Fair housing groups file lawsuit arguing a federal rule change removes protections

Fair housing organizations filed a lawsuit Wednesday over a federal rule change that they say would reverse decades of lending protections and open the door to discrimination against Black people, Latinos and other minorities.

The federal lawsuit, filed in Washington, D.C., takes aim at a change made earlier this year by the Consumer Financial Protection Bureau to the Equal Credit Opportunity Act, which bars lenders from discriminating against credit applicants. Among the changes being challenged is that lenders will no longer have to consider “disparate impact” — policies that appear neutral but tend to cause disproportionate harm to certain groups.

Plaintiffs also argue the rule would make it easier for lenders to market loans to predominantly white neighborhoods, forcing minority communities to rely on risky, high-cost lenders that offer predatory loans with exorbitant interest rates.

“This is the deliberate dismantling of 50 years of legal jurisprudence, regulatory guidance, and bipartisan consensus that lending discrimination has no place in America,” Lisa Rice, the CEO and president of the National Fair Housing Alliance, one of the plaintiffs that filed the lawsuit, said in a statement.

“This reversal by the CFPB is a continuation of this Administration’s efforts to gut fair housing and lending protections,” she said. “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.”

Paulina Gonzalez-Brito, the CEO of another plaintiff, Rise Economy, a California nonprofit that advocates for economic justice, accused the CFPB of ignoring “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,” Gonzalez-Brito said.

The CFPB did not respond to a request for comment.

Plaintiffs argue that the rule change is part of a broader campaign by the Trump administration to dismantle regulations related to fair housing and lending protections.

The administration, the National Fair Housing Alliance said, has proposed eliminating the budget for the Fair Housing Initiatives Program, which funds nonprofits to ensure access to housing for seniors, disabled veterans, families with children and other groups. It also has cut staffing in half at the Department of Housing and Urban Development's Office of Fair Housing and Equal Opportunity.

Several high-profile settlements in recent years indicate housing discrimination remains a significant problem.

In 2023, the Justice Department accused Los Angeles-based City National Bank of discrimination by refusing to underwrite mortgages in predominately Black and Latino communities, requiring the bank to pay more than $31 million in the largest redlining settlement in department history. In 2016. the Justice Department and the CFPB fined Mississippi-based BancorpSouth $10.6 million, alleging the bank deliberately discriminated against minorities in its lending practices.

Plaintiffs are asking court to vacate the rule, which they contend is arbitrary and capricious, in excess of statutory authority, and issued outside the procedures required by Congress.

“The Final Rule does not reflect reasoned decision-making or an expert, good-faith effort to implement our nation’s foundational credit antidiscrimination statute,” plaintiffs wrote. “Quite the opposite: The Final Rule is a drastic turn, without justification, from the CFPB’s (and its Federal Reserve Board predecessor’s) longstanding interpretation and enforcement of key ECOA provisions.”