The American Bankers Association urged regulators to limit lending discrimination cases to only those in which banks admit intent.

In a white paper submitted by the ABA and prepared by financial law firm Buckley Sandler, the group said previous Supreme Court rulings require claims to be based on the text of certain statutes.

And a close reading of the Fair Housing Act and Equal Credit Opportunity Act shows a requirement for a proof of intent, not the effects of the alleged practices, according to the paper. No federal court of appeals has ruled on whether disparate impact claims can be based on "statistical disparities," according to the group.

The Supreme Court had a chance to rule on a similar case brought by the City of Minnesota, but the local government withdrew it.

Wells Fargo (WFC) settled a disparate impact case for $175 million, for alleged discrimination from its independent wholesale lenders. Wells admitted no wrongdoing but shut down its wholesale channel soon afterward.

"We urge government agencies to stand down from applying a disparate impact doctrine approach to fair lending supervision or enforcement and return to the objective of protecting borrowers from intentional prohibited-basis discrimination to assure that similarly situated people are treated similarly," said Frank Keating, CEO of the ABA in a letter sent to federal regulators.

The Consumer Financial Protection Bureau declined to comment, and the Department of Housing and Urban Development did not immediately reply to requests for one.

Katie Buitrago, a policy and communications associate with the Woodstock Institute, said removing this tool "significantly hampers" an agency's ability to create a more just financial marketplace.

"ABA is suggesting is that federal fair lending enforcement should be limited to cases where a lender openly admits that it intended to discriminate against a potential borrower because of his or her race or because he or she has a disability, for example," Buitrago said. "Requiring that kind of blatant evidence would gut fair lending enforcement because no lender is going to make that kind of statement on the record."

jprior@housingwire.com

@JonAPrior