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Miami Faces Hard Task in Proving Bank Lending Bias

  • Miami Faces Hard Task in Proving Bank Lending Bias

    Miami Faces Hard Task in Proving Bank Lending Bias

    Now that the U.S. Supreme Court has ruled that the City of Miami has a right to go after banks they say offered low-quality housing loans to minorities, the next step may prove to be more difficult. The city has to be able to prove that there was a definitive cause-and-effect between the loans handed out and the specific hardships these communities faced, hardships which then negatively affected Miami. This cause-and-effect is called a proximate cause and may be hard to sufficiently argue for when dealing with a large set of occurrences.

    To add to the complexity, around the years 2008-2009, the housing market declined. Because of this, the main banks targeted in this ruling, Bank of America and Wells Fargo, say that the economy and circumstances themselves are to blame for the increase in foreclosures, not their loan practices.

    In order to move forward on a trial to determine proximate cause, the City of Miami will return to the courts of Fort Lauderdale, where U.S. District Judge William Dimitrouleas has previously dismissed the city’s complaint. However, The U.S. Court of Appeals later overturned Dimitrouleas’ decision, and the federal courts were split, which led to the Supreme Court taking the case. Their final decision expanded the right to sue in certain cases, such as when minorities were led to certain neighborhoods and away from others, and included redlining, a practice where groups were singled out for loans with poor terms. The Supreme Court’s decision is now brought back to Dimitrouleas, who must move forward with any new lawsuits.

    The decision that the City of Miami has the potential to sue for predatory loan practices has led some to wonder if a large number of lawsuits will follow in its wake. There is concern for an “unlimited theory of liability,” where this case could be used to justify a number of other cities becoming involved in legal battles over loan practices, as well as individual businesses and landlords seeking recompense from prior agreements. To this point, the Supreme Court decision was able to offer peace of mind to both sides. They allowed standing in the original case, opening the door to a possibility of repayment, but also set a high bar of proving proximate cause to deter frivolous suits that may not be on the firmest ground. As for Bank of America and Wells Fargo, there shouldn’t be a large increase in housing suits, as they say they have ended any predatory lending practices, and any claim needed to be filed within two years of a violation of the Fair Housing Act.