Help us raise $20,000 to celebrate 20 years. For a limited time, your donation is matched!Donate

Supreme Court: Cities Can Sue Banks Over Predatory Lending

The ruling's not a total victory.

(AP Photo/Pablo Martinez Monsivais)

This is your first of three free stories this month. Become a free or sustaining member to read unlimited articles, webinars and ebooks.

Become A Member

The Fair Housing Act (FHA) lives, for now. Yesterday, in a 5-3 decision, the U.S. Supreme Court ruled that, under the 1968 law, Miami has the right to sue Wells Fargo and Bank of America for predatory lending intentionally targeted at black and Latino residents and neighborhoods.

As reported in the Miami Herald, a trial judge originally dismissed the city’s cases, a decision later overturned in federal appeals court, setting the stage for Monday’s judgment. The city’s case hinged on whether courts would uphold the argument that the predatory lending led to a disproportionate number of foreclosures and vacancies in majority-minority neighborhoods, impairing the city’s effort to assure racial integration, diminished the city’s property tax revenue, and increased demand for police, fire, and other municipal services. The Supreme Court, sans Justice Neil Gorsuch who did not participate in this decision, ruled that these claims are “arguably within the zone of interests” the FHA protects.

“With this decision, the Supreme Court has acknowledged the crucial role of municipal governments in protecting residents’ rights. In housing and lending as in other areas, cities can and should serve as a bulwark against discrimination,” said Dennis Parker, director of the ACLU’s Racial Justice Program, in a statement.

The ruling may have implications for similar lawsuits from other local governments, including Los Angeles, Cook County in Illinois, Oakland and Miami Gardens. Cleveland, Cincinnati and Toledo also filed briefs in support of Miami’s case.

Monday’s decision comes two years after the Supreme Court upheld that the FHA outlaws discrimination based not only on intent, but also on the resulting disparate negative impact on a minority group.

But it wasn’t a complete victory for cities. The ruling set a new requirement that plaintiffs must show direct causation between the actions of the banks and the injuries caused, and also hinted that showing that causation could be difficult. As Justice Stephen Breyer wrote in the decision, “The housing market is interconnected with economic and social life. A violation of the FHA may, therefore, ‘be expected to cause ripples of harm to flow’ far beyond the defendant’s misconduct … Nothing in the statute suggests that Congress intended to provide a remedy wherever those ripples travel.”

The Lawyers’ Committee for Civil Rights Under Law, which filed an amicus brief in support of Miami, called the new requirement “a small step backward” in its statement following the decision.

Reflecting the new requirement, Wells Fargo spokesman Tom Goyda issued a statement to the Miami Herald declaring that “the Supreme Court has brought us one step closer to ending the litigation brought by the city of Miami and other municipalities under the Fair Housing Act.”

Like what you’re reading? Get a browser notification whenever we post a new story. You’re signed-up for browser notifications of new stories. No longer want to be notified? Unsubscribe.

Oscar is Next City's senior economic justice correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha and Fast Company.

Follow Oscar .(JavaScript must be enabled to view this email address)

Tags: povertyracismlawsuitssupreme court

Next City App Never Miss A StoryDownload our app ×

You've reached your monthly limit of three free stories.

This is not a paywall. Become a free or sustaining member to continue reading.

  • Read unlimited stories each month
  • Our email newsletter
  • Webinars and ebooks in one click
  • Our Solutions of the Year magazine
  • Support solutions journalism and preserve access to all readers who work to liberate cities

Join 1011 other sustainers such as:

  • Anonymous at $25/Year
  • Shara in Hutchinson, KS at $10/Month
  • Kristin in Rockaway Beach, OR at $30/Year

Already a member? Log in here. U.S. donations are tax-deductible minus the value of thank-you gifts. Questions? Learn more about our membership options.

or pay by credit card:

All members are automatically signed-up to our email newsletter. You can unsubscribe with one-click at any time.

  • Donate $20 or $5/Month

    20th Anniversary Solutions of the Year magazine