CFPB tells advisory board it will end disparate-impact enforcement, prioritize debanking reviews and propose rule changes to Reg B and Section 1071

At a Consumer Advisory Board meeting, Consumer Financial Protection Bureau officials outlined a major reorientation of the agency's fair-lending work under current leadership, saying the bureau will focus on direct evidence of intentional discrimination, identify and remediate debanking related to religion or political viewpoint, and propose regulatory changes to implement those priorities.

"Consistent with executive order 14281 concerning disparate impact, the CFPB will no longer use disparate-impact in its supervision or enforcement of fair-lending laws," a presenter said, explaining that elements of open exams and investigations that relied on disparate-impact liability have been closed and some administrative orders terminated. The bureau said it issued a no-action letter in a Northern District of Illinois matter and coordinated with the Department of Justice to terminate orders against certain institutions.

CFPB staff told the board the agency is reviewing supervisory guidance, complaint records and enforcement data to identify potential debanking and will work with other regulators, including the Justice Department's debanking task force, to pursue remedies. "Financial institutions should consider reviewing current and past policies and practices including underwriting and eligibility criteria, account processes, and complaints to assess debanking risk," staff said.

Officials also detailed two high-priority rulemaking items. The bureau extended compliance deadlines for the Section 1071 small-business lending rule by about one year and proposed amendments to the rule that would alter the definition of covered financial institutions, raise origination thresholds, and change demographic and application data collection. The proposed changes to Regulation B (implementing the Equal Credit Opportunity Act) would, among other items, specify that ECOA does not authorize disparate-impact claims, revise discouragement standards, and impose constraints on special-purpose credit programs offered by for-profit organizations. The bureau said both proposals are open for public comment until Dec. 15.

CFPB also said it rescinded more than 60 nonbinding guidance documents in a May 15 Federal Register notice and is reviewing other materials so that enforcement is based on statutory authority rather than stray or nonbinding policy statements.

Officials emphasized the bureau will continue to enforce intentional discrimination claims and seek maximum penalties when there is direct evidence and identifiable victims. They framed the changes as aligning the bureau with recent executive orders and said the agency will prioritize redress for concrete consumer harms.

Consumer advocates on the CAB contested the bureau's direction, warning that removing disparate-impact liability and limiting special-purpose credit programs could erode tools used to remedy historical and structural discrimination. CAB members urged robust data collection and a clear dispute process for wrongful account closures as CFPB moves forward with rulemaking.

CFPB staff encouraged interested stakeholders to submit comments on the proposed rules by the Dec. 15 deadlines and provided links to www.consumerfinance.gov and reginfo.gov for more information.