The National Fair Housing Alliance (NFHA) has sued the Consumer Financial Protection Bureau (CFPB) to block a new rule that changed the agency’s enforcement policies relating to the Equal Credit Opportunity Act (ECOA) of 1974.
The ECOA was designed to prohibit disparate impact discrimination by lenders who create policies that inadvertently prevented protected demographics from accessing credit and loans. Beginning July 21, the CFPB said it would enact a new rule that revises the prohibition on discouragement cases where the lender either knows or should be aware that its statements could discourage a credit applicant. It also clarifies that marketing statements directed at one group should not be considered as discouraging other groups who were not targeted in the marketing endeavor.
Furthermore, the CFPB will now prohibit for-profit lenders from using race, sex or national origin as criteria for credit and loan qualifications while redefining the common characteristics for determining eligibility.
The lawsuit seeks to vacate the rule as “arbitrary, capricious, contrary to law, in excess of statutory authority, and issued outside the procedures Congress requires.”
The lawsuit was filed in the US District Court for the District of Columbia and names the CFPB and Acting Director Russell Vought as defendants. The complaint also challenges Vought’s lawful authority to serve in his role – Vought is also director of the Office of Management and Budget, and the CFPB has not had a full-time director since the Trump administration began its second term.
“This is the deliberate dismantling of 50-years of legal jurisprudence, regulatory guidance, and bipartisan consensus that lending discrimination has no place in America,” said Lisa Rice, National Fair Housing Alliance president and CEO. “The statute 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.”
NFHA is joined by Rise Economy, BLDS LLC and SolasAI as co-plaintiffs.
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