The CFPB is preparing to finalize a November proposal that would narrow anti‑discrimination rules in lending by eliminating the disparate‑impact standard and focusing enforcement on intentional discrimination. The change follows a Trump executive order criticizing disparate‑impact obligations and, according to OMB, the final draft shows "no material change" from the proposal. Civil‑rights and consumer advocates warn the move undermines the 1974 Equal Credit Opportunity Act, while industry groups praise reduced compliance and legal risk. Timing for formal adoption remains uncertain.
CFPB Readies Final Rule Narrowing Lender Civil‑Rights Protections — Disparate‑Impact Standard Targeted
Signage is seen at the Consumer Financial Protection Bureau (CFPB) headquarters in Washington, D.C., U.S., August 29, 2020. REUTERS/Andrew Kelly
By Douglas Gillison
WASHINGTON, March 31 (Reuters) — The Consumer Financial Protection Bureau (CFPB) is preparing to finalize a regulation first proposed in November that would narrow long-standing civil‑rights protections in lending, according to information posted on a U.S. government website.
Under the proposed rule, banks and other lenders would no longer be subject to a long-established duty to prevent lending practices that have a discriminatory effect — commonly called the "disparate‑impact" standard — on women and racial and ethnic minorities. Instead, enforcement would focus primarily on stopping explicitly intentional discriminatory conduct.
Representatives for both the Office of Management and Budget (OMB) and the CFPB did not immediately respond to requests for comment on Tuesday.
Background and Review
The move implements an executive order issued by President Donald Trump a year ago that criticized disparate‑impact obligations as encouraging favoritism and imposing burdens on businesses. OMB's website — part of the president's office — indicated the final regulation was under review and reflected "no material change" from the version proposed in November. The site also listed CFPB Acting Director Russell Vought in connection with the review process.
It remains unclear when the CFPB will formally adopt the rule or whether OMB reviewers will recommend changes before it is issued.
Reactions
Fair‑lending and consumer advocates have sharply criticized the proposal, saying it contradicts the intent of Congress when it passed the Equal Credit Opportunity Act (ECOA) in 1974 and subsequent protections designed to curb discriminatory lending practices. They warn that removing disparate‑impact liability could make it harder to identify and remedy policies that disadvantage protected groups even when no explicit bias is evident.
Industry groups and many lenders have welcomed the proposal, arguing it would reduce compliance complexity and legal exposure tied to disparate‑impact claims.
Reporting: Douglas Gillison in Washington; Editing: Mark Porter.
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