Washington, D.C. — The National Fair Housing Alliance (NFHA), Rise Economy, BLDS LLC, and SolasAI filed a lawsuit today challenging a sweeping new rule issued by the Consumer Financial Protection Bureau (CFPB) that dismantles decades-old protections against discrimination in lending and weakens enforcement of the Equal Credit Opportunity Act (ECOA). When passed in 1974, ECOA was the first law to prohibit discrimination in the offering of credit based on sex or marital status, thus guaranteeing women access to credit without spousal requirements. Congress then expanded ECOA to also protect against discrimination based on race, color, religion, national origin, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act. Democracy Forward, Relman Colfax PLLC and Public Citizen Litigation Group represent the plaintiffs, and NFHA represents themselves.

The lawsuit argues that the new rule would make it much harder to challenge banks and lenders for policies that unfairly hurt Black communities, women, immigrants, and other historically discriminated communities.

The new rule includes several harmful policies, including:

• Removes protections against discrimination. Banks and lenders would face no legal consequences for policies that indirectly discriminate unless there is proof they intentionally meant to discriminate. Right now, lenders can face legal challenges if a policy looks “neutral” on paper but disproportionately hurts protected groups – for example, Black borrowers being denied loans at much higher rates. The new rule removes that protection.
• Narrows what counts as illegally discouraging people from applying for credit. For decades, the CFPB — and the Federal Reserve before it — recognized that lenders could discriminate before someone even applies — for example, by only advertising in certain neighborhoods, avoiding minority communities, or using messaging that signals certain groups are unwelcome. The new rule makes it much harder to challenge those practices.
• Restricts the use of Special Purpose Credit Programs meant to help underserved communities access credit. These programs help expand access to loans or mortgages for communities that historically faced discrimination. The rule would effectively block many of those programs, especially those that consider race or gender.

“This is the deliberate dismantling of 50-years of legal jurisprudence, regulatory guidance, and bipartisan consensus that lending discrimination has no place in America. The law did not change. The legal decisions did not change. Washington’s commitment did. 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. When the agency built to enforce civil rights and protect consumers walks away from the job, the rule of law remains. That is why we are in court,” said Lisa Rice, National Fair Housing Alliance President and CEO. 

“The CFPB has ignored public comments, common sense, and decades of precedent in its misguided attempt to turn anti-discrimination law on its head. The CFPB was created to protect consumers and small businesses from financial abuse and discrimination, and this final Reg B rule would do real harm, setting us back in our collective efforts to ensure that all families and small businesses have a fair chance to achieve the American Dream. The Equal Credit Opportunity Act prohibits lending discrimination and encourages the development of Special Purpose Credit Programs to address the effects of past discrimination. These programs help ensure that underserved borrowers and communities have equitable access to credit while also allowing lenders to reach new markets and customers. The CFPB needs to follow the law and return to its core mission of protecting consumers and small businesses,” said Paulina Gonzalez-Brito, CEO of Rise Economy.

“This rule undermines one of the nation’s core civil rights protections in lending and will lead to more discrimination in access to credit,” said Skye Perryman, President and CEO of Democracy Forward. “At a time when communities across the country continue to face barriers to homeownership, small business lending, and economic opportunity, the CFPB should be strengthening protections against discrimination, not dismantling them. At Democracy Forward, we are honored to represent a coalition of fair housing and lender advocates in holding the CFPB accountable for abandoning its mission to protect consumers.”

“The CFPB is upending decades of consistent regulatory implementation of ECOA by dismantling some of the statute’s fundamental protections,” said Allison Zieve, director of Public Citizen Litigation Group. “The court should reject the CFPB’s arbitrary and unsupported rule, which is inconsistent with the plain text of ECOA.”

The plaintiffs argue the CFPB ignored decades of law, evidence, and its own research showing discrimination in lending is still a critical problem. They’re asking the court to block the unlawful rule for being poorly justified and for making discrimination easier. 

The case is National Fair Housing Alliance et al. v. CFPB, et al. The legal team at Democracy Forward includes Steven Bressler, Hanna Hickman, and Robin Thurston.

Read the complaint here.