Trump’s Fair Lending Rewrite Is Wall Street Gift, Warren Says

The Consumer Financial Protection Bureau’s proposal to weaken fair lending protections is a present to Wall Street that would open the “floodgates for discrimination,” Sen. Elizabeth Warren and other Democrats said.

“The Trump Administration’s wrongheaded attempts to destroy this longstanding tenet of our civil rights protections—and your defense of those actions—is callous, unjust, and yet another handout to industry on the backs of American consumers,” the senators said in a letter Tuesday to acting CFPB Director Russell Vought first obtained by Bloomberg Law.

The CFPB in November proposed barring the use of disparate impact—a method for determining unintentional discrimination using statistical evaluations of lending outcomes—in fair lending reviews, part of the administration’s broader effort to overhaul federal antidiscrimination law.

The new rule, once completed, will bring enforcement of the 1974 Equal Credit Opportunity Act back to its intended purpose focused on intentional discrimination, Vought said in a Jan. 26 Wall Street Journal op-ed. Under the Biden administration, the CFPB turned the law “on its head” by relying on statistics, Vought said.

But disparate impact has been used for 50 years to root out patterns of discrimination, and the US Supreme Court has affirmed its use, the Senate Democrats said.

Warren (Mass.) is the top Democrat on the Senate Banking Committee and the architect of the CFPB. The letter was also signed by Sens. Raphael Warnock (Ga.), Angela Alsobrooks (Md.), Chris Van Hollen (Md.), Andy Kim (N.J.), Cory Booker (N.J.), Jack Reed (R.I.), Catherine Cortez Masto (Nev.), Edward Markey (Mass.), and Tammy Duckworth (Ill.).

The senators urged the CFPB to withdraw the proposal.

The CFPB didn’t immediately respond to a request for comment.

Bank Backing

The CFPB’s proposal to eliminate the use of disparate impact in fair lending reviews is in line with policies across the Trump administration curbing anti-bias efforts, the Democratic lawmakers said.

“The CFPB’s proposed rule seeks to upend many decades of legal precedent, including Congressional intent, to advance the Trump Administration’s unsubstantiated ideological crusade to dismantle disparate impact protections across the federal government,” the senators said.

It would also set a standard for creating special purpose credit programs that would be “virtually impossible to meet,” the senators said.

SPCPs have been used to boost homeownership for women, minorities, and other targeted communities. The CFPB and other federal agencies issued Biden-era guidance aimed at making it easier for banks and other lenders to implement the programs.

Banks, many of which continue to be vocal about their efforts to boost financial inclusion, largely supported the CFPB’s proposal in December comments.

Consumer advocates raised concerns that the rise of artificial intelligence in lending makes disparate impact an even more vital tool to track potential discrimination. With machines making decisions, spotting intentional bias will be much more difficult, they said.

The Democratic senators said rolling back fair lending enforcement by eliminating the use of disparate impact would also increase costs for consumers, even as President Donald Trump tries to convince voters he’s addressing affordability concerns.

Women, minority, and other borrowers protected by the ECOA would face higher borrowing costs and increased denial rates without strict enforcement of unintentional discrimination, they said.