Civil Rights and Community Development Groups Sue Trump Administration Over Rollback of Fair Lending Protections

Today, the National Urban League and the Massachusetts Association of Community Development Corporations filed a lawsuit challenging the administration's efforts to undermine equal access to credit. The suit challenges the Consumer Financial Protection Bureau (CFPB)'s elimination or narrowing of three critical, longstanding protections of Regulation B, which implements the Equal Credit Opportunity Act (ECOA). ECOA and Regulation B have long protected people of color, women, and other groups from discrimination and have been important tools for driving homeownership and small business growth in the United States. The lawsuit seeks to stop the administration's efforts to abandon these protections.

The plaintiffs are represented by the Legal Defense Fund and the National Consumer Law Center. The lawsuit was filed in the United States District Court for the District of Massachusetts and asks the court to vacate three changes to Regulation B.

"This administration is attempting to upend anti-discrimination law," said John Fowler, Senior Counsel and Manager of Professional Development at the Legal Defense Fund. "This regulation has long protected Black communities and other communities of color from unlawful discrimination and promoted programs that help reduce the racial wealth gap. But equal opportunity is impossible when the government uses its power to impose new barriers to credit. We all deserve better."

"This administration has waged a war on pathways to social and economic opportunity for communities of color and other groups," said Marc H. Morial, President and CEO of the National Urban League."Regulation B historically has served as a tool for growth and equal access to credit. The administration is wrong to try to set us back 50 years, and we will fight to stop these changes."

"Fair access to credit allows families to buy homes, entrepreneurs to start businesses, and communities to build wealth," said Emily Haber, President and CEO of the Massachusetts Association of Community Development Corporations. "Our members are mission-driven organizations committed to breaking down barriers to economic opportunity, particularly in communities of color and historically underserved neighborhoods. At a time when significant racial disparities in access to capital and wealth persist, weakening Regulation B's protections risks creating additional obstacles for the families, small businesses, and communities our members serve."

"Since the 1970s, Regulation B and ECOA have effectively reduced credit discrimination, but it still persists, sometimes in new and disguised ways in the age of AI-enhanced financial products," said Odette Williamson, Director of Racial Justice Advocacy at the National Consumer Law Center. "The CFPB is turning its back on economic equality by dismantling this powerful tool that is still necessary to reduce barriers to wealth building for Black communities, communities of color, women, and other protected groups."

The protections enshrined in ECOA and Regulation B remain as important today as they were in the 1970s when they first became law. As of 2023, applicants of color continue to be denied home mortgages at higher rates than white applicants, regardless of credit score, income, size of the loan, and other factors. And, as of 2022, the Black-white homeownership gap stands at 30 percentage points-wider than it was in 1960. Today, some lenders target women with predatory loan products, such as subprime loans. These predatory policies disproportionately harm women of color, with Black women 256% more likely than white men to receive subprime loans. Despite this ongoing discrimination, the CFPB opted to roll back protections that mitigate some of this harm.

First, the changes to Regulation B narrow a prohibition on discouraging people from applying for credit. These protections have, for example, banned lenders from choosing to avoid placing bank branches in or marketing to Black communities.

Second, the changes to Regulation B prohibit lenders from using certain types of special purpose credit programs that address documented racial and other disparities, and have been an important tool for expanding access to credit and help to overcome the effects of historical and modern-day discrimination in lending.

Third, the changes reverse a longstanding ban on lending policies and practices that have discriminatory effects and also have no legitimate business justification-which is called disparate-impact liability.

Discrimination in the country's credit markets is also costly. One study estimates that financial institutions would see an increase of $2 billion in annual incremental revenue if they offered Black customers access to financial products at the same rates as white customers. These changes are part of a broader attack by the administration on efforts to reduce unjustified racial disparities in lending and other aspects of economic life.

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