Predatory Lending Cases Headed to Supremes

(CN) — The Supreme Court agreed Tuesday to decide whether a city has standing to bring Fair Housing Act claims accusing banks of predatory mortgage loans.

The City of Miami brought separate fair-housing lawsuits against Wells Fargo, Bank of America and Citigroup, claiming the banks targeted minorities for predatory loans.

A federal judge dismissed the city's Fair Housing Act claim against each bank, finding that the city lacked standing because its alleged injuries fell outside the law's "zone of interests," and that the claims were barred by the statute of limitations.

Last September, however, the 11th Circuit reversed in part, finding that Miami can pursue its FHA claims.

"Because the district court imposed too stringent a zone of interests test and wrongly applied the proximate cause analysis, we conclude that it erred in dismissing the city's federal claims with prejudice and in denying the city's motion for leave to amend on the grounds of futility," Judge Stanley Marcus wrote for the Atlanta-based appeals court.

The banks petitioned the U.S. Supreme Court for review in March of this year, asking whether an FHA must plead more than just "Article III injury-in-fact."

They also want the high court to decide whether proximate cause requires more than just the possibility that an FHA defendant could have foreseen that a plaintiff like Miami might ultimately lose money through a theoretical chain of contingencies.

"The city did not buy a house or take out a mortgage, and it did not experience any racial discrimination or even any actionable 'disparate impact.' Nor does it contend that its neighborhoods have become more or less segregated or that any 'discriminatory housing practice' was visited upon it," the petition states.

Bank of America and Wells Fargo claim Miami wants to use the FHA to make the banks replace property-tax revenue that was lost in the late-2000s financial crisis.

"This case, and the host of copycat cases like it... is a perfect example of how a civil-rights statute can be ill used by plaintiffs seeking a money recovery that Congress never meant to award them," they claim.

Per its custom, the Supreme Court did not comment on its decision to review the consolidated FHA cases.

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