Fair housing organizations have filed a lawsuit contesting a federal rule change they argue reverses decades of lending protections. This change reportedly opens the door to discrimination against Black people, Latinos, and other minorities. The lawsuit, filed in Washington, D.C., targets a modification made earlier this year by the Consumer Financial Protection Bureau (CFPB) to the Equal Credit Opportunity Act. This Act prohibits lenders from discriminating against credit applicants.
The rule change challenged involves lenders no longer needing to consider ‘disparate impact,’ a policy that seems neutral but causes more harm to certain groups. Plaintiffs also claim the rule would make it simpler for lenders to promote loans to mainly white neighborhoods. Consequently, minority communities might have to depend on high-risk, costly lenders offering predatory loans at exorbitant interest rates.
This is the deliberate dismantling of 50 years of legal jurisprudence, regulatory guidance, and bipartisan consensus that lending discrimination has no place in America,” said Lisa Rice, CEO and president of the National Fair Housing Alliance, one of the plaintiffs.
Rice criticized the CFPB’s reversal as aligning with efforts to weaken housing and lending protections. Eroding these protections will diminish credit access for many people, weaken market stability, and reduce economic productivity.
Paulina Gonzalez-Brito, CEO of Rise Economy, a California nonprofit advocating for economic justice, accused the CFPB of disregarding public comments, common sense, and precedent in its effort to overturn anti-discrimination laws. She emphasized that the CFPB was designed to protect consumers and businesses from financial abuse and discrimination. The final rule, she argues, causes significant harm by inhibiting efforts to give all families and small businesses a fair chance at the American Dream.
The CFPB did not offer a comment when requested. The plaintiffs argue that the rule change is part of a broader initiative by the Trump administration to dismantle regulations related to fair housing and lending protections. The administration has proposed cutting funding for the Fair Housing Initiatives Program and halving staffing at the Department of Housing and Urban Development’s Office of Fair Housing and Equal Opportunity.
Recent settlements highlight ongoing housing discrimination issues. In 2023, the Justice Department accused City National Bank in Los Angeles of redlining, leading to a $31 million settlement. Previously, the Justice Department and the CFPB fined BancorpSouth $10.6 million for discriminatory practices against minorities.
The plaintiffs urge the court to annul the rule, arguing it is arbitrary, exceeds statutory authority, and was issued without following necessary procedures. They claim the rule is a drastic departure from the CFPB’s prior interpretation and enforcement of key provisions of the Equal Credit Opportunity Act.
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