A coalition of fair housing and lending advocacy organizations filed a federal lawsuit against the Consumer Financial Protection Bureau (CFPB), challenging a new rule they say will lead to rampant discrimination in lending and roll back decades of fair housing protections.
The National Fair Housing Alliance (NFHA), Rise Economy, BLDS LLC and SolasAI filed the suit against the CFPB and acting director Russell Vought in the U.S. District Court for the District of Columbia on Wednesday. Plaintiffs claim the bureau’s revised Regulation B rule unlawfully narrows the Equal Credit Opportunity Act’s (ECOA) protections.
Passed in 1974, the ECOA prohibits lenders from discriminating against borrowers based on race, sex, national origin, age, religion and other protected characteristics. However, the CFPB’s revised rulemaking eliminates disparate impact claims and liability for lenders, which fair housing advocates fear will open the door to housing and lending discrimination.
The case, National Fair Housing Alliance et al. v. CFPB, et al., was filed in response to the CFPB’s overhaul of ECOA and, specifically, Regulation B, finalized in April. The plaintiffs are seeking declaratory and injunctive relief and are asking the court to vacate the rule entirely.
The revised rule is a “deliberate dismantling” of anti-discrimination protections, plaintiffs say. Central to the lawsuit is whether lenders can be held liable for policies that result in discrimination against certain borrowers, even if those policies appear neutral and don’t have overt discriminatory intent.
For decades, regulators allowed challenges to disparate impact lending practices. These are policies that are race-neutral in language but disproportionately harm protected groups in practice, such as Black borrowers being denied loans at much higher rates than other races, according to fair housing groups.
Under the CFPB’s revised rule, plaintiffs argue, lenders would be shielded from legal consequences unless there’s direct proof of intentional discrimination. The rule also narrows what constitutes illegal “discouragement” of loan applicants.
Previously, regulators interpreted ECOA to prohibit lenders from subtly steering away certain applicants, or digital redlining, through targeted advertising, geographic marketing decisions or messaging. These practices could deter applicants before they even submit an application, resulting in “digital redlining,” plaintiffs say.
Additionally, plaintiffs argue that the new rule limits the use of Special Purpose Credit Programs (SPCPs) by prohibiting programs based on race, color, national origin or sex. The CFPB added stringent conditions to justify remaining SPCPs, such as additional eligibility and documentation requirements.
“This is the deliberate dismantling of 50-years of legal jurisprudence, regulatory guidance, and bipartisan consensus that lending discrimination has no place in America,” Lisa Rice, NFHA president and CEO, said in a statement.
“This reversal by the CFPB is a continuation of this Administration’s efforts to gut fair housing and lending protections. Eviscerating these guardrails will ultimately result in less credit access for many people, make our markets less sound, and cause our economy to be less productive.”
CFPB says new rule addresses regulatory overreach, provides legal clarity
The CFPB has undergone a massive overhaul during the Trump administration, with an eye on rolling back what it deems as burdensome and duplicative regulations that hamper lending activity.
In particular, the administration has gutted diversity, equity and inclusion (DEI) policies and programs throughout all levels of the federal government. The Trump administration contends that DEI policies result in reverse discrimination and violate the Constitution.
Shortly after coming to power in 2025, President Trump issued a nationwide executive order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” which the CFPB cited as the basis for revising Regulation B.
“(I)t is the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the Constitution, Federal civil rights laws, and basic American ideals,” the CFPB said in the final rule.
The CFPB received more than 64,000 comments overwhelmingly opposed to its revised rule, which it ignored, the NFHA said.
The agency insists the Regulation B revisions are a course correction to narrow interpretations of disparate impact liability that put lenders in the impossible position of managing for statistical outcomes rather than creditworthiness.
Opponents to SPCPs have also raised concerns that race-conscious lending initiatives, even to remedy past discrimination, create their own legal and constitutional quandaries under equal protection principles.
