The CFPB is being sued by fair housing organizations over a rule change that the groups said would reverse decades of lending protections and open the door to discrimination against Black people, Latinos, and other minorities.
The organizations filed the federal lawsuit on Wednesday in Washington, D.C..
The lawsuit targets a change made earlier this year by the Consumer Financial Protection Bureau to the Equal Credit Opportunity Act that prohibits lenders from discriminating against credit applicants. Among the changes being challenged in the lawsuit is that lenders no longer will have to consider “disparate impact” — policies that appear neutral but tend to cause disproportionate harm to certain groups.
The plaintiffs argue that 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, The Boston Herald reported.
“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.
Decades of Precedents
“This reversal by the CFPB is a continuation of this Administration’s efforts to gut fair housing and lending protections,” Rice 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.”
The Herald reported that Paulina Gonzalez-Brito, CEO of another plaintiff, Rise Economy, a California nonprofit that advocates for economic justice, accused the agency 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 has not commented.
In the lawsuit, the plaintiffs argue that the rule change is part of a broader campaign by the Trump administration to eliminate regulations related to fair housing and lending protections.
Administration Cuts
According to the National Fair Housing Alliance, the Trump administration has proposed eliminating the budget for the Fair Housing Initiatives Program that funds nonprofits to ensure access to housing for seniors, disabled veterans, families with children and other groups.
The administration has also cut staffing in half at the Department of Housing and Urban Development’s Office of Fair Housing and Equal Opportunity.
