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Supreme Court deals setback to Miami in predatory lending suits

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Supreme Court deals setback to Miami in predatory lending suits

(Reuters) — The U.S. Supreme Court on Monday threw out a lower court ruling that had given Miami the green light to pursue lawsuits accusing major banks of predatory mortgage lending to black and Hispanic home buyers, but gave the city another chance to argue its case.

The court ruled 8-0 in tossing out a ruling in favor of Miami by the Atlanta-based 11th U.S. Circuit Court of Appeals. Bank of America Corp. and Wells Fargo & Co. had challenged the decision to permit the lawsuits by the Florida city against the banks. The ruling by the justices also affects a related case brought by Miami against Citigroup Inc.

Writing for the court, liberal Justice Stephen Breyer said Miami had the legal standing to sue the banks but needed to present more evidence that the injuries it claims to have suffered, which included lost property tax revenues, were tied to alleged violations of the federal Fair Housing Act.

Miami accused the banks of a decade of lending discrimination in its residential housing market. Miami said Wells Fargo, Bank of America and Citigroup steered nonwhite borrowers into higher-cost and riskier loans they often could not afford, even if they had good credit.

As a result of the banks' alleged discriminatory lending, Miami said, property values declined and the city was forced to pay to repair and maintain properties that went into foreclosure. Other U.S. cities, including Los Angeles and Oakland, have launched similar lawsuits.

Miami filed the cases in 2013 in the aftermath of the U.S. financial crisis under the housing law, which prohibits discrimination in housing sale, rental and financing.

Miami will now have a chance to make its case before a lower court.

Three of the court's conservative justices, Clarence Thomas, Samuel Alito and Anthony Kennedy, said they would have thrown out the lawsuit altogether. Newly appointed Justice Neil Gorsuch, who was not on the court when the case was argued in November, did not participate.

In order to show that the connection between the alleged violation and the harm suffered, "a plaintiff must do more than show that its injuries foreseeably flowed from the alleged statutory violation," Justice Breyer wrote.

The appeals court in September 2015 overturned a lower court's decision to dismiss lawsuits by Miami against the banks. Citigroup Inc decided not to appeal to the Supreme Court.

The banks contend that Miami has failed to show a direct link from their lending practices to the financial harm it claims to have sustained.

Business interests have sought to narrow the scope of the Fair Housing Act in an effort to ward off expensive litigation.

In 2015, the Supreme Court ruled in a major Fair Housing Act case from Texas, upholding a broad interpretation of discrimination claims allowed under that law, in a setback to lenders and insurers.

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