[Federal Register Volume 64, Number 248 (Tuesday, December 28, 1999)]
[Rules and Regulations]
[Pages 72726-72728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33501]


      

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Part III





Department of Housing and Urban Development





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24 CFR Part 180



Civil Penalties for Fair Housing Act Violations; Rule

  Federal Register / Vol. 64, No. 248 / Tuesday, December 28, 1999 / 
Rules and Regulations  

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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.

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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]
BILLING CODE 4210-28-P