Legal Bulletins

Montgomery County Council Bill 36-04 entitled Commission on Human Rights - Discrimination in Housing Amendments was introduced by Montgomery County Council President Perez and Council Members Subin and Floreen on October 26, 2004. After a public hearing and numerous Committee work sessions, Bill 36-04 was approved with amendments by the Health and Human Services Committee. On November 29, 2005, Bill 36-04 was approved by the full Montgomery County Council on a 7-2 vote. The Council as a whole adopted one amendment.

The Bill was signed by the County Executive and was to become effective on March 8, 2006. A summary of Bill 36-04 is provided below. However, on March 7, 2006, the Circuit Court for Montgomery County, in Civil Action No. 269105-V, issued an Order enjoining Bill 36-04 from becoming effective until the issue of its validity (as raised by the plaintiffs in that case) is resolved.

The following is a summary of Bill 36-04:

Section 27-4 Commission Staff and Office of Human Rights.

The Office of Human Rights is required to educate County residents and work with other organizations to identify and educate the public about discriminatory lending practices.

Section 27-5 Duties Generally

By March 1 of each year, the Office of Human Rights must file a written report for the preceding calendar year with the County Executive and the County Council detailing discrimination complaints, overall lending patterns and other information.

Section 27-8 Penalties and Relief

The present cap of $5,000 on damages for humiliation and embarrassment "based on the nature of the humiliation and embarrassment, including its severity, duration, frequency, and breadth of observation by others" is increased to $500,000. In addition, damages may be awarded for financial losses resulting from the discriminatory act. As introduced, there was no cap on the amount of these damages.

Section 27-12 Discriminatory Housing Practices.

Existing Subsection 27-12(b), which prohibits discrimination in any aspect of lending because of race, color, religious creed, ancestry, national origin, sex, marital status, disability, presence of children, family responsibilities, source of income, sexual orientation, or age, is amended to apply to a "person" rather than a "lending institution." Under Section 27-6, as amended, "person" includes banks and others regularly engaged in lending money, including "brokering money." Subsection 27-12(b) is also amended to specifically prohibit discrimination in "brokering money" or "servicing, or purchasing loans."

New Subsection 27-12(c) is more specific than Subsection 27-12(b) and prohibits a person, "because of race, color, religious creed, ancestry, national origin, sex, marital status, disability, presence of children, family responsibilities, source of income, sexual orientation or age" from (1) engaging in "steering" or (2) making available loans with certain characteristics.

Subsection 27-12(c)(1) defines steering as (a) restricting or attempting to restrict a person's choices because of factors other than a person's income or credit level in connection with a mortgage loan; (b) discouraging a person from a particular mortgage loan with more favorable terms if the person may qualify for that particular mortgage loan; (c) directing a person away from the mortgage loan, etc. with more favorable terms if the person may qualify for that loan; or (d) offering less favorable mortgage loan terms than would otherwise be offered.

Subsection 27-12(c)(2) provides that a person must not (because of race, etc.) make available a mortgage loan which (a) includes the financing of single premium credit insurance; (b) provides for excessive up front points, excessive fees, or excessive pre-payment penalties, or; (c) provides compensation paid direct or indirectly to a person (the Council amendment struck "mortgage broker" and substituted "person") from any source.

As originally introduced, Subsection 27-12(c) provided that one must not "discriminate by" engaging in steering, originating predatory loans or engaging in practices which have a disparate impact. The effect of the original bill was to create a class of activities which would be per se discriminatory. The bill was amended to remove the "discriminate by" language so that the activities described in subsections (c)(1) and (c)(2) are discriminatory only if engaged in because of a person's race, etc. Provisions defining loans with certain characteristics as "predatory" were removed. All references to loan suitability, mandatory arbitration and tangible net benefit were deleted.

Original Subsection 27-12(c)(3), which prohibited practices that had a "disparate impact", was deleted in its entirety. This disparate impact provision would have required lenders to prove both a "compelling" business justification for any practice causing a disparate impact and that there was "no less discriminatory way to advance the business justification with a less discriminatory effect."

Section 11-1, 11-2, and 11-6A

These sections establish a process for the County Office of Consumer Protection to assist consumers who notify the office regarding discriminatory, predatory or abusive lending practices.