Fair Housing Groups Sue CFPB Over Sweeping Rollback of Credit Discrimination Protections
A coalition of fair housing organizations and fair lending consultancies filed suit against the Consumer Financial Protection Bureau this week, challenging a rule that the plaintiffs say dismantles five decades of credit discrimination protections and will make it easier for lenders to discriminate against minority borrowers.
The lawsuit, filed in the District Court for the District of Columbia, targets a Final Rule the CFPB issued last month that rewrites Regulation B, the implementing regulation of the Equal Credit Opportunity Act. Plaintiffs include the National Fair Housing Alliance, nonprofit Rise Economy, and two Philadelphia-area fair lending firms, BLDS LLC and SolasAI.
The rule makes three sweeping changes. It eliminates disparate-impact liability under ECOA, reversing an interpretation the Federal Reserve Board first codified in 1977 and that every subsequent agency had maintained without interruption. It narrows the definition of unlawful “discouragement” of prospective credit applicants, exempting decisions about branch locations and advertising placement that plaintiffs say are central to modern redlining enforcement. And it effectively eliminates Special Purpose Credit Programs for for-profit lenders by barring race, color, national origin, and sex as eligibility criteria and imposing new requirements plaintiffs argue no lender could realistically meet.
The CFPB acknowledged in the rule itself that the changes are likely to result in some consumers being excluded from advertising campaigns and lenders informally discouraging certain applicants before they ever apply.
Plaintiffs are asking the court to vacate the rule entirely. Their complaint argues the CFPB relied on speculation rather than evidence, ignored voluminous comments from across the credit industry, and made zero changes between its proposed and final rule despite receiving 64,000 public comments. Industry groups, including the Consumer Bankers Association and the U.S. Chamber of Commerce, raised concerns during the comment period about the chilling effect the rule could have on lenders’ voluntary compliance efforts.
The complaint also takes aim at the rulemaking process itself, alleging the CFPB compressed the public comment period to just 32 days over the Thanksgiving holiday, failed to conduct required small business impact analyses, and did not convene a Small Business Regulatory Enforcement Fairness Act panel as required by law.
A separate count challenges whether Russell Vought has lawful authority to serve as Acting CFPB Director at all. The complaint argues his appointment did not satisfy the Federal Vacancies Reform Act because former Director Rohit Chopra was fired rather than having died, resigned, or become unable to perform his duties.
