Civil Penalties for Fair Housing Act Violations

Directive Number: FR-4302-F-03

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 180

[Docket No. FR-4302-F-03]
RIN 2529-AA83

Civil Penalties for Fair Housing Act Violations

AGENCY: Office of the Assistant Secretary for Fair Housing and Equal
Opportunity, HUD.

ACTION: Final rule.

SUMMARY: This final rule adopts revisions to HUD's regulations
governing hearing procedures for civil rights matters made effective by
an interim rule published on February 10, 1999. These revisions
implement two important changes in the way civil penalties are assessed
in fair housing cases. First, they allow an administrative law judge
(ALJ) to assess a separate civil penalty against a respondent for each
separate and distinct discriminatory housing practice committed by the
respondent. Second, they require an ALJ to take into account, in favor
of imposing a maximum civil penalty, a finding that a respondent has
committed a housing-related hate act. This final rule takes into
consideration public comments received on the February 10, 1999 interim
rule. After careful consideration of the public comments, HUD has
decided to adopt the interim rule without change.

DATES: Effective Date: January 27, 2000.

FOR FURTHER INFORMATION CONTACT: Office of the Associate General
Counsel for Fair Housing, Room 10270, U.S. Department of Housing and
Urban Development, 451 Seventh Street, SW, Washington, DC 20410-0500;
telephone (202) 708-0570 (this is not a toll-free telephone number).
Hearing- or speech-impaired persons may access this number via TTY by
calling the toll-free Federal Information Relay Service at (800) 877-
8339.

SUPPLEMENTARY INFORMATION:

I. The ``Make 'Em Pay'' Initiative

This rulemaking was initiated in response to President Clinton's
``Make 'Em Pay'' (MEP) Initiative, announced on November 10, 1997. The
MEP Initiative is designed to increase enforcement of the Fair Housing
Act (42 U.S.C. 3601-3619), particularly in the case of housing-related
acts of violence and intimidation.
This final rule implements two aspects of the MEP Initiative.
First, an administrative law judge (ALJ) may now assess a separate
civil penalty against a respondent for each separate and distinct
discriminatory housing practice committed by the respondent. Second, an
ALJ is required to take into account, in favor of imposing a maximum
civil penalty, a finding that a respondent has committed a housing-
related hate act.

II. The December 18, 1997 Proposed Rule

This rulemaking was initiated by the publication of a proposed rule
on December 18, 1997 (62 FR 66488). The proposed rule advised that it
would amend HUD's regulations at 24 CFR part 180 (entitled ``Hearing
Procedures for Civil Rights Matters'') to allow an ALJ to assess more
than one civil penalty against a given respondent, where the respondent
has committed separate and distinct acts of discrimination. The
proposed rule also advised that it would amend part 180 to require ALJs
to consider housing-related hate acts in determining the amount of a
civil penalty assessed against a respondent found to have committed a
discriminatory housing practice.
In addition to the substantive amendments described above, the
December 18, 1997 proposed rule advised of a proposed structural change
to 24 CFR part 180. Specifically, the December 18, 1997 rule proposed
to move certain provisions governing the assessment of civil penalties
found at Sec. 180.670(b)(3)(iii)(A), (B), and (C) to a new Sec. 180.671
(entitled ``Assessing civil penalties for Fair Housing Act cases'').
HUD proposed this change to make the part 180 regulations easier to
understand.

III. The February 10, 1999 Interim Rule

The rulemaking process was continued with the publication of an
interim rule on February 10, 1999 (64 FR 6744). During the comment
period for the December 18, 1997 proposed rule, HUD received six public
comments. A discussion of these public comments was published in the
preamble to the interim rule. In response to the public comments, we
clarified the definition of ``separate and distinct housing practice''
in Sec. 180.671(b) and revised the definition of ``housing-related hate
act'' in Sec. 180.671(c)(2)(ii). The interim rule made the revised
regulations effective as of March 12, 1999, and solicited additional
public comment on the amendments to 24 CFR part 180.

IV. This Final Rule

This final rule adopts the regulations made effective by the
interim rule published on February 10, 1999 without change. The public
comment period for the interim rule closed on April 12, 1999. HUD
received two comments, both from trade associations. We carefully
considered the issues raised by the commenters and appreciate the
suggestions offered by them. For the reasons discussed below, however,
we chose not to implement their suggestions. This section of the
preamble presents a summary of the issues raised by the public
commenters and HUD's responses to their comments.
Comment--ALJs should be required to consider the amount and quality
of compliance guidance supplied by HUD when determining the amount of a
civil penalty. One commenter was concerned about housing providers
being held responsible for violations of unclear or ambiguous fair
housing regulations and guidance, and whether these respondents would
receive fair and consistent assessments. The commenter suggested that
an additional factor should be included in Sec. 180.671(c) (entitled
``Factors for consideration by ALJ'') that requires ALJs to consider
the amount and quality of compliance guidance supplied by HUD when
determining the amount of a civil penalty.
The commenter proposed the following language for this additional
factor: ``Whether HUD has given notice previous to the allegations in
this case, through a promulgated rule or regulation, and has made clear
in that rule or regulation the act, transaction, or occurrence that
constitutes the alleged separate and distinct discriminatory housing
practice.''
The commenter also suggested that HUD undertake a thorough review
of our fair housing regulations and guidance to ensure that they are
clear and understandable to the broader regulated community.
HUD Response. We believe that Sec. 180.671(c) provides substantial
protections for respondents with differing circumstances and levels of
culpability. Among the six factors laid out in Sec. 180.671(c), four
address the commenter's concerns. Section 180.671(c)(iii) requires an
ALJ to consider the nature and circumstance of the violation. Section
180.671(c)(iv) specifically requires an ALJ to consider a respondent's
degree of culpability when determining the amount of a civil penalty.
Section 180.671(c)(v) requires an ALJ to consider the goal of
deterrence. Finally, Sec. 180.671(c)(vi) requires the ALJ to consider
other matters as justice may require.
The cumulative effect of these provisions is to provide an ALJ with
the opportunity to consider the fairness of any penalty. An ALJ may
consider the level of intent a respondent had in violating the Fair Housing Act. The
ALJ may also consider whether the respondent was provided with
sufficient guidance. Determining appropriate justice, as with any
judicial proceeding, is a complex process. This final rule provides an
ALJ with substantial flexibility to fashion an appropriate remedy.
Regarding the suggestion that HUD should undertake a thorough
review of its fair housing regulations and guidance, we appreciate the
suggestion and agree that clear guidance is very important. While we
are not in a position to institute a complete formal review of all our
fair housing regulations at this time, it should be emphasized that HUD
is committed to producing clear guidance, and, therefore, we strive on
a continuing basis to ensure that all of our fair housing regulations
and guidance are clear and understandable.
For example, in the case of the regulations adopted by this final
rule, we reviewed part 180 in its entirety during the development of
the proposed rule. As a result of this review, we simplified
Sec. 180.670 by creating a new Sec. 180.671. The purpose of this change
was to make the part 180 regulations easier to understand. In addition,
we revised the definitions of the terms ``separate and distinct housing
practice'' and ``housing-related hate act'' in response to public
comments on the proposed rule. The revised definitions were also
designed to improve the clarity of the regulations.
Comment--HUD must address subtitle B of the Small Business
Regulatory Enforcement Fairness Act. One commenter wrote that HUD had
not adequately addressed subtitle B of the Small Business Regulatory
Enforcement Fairness Act (SBREFA). In particular, the commenter wrote
that ALJs must be informed of SBREFA's civil penalty reduction/waiver
provisions and that ALJs must be required to consider these provisions
when determining the amount of a civil penalty.
HUD Response. This issue was raised in a comment to the December
19, 1997 proposed rule and was addressed in the preamble to the
February 10, 1999 interim rule. As stated in HUD's response in the
interim rule, we believe that the six factors that ALJs consider when
determining the amount of a civil penalty are consistent with subtitle
B of SBREFA. Section 223, the relevant section of subtitle B, provides
in part that:

Each agency regulating the activities of small entities shall
establish a policy or program * * * to provide for the reduction,
and under appropriate circumstances for the waiver, of civil
penalties for violations of a statutory or regulatory requirement by
a small entity.

This final rule addresses this requirement in
Sec. 180.671(c)(1)(ii), which requires an ALJ to consider the
respondent's financial resources when determining the amount of a civil
penalty. To the extent a small entity may have less financial ability
to pay a civil penalty, Sec. 180.671(c)(1)(ii) permits an ALJ to assess
a lower civil penalty.
In addition, HUD is cognizant that section 222 of SBREFA requires
the Small Business and Agriculture Regulatory Enforcement Ombudsman to
``work with each agency with regulatory authority over small businesses
to ensure that small business concerns that receive or are subject to
an audit, on-site inspection, compliance assistance effort or other
enforcement related communication or contact by agency personnel are
provided with a means to comment on the enforcement activity conducted
by this personnel.''
To implement this statutory provision, the Small Business
Administration has requested that agencies include the following
language on agency publications and notices which are provided to small
businesses concerns at the time the enforcement action is undertaken.
The language is as follows:

Your Comments Are Important

The Small Business and Agriculture Regulatory Enforcement
Ombudsman and 10 Regional Fairness Boards were established to
receive comments from small businesses about federal agency
enforcement actions. The Ombudsman will annually evaluate the
enforcement activities and rate each agency's responsiveness to
small business. If you wish to comment on the enforcement actions of
[insert agency name], call 1-888-REG-FAIR (1-888-734-3247).

As HUD stated in our notice describing HUD's actions on
implementation of SBREFA, which was published on May 21, 1998 (63 FR
28214), HUD intends to work with the Small Business Administration to
provide small entities with information on the Fairness Boards and
National Ombudsman program, at the time enforcement actions are taken,
to ensure that small entities have the full means to comment on the
enforcement activity conducted by HUD.
Comment--HUD should clarify that publishing the same discriminatory
advertisement on multiple days constitutes only one act of housing
discrimination. One commenter was concerned that, under the revisions
adopted by this final rule, a newspaper publisher would be held liable
for multiple civil penalties for publishing the same discriminatory
advertisement on multiple days. The commenter noted that: (1)
Newspapers receive a high volume of daily telephone calls requesting
the placement of classified advertisements; (2) newspaper employees
taking those calls often only have a brief period in which to take the
pertinent information; and (3) usually, advertisers placing real estate
advertisements ask that they be published multiple times.
The commenter urged HUD to revise the final rule to clarify that:
(1) the publication of a discriminatory advertisement multiple times
does not constitute multiple acts of discrimination; and (2) an ALJ may
not assess multiple civil penalties against the publisher of the
newspaper.
HUD Response. HUD believes that the final rule provides sufficient
protection for newspaper publishers. First, under HUD's advertising
guidelines,1newspapers will only be held responsible for
publishing an advertisement that violates the Fair Housing Act, if the
advertisement is discriminatory on its face. For example, an
advertisement that states ``whites only'' would constitute an
advertisement that is discriminatory on its face. We believe that it is
reasonable to require that even large and busy newspapers avoid
publishing such explicitly discriminatory advertisements.
Second, in response to this comment, we considered adding a
``bright line'' standard to the rule that would dictate the exact
circumstances when publishing the same discriminatory advertisements on
multiple occasions would be considered multiple acts of housing
discrimination. We concluded, however, that because of the myriad of
possible scenarios that might occur, the determination should be made
by the ALJ hearing the case, based upon the specific facts of the case.
We believe that an ALJ is in the best position to make the
determination as to which cases are suitable for such treatment. As the
final rule does not require an ALJ to assess multiple civil penalties,
even in cases that clearly involve multiple separate and distinct discriminatory
housing practices, a respondent faced with possible multiple civil penalties
may present any possible arguments to the ALJ.
Comment--Newspaper publishers should be given the opportunity to
correct discriminatory advertisements. One commenter urged HUD to
consider changing its regulations to require a prospective aggrieved
person to notify a newspaper publisher of an alleged violation to give
the publisher an opportunity to contact the advertiser and request
revisions to the advertisement before HUD accepts and investigates the
aggrieved person's allegations.
HUD Response. We appreciate the commenter's suggestion. The
suggestion, however, requests changes to HUD's procedures for accepting
and investigating fair housing complaints. This final rule only
concerns revisions to HUD's regulations covering the assessment of
civil penalties. The suggestion, therefore, is outside the scope of
this rulemaking and was not considered in the preparation of this final
rule.

V. Findings and Certifications

Environmental Impact

In accordance with 40 CFR 1508.4 of the Council on Environmental
Quality regulations and 24 CFR 50.19(c)(3) of the HUD regulations, the
policies and procedures contained in this final rule are determined not
to have the potential of having a significant impact on the human
environment and are therefore exempt from further environmental review
under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Federalism Impact

Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct compliance costs on State and local governments and
is not required by statute, or preempts State law, unless the relevant
requirements of section 6 of the Executive Order are met. This final
rule does not have federalism implications and does not impose
substantial direct compliance costs on State and local governments or
preempt State law within the meaning of the Executive Order.

Regulatory Flexibility Act

The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) has reviewed and approved this final rule and in so
doing certifies that the final rule is not anticipated to have a
significant economic impact on a substantial number of small entities.
This final rule explicitly interprets the Fair Housing Act to allow
ALJs to assess a separate civil penalty against a respondent who has
been found to have committed separate and distinct acts of
discrimination. The rule also amends 24 CFR part 180 to describe how
ALJs are to consider housing-related hate acts under the six factors
ALJs apply in determining the amount of a civil penalty to assess
against a respondent found to have committed a discriminatory housing
practice.
The rule will affect only those few small entity housing providers
who are respondents in cases where HUD determines that there is
reasonable cause to believe that they have committed multiple
violations of the Fair Housing Act and whose cases are then heard
before an ALJ. The ALJ may or may not then assess multiple civil
penalties against the provider after a hearing comporting with due
process requirements. To date, the number of entities who actually
become respondents in Fair Housing Act cases before ALJs is extremely
small.
For example, in FY 1994, the year when the most administrative fair
housing cases (through 1997) were docketed, of the 325 cases HUD
charged, 220 elected to be heard in federal court, leaving only 115 to
be heard by the ALJs. Of these cases, civil penalties were only
assessed against an even fewer number: after hearings in 15 cases, and
as part of a consent order in another 12 cases, for a total of 27
cases, or 8.3% of the cases docketed. The average civil penalty was
$3,727.77. Only a few of these cases involved multiple acts of housing
discrimination.
Furthermore, ALJs have had the authority to assess multiple civil
penalties in instances where respondents have been found to commit
multiple discriminatory housing practices and have done so in
appropriate circumstances. Thus, the economic impact of the rule on
small entities should not be substantially greater than that already
inherent in the Fair Housing Act.
Finally, the rule will not have a significant economic impact on a
substantial number of small entities because it requires ALJs to
consider each respondent's ability to pay when assessing one or more
civil penalties. Thus, everything else being equal, smaller entities
with diminished ability to pay would be subject to lower penalties.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. This final rule does not impose any
Federal mandates on any State, local, or tribal governments or the
private sector within the meaning of Unfunded Mandates Reform Act of
1995.

VI. List of Subjects in 24 CFR Part 180

Administrative practice and procedure, Aged, Civil rights, Fair
housing, Individuals with disabilities, Intergovernmental relations,
Investigations, Mortgages, Penalties, Reporting and recordkeeping
requirements.

PART 180--HEARING PROCEDURES FOR CIVIL RIGHTS MATTERS

Accordingly, the interim rule amending 24 CFR part 180, which was
published at 64 FR 6744 on February 10, 1999, is adopted as a final
rule without change.

Dated: December 17, 1999.
Eva M. Plaza,
Assistant Secretary for Fair Housing and Equal Opportunity.

[FR Doc. 99-33501 Filed 12-27-99; 8:45 am]

BILLING CODE 4210-28-P


FOOTNOTES:
1.  Memorandum from Roberta Achtenberg, former HUD Assistant  Secretary for Fair Housing and Equal Opportunity, to FHEO Office  Directors, Enforcement Directors, Staff, Office of Investigations,  Field Assistant General Counsel, Subject: Guidance Regarding  Advertisements Under Sec. 804(c) of the Fair Housing Act (Jan. 9,  1995). This Guidance memorandum is publicly available on the  National Fair Housing Advocate's WWW site at http://www.fairhousing.com  /hud_resources/hudguid2.htm (current as of the date of publication of this rule).   BACK TO TEXT