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  • 05.01.17

Cities can now sue banks over discriminatory lending, Supreme Court rules

Big banks paid out hundreds of millions of dollars in fines following the financial crisis for selling risky mortgages to minority borrowers. Now the banks that engaged in those predatory practices may have an additional price to pay: Footing the bill for the ripple effect that foreclosures have had on municipal finances.

When foreclosures become widespread, property values drop and crime tends to increase. Cities across the country have filed suit against major lenders—including Bank of America, Citigroup, and Wells Fargo—demanding compensation for lost tax revenue and increased policing and maintenance expenses.

One such case, Bank of America Corp et al v. City of Miami, Florida, rose to the U.S. Supreme Court, which issued its ruling earlier today. The court backed the idea, in principle, that cities can sue as “aggrieved persons” under the Fair Housing Act—a nod of encouragement for Los Angeles, Oakland, and other cities with pending suits. But the justices returned the case to the 11th Circuit Court of Appeals, where Miami will need to prove a stronger link between discriminatory lending on the part of the banks and the city’s own financial injuries. 

AH