WASHINGTON — The National Fair Housing Alliance and several other advocacy groups have filed a federal lawsuit against the Consumer Financial Protection Bureau challenging a recent CFPB rule that removed “disparate impact” standards from Regulation B under the Equal Credit Opportunity Act, according to court filings and reporting by Reuters and Associated Press.
The lawsuit, filed in U.S. District Court for the District of Columbia, alleges the CFPB unlawfully weakened longstanding anti-discrimination protections in lending when it finalized changes to Regulation B in April, according to the complaint and Reuters.
The plaintiffs include the National Fair Housing Alliance, Rise Economy, BLDS LLC and SolasAI, according to the court filings, Reuters and statements released by the National Fair Housing Alliance. The suit also names acting CFPB Director Russell Vought as a defendant.
Rule Removed ‘Disparate Impact’ Standard
According to Reuters, the CFPB’s April final rule amended Regulation B, which implements the 1974 Equal Credit Opportunity Act, or ECOA. Reuters reported that among the most significant changes was the elimination of the longstanding “effects test,” also known as disparate impact liability, which had allowed regulators and plaintiffs to challenge lending policies that produced discriminatory outcomes even without explicit discriminatory intent.
Reuters and legal analyses published by Norton Rose Fulbright and Husch Blackwell said the rule also narrowed standards related to discouraging prospective applicants from seeking credit and imposed new limits on Special Purpose Credit Programs designed to expand lending access to underserved communities.
According to Reuters and the legal analyses, the CFPB said in announcing the final rule that ECOA does not authorize disparate impact liability and that the statute focuses on intentional discrimination rather than discriminatory effects. The bureau said intentional discrimination and proxy discrimination would remain prohibited.
Reuters reported the CFPB cited a January 2025 executive order issued by President Donald Trump directing agencies to eliminate what the administration described as unlawful diversity, equity and inclusion preferences and disparate impact frameworks.
Plaintiffs Say Protections Were Weakened
According to the complaint and Associated Press reporting, the plaintiffs argue the CFPB’s changes undermine decades of fair lending protections and could increase discrimination against Black borrowers, Latinos, women and other historically underserved groups.
Reuters reported that Democracy Forward President Skye Perryman said the rule “undermines one of the nation’s core civil rights protections in lending and will lead to more discrimination in access to credit.”
Associated Press reported the lawsuit alleges the rule could make it easier for lenders to avoid serving minority communities and steer borrowers toward higher-cost or predatory lending products.
According to the complaint and Reuters, the plaintiffs further allege the CFPB violated the Administrative Procedure Act by failing to provide a reasoned explanation for the changes and by failing to rely on evidence supporting the removal of disparate impact standards.
Reuters also reported the plaintiffs are challenging Vought’s authority to lead the CFPB, arguing he has not been lawfully appointed because he has not been confirmed by the Senate as CFPB director.
Broader Debate Over Fair Lending Standards
The disparate impact liability has long been a major enforcement tool in fair lending, housing and employment discrimination cases because it allows regulators and courts to evaluate whether facially neutral policies disproportionately harm protected groups.
Legal analyses published by Norton Rose Fulbright and Husch Blackwell noted that supporters of the CFPB’s rule change argue ECOA’s statutory language does not expressly authorize disparate impact claims and that enforcement should focus on intentional discrimination.
Consumer advocates and civil rights groups, however, have warned the rollback could make it more difficult to challenge discriminatory lending practices, particularly as lenders increasingly rely on algorithms and artificial intelligence in underwriting and credit decisions, according to Reuters.
The case is captioned National Fair Housing Alliance v. Consumer Financial Protection Bureau, No. 1:26-cv-01820.
