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Compliance

Town Delays Vote in Disparate Impact Case

November 07, 2013

MOUNT HOLLY, N.J. — An expected vote on a housing discrimination case was tabled on Tuesday, Nov. 6, by the town council there. The case, which is pending before the U.S. Supreme Court, relies on a much-disputed legal theory called “disparate impact,” which the Consumer Financial Protection Bureau is currently using in its review of the indirect financing channel.

In 2008, 20 low-income, African-American and Hispanic households sued the Mount Holly Township over plans to demolish and redevelop the Mount Holly Gardens neighborhood, claiming the plans unfairly price minorities out of the market. If the township does not vote on a settlement, the Supreme Court will begin hearing arguments on Dec. 4 on whether minority residents can sue under the Fair Housing Act when a policy has a disparate impact on them.

In March, The CFPB issued guidance to finance sources stating that it would hold them liable under the legal doctrine of disparate impact for policies that cause minorities to pay higher rates for auto loans, which is prohibited under the Equal Credit Opportunity Act. The doctrine allows finance sources to be sanctioned for actions that have a discriminatory effect — even if they didn’t intend to discriminate.

Experts tackled the topic in September at the 2013 F&I Industry Summit, suggesting that if the Supreme Court is to rule on the Mount Holly case, the CFPB’s cause for going after auto finance sources could be struck down.

“If they rule [there’s no disparate impact theory], there’s going to be a complete sea change in everything we’re talking about today,” said Andy Koblenz, general counsel for the National Automobile Dealers Association, during a session on the Dodd-Frank Wall Street Reform and Consumer Protection Act. “Their primary tool will no longer be available to them and they’ll be back to the drawing board.”

In a media advisory issued Nov. 6, Mount Holly officials said a new date for a vote on the proposed settlement has yet to be determined. 

“All parties are working diligently to finalize the procedural aspects involved with resolving a highly complicated matter,” said Mount Holly Township Solicitor George Saponaro. “We expected to have had these items completed so they could have been presented and voted on during tonight’s meeting, but we still have some work to do.” 

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