'Overbroad and unfair' liability: Opposing view

Discrimination is immoral and illegal, and businesses are committed to ensuring fairness in our housing, credit and other markets.

Discrimination has no place in the United States, and the government should be equipped to hold accountable those who practice it. However, disparate-impact liability is overbroad and unfair, and will ultimately harm those it is intended to protect.

Companies invest heavily in compliance systems designed to prevent discrimination, but disparate-impact liability creates potential lawsuits where no actual discrimination exists and does not give businesses clear rules of the road.

Disparate-impact liability can be entirely unpredictable, as companies are blindsided by expensive litigation and enormous reputational harm over policies that they never thought could hurt consumers, and certainly reflect no discriminatory intent.

For example, mortgage lenders face the conundrum of how to comply with legally required underwriting standards while avoiding any disparate impact caused by denying credit to lower-income individuals. An insurance company may be dragged into court over its policy of treating flat-roofs differently for underwriting purposes, or a lender may find itself under fire for asking how long disability income will continue.

Even more troubling, disparate-impact liability threatens the data-driven foundation of our modern economy. Using credit scores to determine mortgage eligibility or historical data to underwrite insurance by nature creates disparities — but doing so is not discriminatory.

However, in its decision, the Supreme Court recognized the importance of protecting legitimate business interests and sought to limit the many negative consequences of disparate-impact litigation. The court narrowed plaintiffs' ability to bring disparate-impact claims and emphasized constitutional restraints on remedies for such claims.

Thursday's decision acknowledges the threat of unfettered disparate-impact liability, which makes it harder, rather than easier, to develop and finance affordable housing. The court's assessment in placing new limitations on the use of disparate impact is correct, and we hope that courts will implement the decision in a way that avoids unintended consequences.

David Hirschmann is president and CEO of the U.S. Chamber of Commerce Center for Capital Markets Competitiveness.