On June 28, 2016, the Supreme Court of the United States granted and consolidated two cases about whether the City of Miami can sue for predatory and discriminatory lending practices. These cases are brought under the Fair Housing Act of 1967, which is a critical tool for combating housing discrimination and a means of seeking redress and reform from large banks and other major institutions. The underlying facts at the heart of the cases are widely known and deeply problematic:
In recent years, several major financial institutions targeted Black communities for predatory loans using discriminatory and deceptive terms, such as inflatable interest rates, balloon payments, and harsh repayment terms. The short-term result was that lenders profited from growing numbers of new borrowers in communities of color. But the long-term consequences have proven devastating, as waves of subprime loans have come crashing down, triggering widespread foreclosures in cities like Miami, a massive reversal in minority homeownership rates, and an erosion in Black wealth accumulation. The human and economic toll has been thoroughly documented by Congressional investigations, the financial press, and through television and films like The Big Short. Black communities were particularly hard-hit, given a legacy of being excluded from access to credit – only to be targeted by predatory lenders and deluged by subprime credit in recent years.
Yet, while this troubling story of discriminatory lending is well-known, the reality is that justice has proven elusive. In practice, when the victims of lending discrimination sought their day in court, significant obstacles, often in the form of procedural barriers, have been placed in their way. The result is that few people or groups have been able to successfully obtain redress from banks or secure assurances that predatory practices will stop in the future.
Against this backdrop, the City of Miami filed suit against Bank of America and Wells Fargo, seeking to hold them accountable for damage to several of the city’s primarily Black neighborhoods due to predatory lending practices. The City and its residents suffered a variety of harms from these foreclosures, including plummeting property values and tax revenue, which, in turn, deprived fair-housing programs of operating funds. The banks again sought to create a procedural hurdle to relief, arguing that the City does not have standing, or the right to appear in court, to seek relief for the practices challenged.
The United States District Court for the Southern District of Florida granted the banks’ motion. But, a three-judge panel of the United States Court of Appeals for the Eleventh Circuit reversed, explaining that for more than forty years, the Supreme Court has accepted that the City and others like it are authorized to seek relief under the Fair Housing Act. The banks appealed to the Supreme Court, which agreed to hear the case.
LDF filed an amicus brief in support of the City of Miami emphasizing four key arguments: First, under the Fair Housing Act, the term “aggrieved” plainly includes municipalities that have experienced harm. Second, predatory lending gravely damaged communities of color, including the City of Miami, in terms of the destruction of wealth, entrenchment of segregation and economic immobility, and the human cost. The brief also situated the latest predatory practices in the context of segregation, redlining, and other discriminatory practices that we continue to live with to this day. Third, LDF explained why the absence of meaningful relief for communities and cities ravaged by predatory lending further compels the Court to allow Miami to seek accountability in a court of law. Finally, the brief noted how, since the inception of the Fair Housing Act, cities have been a special place of concern and treated as unique actors in advancing fair housing and integration through various means.
The Supreme Court heard oral argument on November 8, 2016. In a 5-3 decision issued on May 1, 2017, the Court ruled in favor of the City of Miami, holding that the City of Miami is an “aggrieved person” within the meaning of the Fair Housing Act and can sue under the statute. The decision allows Miami to bring a lawsuit against Bank of America and Wells Fargo, arguing that both banks violated the law when they issued riskier but more costly mortgages to minority customers offered to white borrowers. The Court explained that its precedent had repeatedly recognized that “the FHA’s definition of person ‘aggrieved’ reflects a congressional intent to confer standing broadly,” and that “principles of statutory interpretation require[d] [the Court] to respect Congress’ decision to ratify those precedents when it reenacted the relevant statutory text.” In determining whether the banks’ lending practices were the proximate cause of Miami’s injuries, the Court concluded that the Eleventh Circuit applied the wrong standard and remanded the case to that court for further consideration of that issue.
