Civil Penalties for Fair Housing Act Violations

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.

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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

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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,1 newspapers 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.

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\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).

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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

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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]

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