US Fair Lending Enforcement Curbed Under Trump CFPB’s Final Rule

The Trump administration’s CFPB finalized a rule rolling back fair lending enforcement by eliminating a tool used to weed out unintended bias and making it harder to bring claims that lenders discouraged borrowers based on race, gender, or other characteristics.

The Consumer Financial Protection Bureau will no longer use disparate impact—statistical analyses for identifying discriminatory lending practices—under the Equal Credit Opportunity Act, the agency said in its final rule posted Tuesday.

The rule, which adopts the proposal largely as written, is set for publication in the Federal Register Wednesday and will take effect after 90 days.

“One Hallmark of the second Trump administration has been the eradication of discriminatory raced based policies that have permeated every aspect of government under the banner of ‘diversity equity and inclusion,’” acting CFPB Director Russell Vought said in a statement. “The administration of fair lending laws is no exception.”

The ECOA is a 1974 law that makes it illegal to discriminate against potential borrowers based on their race, sex, gender, marital status, ethnicity, religion, and other “protected characteristics.” Regulators, beginning with the Federal Reserve and then the CFPB, have long said that statistical evidence could be used to determine unintentional discrimination.

The CFPB took over ECOA enforcement from the Fed after it was established by the 2010 Dodd-Frank Act.

But the CFPB now says the law doesn’t allow for the use of disparate impact. Lenders will face discrimination claims only in instances where there is evidence, such as emails and other documents, showing intentional bias, according to the rule.

The CFPB’s about-face is part of the Trump administration’s broader initiative to roll back anti-discrimination and “diversity, equity, and inclusion” efforts across the country.

Consumer advocates and Democratic lawmakers said in comment letters that eliminating disparate impact would make it significantly harder to bring discrimination claims, particularly as lenders increasingly rely on artificial intelligence in credit decisions.

“This is an open invitation to some of the biggest companies in the world, including big banks and tech firms, to discriminate on the basis of race,” said Brad Lipton, director of the corporate power and financial regulation program at progressive think tank the Roosevelt Institute, and a former top CFPB official. “The only sliver of good news is that courts may well see through this and reject the CFPB’s latest unlawful action.“

The ECOA itself doesn’t permit the use of disparate impact or “effects-based” discrimination tests, unlike other statutes such as the Fair Housing Act, the CFPB said in its rule.

Townstone Settlement

The new provisions targeting anti-discouragement protections come after the CFPB tried to terminate its previous settlement with a Chicago mortgage lender, Townstone Financial Inc.

The CFPB during the first Trump administration had accused Townstone and its founder of using racist language in advertising, podcasts, and radio broadcasts to discourage Black borrowers from applying for loans, among other fair lending violations.

But the current CFPB now says the anti-discouragement provisions at the heart of the Townstone case restrict lenders’ free speech, and the agency is curtailing the prohibition in the final rule.

A federal judge blocked the CFPB’s effort to overturn the Townstone settlement in June 2025.

The final rule also bars lenders from creating “special purpose credit programs” aimed at boosting lending based on the ECOA’s protected characteristics.

For-profit lenders, including several large banks, have used the programs to boost lending in targeted communities. Those banks now may face CFPB enforcement actions if they continue to do so.