CFPB Issues Notice of Proposed Rulemaking to Amend ECOA Fair Lending Regulations

The CFPB recently issued a proposed rule and request for public comment regarding amendments to fair lending provisions in Regulation B, which implements the Equal Credit Opportunity Act (ECOA).

The proposed amendments make three main changes.  First, ECOA would be interpreted by the CFPB as not authorizing discrimination claims based on disparate impact liability or use of a disparate impact-like “effects test.”  The proposal is consistent with an Executive Order from earlier this year requiring agencies to eliminate use or application of disparate impact liability to the fullest extent possible.

Second, the new regulations clarify a provision which prohibits a creditor from making any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage a reasonable person from making or pursuing an application based on a protected characteristic. Among other things:

• “Oral or written statements” would be defined to mean spoken or written words, or visual images such as symbols, photographs, or videos, including any visual images used in advertising or marketing campaigns.  Oral or written statements would not be deemed to include things like business decisions on where to locate branch offices, where to advertise, or where to engage with the community through open houses or similar events.

• The concept of what constitutes a “statement to an applicant or prospective applicant” would be interpreted such that directing encouraging statements to one group of consumers (e.g., advertising to people who live in one geographic area) would not be deemed to discourage consumers who were not the intended recipients of the statements (e.g., who live in a different geographic area).

• A statement would be considered discouraging if it would cause a reasonable person to believe that the creditor would deny, or would grant on less favorable terms, a credit application by the applicant or prospective applicant because of a protected characteristic.

Finally, the revised regulations would place new prohibitions and restrictions on for-profit entities which seek to offer special purpose credit programs (SPCPs).  SPCPs refer to certain types of loan programs which meet special social needs for people who might not be able to obtain credit (or obtain credit on favorable terms) under the lender’s regular credit standards.  Under the CFPB’s proposed provisions, a for-profit would be prohibited from using race, color, national origin, or sex as eligibility criteria for an SPCP, and would be restricted in using religion, marital status, age, or income derived from a public assistance program as eligibility criteria.  Also, among other things, the proposed rule adds new requirements to the required written plan any for-profit must have in support of its SPCP.

Comments on the proposed regulations are due December 15, 2025.