Are Disparate Impact Claims Legally Cognizable Under ECOA?


In Texas Dep’t of Housing and Community Affairs v. The Inclusive Communities Project, 135 S. Ct. 2507 (2015), the Supreme Court held that disparate impact claims are legally cognizable under the Fair Housing Act (“FHA”). As a result, under the FHA, a plaintiff can proceed with a discrimination claim based on the effects of a defendant’s policies, even if the defendant did not intend to discriminate.

However, the Supreme Court has not yet ruled on the issue of whether disparate impact claims are legally cognizable under the Equal Credit Opportunity Act (“ECOA”). The question of whether ECOA contemplates disparate impact liability is important for a number of reasons, including (1) because the scope of ECOA is not limited to the housing industry, (2) ECOA has a longer statute of limitations (5 years) than the FHA (2 years), and (3) ECOA is enforced by a different regulatory agency (the Consumer Financial Protection Bureau (“CFPB”)) than the FHA (the U.S. Department of Housing and Urban Development (“HUD”)). Thus, if the disparate impact theory is applicable to ECOA, a significantly wider range of entities, and transactions, may be exposed to disparate impact claims.

Prior to Inclusive Communities, several lower courts held that plaintiffs could bring ECOA claims based on disparate impact allegations. However, following the Inclusive Communities decision, courts presented with disparate impact claims under ECOA likely will engage in a de novo analysis, and will ask whether the reasoning of Inclusive Communities is applicable to ECOA. As discussed below, applying the reasoning of Inclusive Communities to ECOA may present complex and challenging questions, principally because the relevant language of ECOA is not a mirror image of the FHA.


The Supreme Court has never held on an across-the-board basis that all federal anti-discrimination statutes call for disparate impact liability. The issue of whether a particular statute contemplates disparate impact liability requires a close analysis of the statute’s language and intent. To date, the Court has considered the viability of disparate impact claims in the context of Title VII claims, Age Discrimination in Employment Act (“ADEA”) claims, and, now, FHA claims. In each instance, the Court found that disparate impact claims were consistent with the statute. Nonetheless, ECOA is a unique statute, and thus the notion that ECOA permits disparate impact claims is not necessarily a given.

Neither the FHA nor ECOA explicitly uses the phrase “disparate impact.” However, in Inclusive Communities, the Court found that this factor was not dispositive, holding that disparate impact liability could be implied based on other aspects of the statute. As the Court explained, “antidiscrimination laws must be construed to encompass disparate-impact claims when their text refers to the consequences of actions and not just to the mindset of actors, and where that interpretation is consistent with statutory purpose.” See Inclusive Communities, 135 S.Ct. at 2518. Based on that general premise, the Court concluded that certain aspects of the FHA implicitly opened the door to disparate impact claims. But the question then becomes whether ECOA contains similar characteristics.

In Inclusive Communities, the Court focused on Section 804(a) of the FHA, which states, as relevant here, that it is unlawful “[t]o refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” See 42 U.S.C. § 3604 (emphasis added). The Court held that the phrase “otherwise make unavailable” “refers to the consequences of an action rather than the actor’s intent.” See Inclusive Communities, 135 S.Ct. at 2518.

Notably, ECOA does not contain this language. Section 1691(a) of ECOA, entitled “Activities constituting discrimination,” does not use the word “otherwise” or any other term referring to the consequences of an act. The provision simply states that “[i]t shall be unlawful for any creditor to discriminate against any applicant” based on race, religion, or certain other characteristics. See 15 U.S.C. § 1691(a). Thus, a key pillar of the majority’s reasoning in Inclusive Communities is missing from ECOA.

Second, the main argument of the strongly-worded principal dissent in Inclusive Communities, which carried the support of four Justices, focused on the use of the phrase “because of” in the FHA. Specifically, the FHA bars discrimination “because of” race, ethnicity, or certain other characteristics (see 42 U.S.C. § 3604), which the dissent construed as a reference to intentional discrimination. The majority in opinion in Inclusive Communities did not find this language to be dispositive, citing an earlier Supreme Court precedent in which the term “discriminate,” in the context of a different statute, was construed by the Court to encompass disparate impact liability. However, the key provision of ECOA, Section 1691(a), uses the phrase “on the basis of,” not “because of.” See 15 U.S.C. § 1691. The issue, then, is whether the phrase “on the basis of” is an even stronger signal that the statute is concerned exclusively with the problem of intentional discrimination.

In Inclusive Communities, the Court also discussed amendments made to the FHA in 1988. Although these amendments did not concern disparate impact litigation, the Court noted that, at that time, several courts had approved disparate impact claims under the FHA. The Court held that, as Congress did not incorporate into these amendments an explicit prohibition on such claims, Congress implicitly ratified this interpretation of the FHA. This reasoning arguably could be extrapolated to ECOA, which was amended in 1991 and 2010.

Lastly, in Inclusive Communities, the Court determined that disparate impact litigation was consistent with the statutory purpose of rectifying the history of discrimination in the residential mortgage industry, and the related problem of de facto segregation. ECOA, like the FHA, is concerned with problems of discrimination in the extension of credit. However, while FHA is focused on the housing industry, ECOA deals with the extension of credit more generally, cutting across a variety of industries. It is not obvious that disparate impact litigation is productive on such a broad scale, including because not all such industries even gather data on the race or ethnicity of borrowers.

In sum, several, but not all, of the key bases for the Court’s holding in Inclusive Communities arguably are difficult to analogize to ECOA. However, two other factors, while not explicitly central to the Court’s reasoning, may weigh heavily as courts consider whether ECOA contemplates disparate impact litigation. First, the CFPB has concluded that disparate impact liability is consistent with ECOA. Courts may tend to accord some degree of deference to the CFPB’s view in this regard, especially if they find the language of the statute to be ambiguous on its face. Second, given the Supreme Court’s holding that Congress incorporated disparate impact into the FHA, courts may place a heavier burden on defendants to point to evidence that Congress intended ECOA to operate differently in this regard. Relatedly, courts may ask whether the notion that ECOA does not contemplate disparate impact claims would create an unacceptable tension between the two statutes, given that a residential mortgage loan may be subject to the FHA and ECOA simultaneously.


In the wake of the Inclusive Communities decision, it is not possible to predict with certainty how federal courts will construe ECOA in disparate impact cases. ECOA is a unique statute that does not entirely match the relevant language of the FHA, but at the same time does not explicitly reject the concept of disparate impact liability. As a result, it is not unlikely that another Circuit split will ensue on the question of the viability of disparate impact claims under ECOA, requiring further clarification by the Supreme Court.

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Note: This blog article was re-published in Law360 — please open this link.