial that clarified the burdens of proof for disparate impact claims under the FHA (24 C.F.R. §100.500). The defendant petitioned the Supreme Court to determine: 1) Are disparate impact claims cognizable under the FHA? and 2) If they are cognizable, what are the standards and burdens of proof that should apply? The Supreme Court accepted the first question in the petition.
The Supreme Court agreed twice before to hear cases regarding the disparate impact doctrine in the past two years, but the cases settled prior to oral arguments. The court will hear this case in January 2015.
U.S. District Court vacates FHA disparate impact regulation. American Insurance Association v. U.S. Department of Housing and Urban Development, 2014 WL 5702711 (D.D.C. November 3, 2014). In February 2013, HUD issued a final rule codifying its long-held position that the FHA provides for disparate impact liability and clarifying the burdens of proof for such claims. See 78 Fed. Reg. 11460 (Feb. 15, 2013); 24 C.F.R. §100.500 (“Liability may be established under the Fair Housing Act based on a practice’s discriminatory effect … even if the practice was not motivated by a discriminatory intent.”). The plaintiffs, two homeowners insurance industry trade groups, filed a lawsuit against HUD to invalidate the regulation, and the U.S. District Court for the District of Columbia granted their motion for summary judgment, holding that the agency exceeded its rulemaking authority because the text of the FHA solely prohibits disparate treatment. The district court found that when Congress intended for the disparate impact doctrine to apply to an antidiscrimination statute, it used language focusing on the effect of the conduct instead of the conduct itself. In support, the district court cited two federal employment discrimination statutes that contain text that specifically prohibits conduct that adversely affects an employee’s status on a prohibited basis. Because the FHA does not contain similar language, the district court held that it does not provide for disparate impact liability. As just noted, the Supreme Court will hear arguments on this issue in an unrelated case in January 2015 in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.
FAIR CREDIT REPORTING ACT (FCRA)
The FCRA prohibition against providing electronically printed receipts that include certain credit or debit card information does not apply to receipts sent by e-mail. Bormes v. United States, 759 F.3d 793 (7th Cir. 2014). The Fair and Accurate Credit Transactions Act amended the FCRA to prohibit persons accepting credit or debit cards in transacting their business from including more than the last five digits of the card number or the expiration date on an electronically printed receipt provided to the cardholder at the point of the sale or transaction (15 U.S.C. §1681c(g)(1)). The plaintiff conducted a transaction on the Internet with a federal agency, which e-mailed him a receipt that included both the last four digits of his credit card number and the expiration date. The plaintiff’s suit alleged that the United States violated the statute’s prohibition by including both the last four digits and the expiration date in the e-mailed receipt. The Seventh Circuit affirmed the lower court’s dismissal of the suit, finding that the prohibition solely applies to receipts that are electronically printed and provided to cardholders at the point of sale or transaction.
REGULATION Z — TRUTH IN LENDING ACT (TILA)
Creditor for retail installment contract violated the TILA by failing to disclose payment dates. Lea v. Buy Direct, L.L.C., 755 F.3d 250 (5th Cir. 2014). The plaintiffs entered into a retail installment contract to finance the purchase of a wholesale club membership. The contract required the plaintiffs to make a 10 percent down payment and finance the balance. The contract left the date blank that the payment obligation began and the day of the month on which the installment payments were due because these obligations were triggered by the completion of the down payment requirement, and the date for making the down payment was extended at the plaintiffs’ request. After partially paying the down payment, the plaintiffs sought to cancel the membership contract and, seeking statutory damages, filed suit, alleging that the creditor violated the TILA (15 U.S.C. §1638(a)(6); 12 C.F.R. §1026.18(g)) by failing to disclose the starting payment date and subsequent monthly payment due dates. The district court dismissed the case because it determined that the credit transaction had not been consummated since the plaintiffs did not fulfill their contractual down payment requirement. However, on appeal, the Fifth Circuit reversed, holding that “the agreement was consummated when the [plaintiffs] signed the Membership Agreement, Retail Installment Contract, and Payment Agreement and paid the first $100 of their down payment. That is when their obligations became fixed even though their performance was far from complete.” The creditor was obligated under the TILA to disclose, prior to consummation of the transaction, the number of payments, the amount of each payment, and the due dates. Because the creditor failed to disclose this material information, the court held that it violated the TILA and was liable for damages, costs, and attorney’s fees.
REGULATION X — REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
Second Circuit holds that a servicer does not have to respond to purported Qualified Written Requests (QWRs) that are not mailed to the address designated by the servicer. Roth v. CitiMortgage, Inc., 756 F.3d 178 (2nd Cir. 2014). The RESPA (12 U.S.C. §2605(e)) and its implementing Regulation X (12 C.F.R. §1024.35) require servicers to acknowledge and respond to borrower QWRs seeking information or asserting servicer errors within certain time frames. The regulation also permits a servicer to designate an address to which QWRs must be sent. The plaintiff defaulted on her mortgage and sent letters requesting information to the servicer, which she requested be treated as QWRs, but did not mail them to the servicer-designated address. The servicer nonetheless responded, noting that the loan was in default, and threatened legal action if the matter was not resolved. The plaintiff then filed suit, individually and on behalf of a class of similarly situated borrowers, alleging that the servicer violated the RESPA by not providing the information requested in her letters and by reporting adverse information to the consumer reporting agencies about disputed payments during the 60-day period after the correspondence was sent, which the RESPA prohibits in connection with QWRs. The lower court dismissed the suit because the purported QWRs were not sent to the servicer’s QWR address. On appeal, the Second Circuit affirmed, indicating “[the] letters were not sent to [the servicer’s] designated QWR address, and the requests are thus not QWRs under RESPA,” citing with approval the Tenth Circuit’s decision in Berneike v. CitiMortgage, Inc., 708 F.3d 1141, 1148–49 (10th Cir. 2013), which held that “[f]ailure to send the QWR to the designated address … does not trigger the servicer’s duties under RESPA.”