As previewed in last month’s newsletter, legal challenges to the CFPB’s April fair lending rule eliminating disparate-impact liability under ECOA arrived quickly. The National Fair Housing Alliance, Rise Economy, and two fair lending compliance firms filed suit in D.C. federal court on May 27, challenging the rule as “arbitrary and capricious” and seeking vacatur.
The complaint raises substantive, procedural, and constitutional challenges. On the merits, plaintiffs argue the CFPB’s reversal of 50 years of Regulation B disparate-impact authority is unsupported and conflicts with Supreme Court precedent recognizing effects-based liability under sister statute the Fair Housing Act. Procedurally, they allege the CFPB allowed only a rushed 30-day comment period, failed to conduct required small-business review, and ignored the overwhelming weight of over 64,000 comment letters. The complaint also challenges the authority of Acting Director Russell Vought himself, arguing his appointment is unlawful because ECOA only allows the president to appoint a temporary director when there is a vacancy due to death, resignation, or incapacitation, not a firing.
The Vought authority argument, if successful, could void not only the fair lending rule but other CFPB rulemaking and enforcement actions taken under his direction. California Attorney General Rob Bonta and other state AGs continue to signal interest in the case. Multiple parties indicated in April that an injunction was a realistic near-term outcome.
What you should do: Do not adjust your fair lending compliance program based on this rule — at least not yet. An injunction could restore prior Regulation B standards at any time, and state enforcement and private litigation remain live regardless of the federal rule’s status. Consistent documentation of your lending program’s fair lending controls is the most durable protection in either regulatory environment.
NFHA press release: https://nationalfairhousing.org/nfha-sues-cfpb-ecoa-rule-change/