When the Supreme Court agreed to hear a Texas "disparate impact" case last year, banks hoped it would end the use of the divisive legal theory used by regulators and other authorities. But the court's Thursday decision, by contrast, appears to strengthen the government's hand.

The court's decision upholding disparate impact — which makes defendants liable in fair-housing and fair-lending cases even if discrimination was unintentional — bolsters efforts by the Consumer Financial Protection Bureau and other agencies as well as consumer advocates to bring claims while dampening other challenges to the theory, observers said.

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