Fair housing and fair lending organizations filed suit on May 27 against the Consumer Financial Protection Bureau and Acting Director Russell Vought, seeking to block a controversial rule that would reshape how fair lending is enforced under the Equal Credit Opportunity Act.
The plaintiffs, including the National Fair Housing Alliance, Rise Economy, BLDS LLC, and SolasAI, filed the complaint in the U.S. District Court for the District of Columbia.
The filing takes aim at the CFPB's final rule, published April 22, amending Subpart A of Regulation B under the ECOA. According to the complaint, it eliminates disparate impact as a theory of liability, narrows protections against discouraging prospective applicants, and establishes new restrictions on special purpose credit programs, or SPCPs.
Congress enacted ECOA 50 years ago to combat credit discrimination against groups, including women, Black Americans, and other underserved communities, that had long been denied access to financial independence and opportunity.
The CFPB previously said it took action after receiving about 64,000 comments on the proposal from industry groups, consumer advocates, state attorneys general, members of Congress, and others.
But the plaintiffs allege that several parts of the CFPB rule conflict with ECOA and exceed the agency’s legal authority. They also argue that Vought is not lawfully serving as CFPB director, making the rule invalid because it was issued under his purported authority.
“To start, the CFPB failed to identify any concrete problem with the current regulatory regime. The CFPB relied on conclusory assertions and speculation, not evidence, to justify its dramatic departure from decades of settled ECOA implementation,” the complaint reads. “The CFPB’s approach is at odds with the available evidence: As commenters to the proposed rule made clear, public data and research — much of it from the CFPB itself — show that the Final Rule is ill-conceived and likely to harm covered entities and consumers alike.”
Disparate Impact Protections
Plaintiffs argue the CFPB misunderstands how disparate impact protections work. They claim these protections are not about helping one group at another group’s expense, but about removing unnecessary lending barriers that unfairly block protected groups while still allowing lenders to meet legitimate business needs. When those barriers are removed, the complaint argues, more qualified borrowers can access credit and lenders can reach more customers.
Plaintiffs also claim the CFPB ignored evidence that disparate impact compliance has helped consumers, businesses, and lenders. They argue the rule may discourage lenders from voluntarily finding and fixing policies that have discriminatory effects because lenders may fear the CFPB will treat those efforts as unlawful. The complaint contends the CFPB failed to explain why allowing supposedly neutral policies that discriminate in practice would advance ECOA’s goal of equal credit opportunity.
Discouragement And Redlining
The lawsuit also challenges the CFPB rule for weakening protections against discriminatory lending practices that discourage people from applying for credit. Plaintiffs argue the rule takes away the role of courts and juries in deciding whether certain statements are actually coded discriminatory messages. As a result, they claim, the rule would make it easier for lenders to steer people away from credit based on protected traits and shield practices tied to redlining, especially in communities of color.
The complaint argues the CFPB’s rule narrows “discouragement” from broad “acts or practices” to only spoken or written words or visual images. Plaintiffs allege that change would make it harder to challenge redlining, selective advertising, branch placement, and digital targeting.
The complaint also highlights “digital redlining” and “digital steering,” arguing that targeted online advertising and algorithmic marketing can exclude protected groups before they ever apply for credit.
Special Purpose Credit Programs
The lawsuit also challenges the CFPB rule for restricting Special Purpose Credit Programs, which are designed to expand credit access for communities that face persistent barriers. Plaintiffs argue these programs are proven tools for advancing equal credit opportunity, the core purpose of ECOA.
On SPCPs, the complaint argues the rule specifically bars for-profit lenders from using race, color, national origin, or sex as eligibility criteria, while leaving other SPCP provisions for nonprofits or other entities untouched without explanation.
Plaintiffs point to SPCP usage data, including that Fannie Mae and Freddie Mac purchased about 57,282 SPCP loans from 2022 to 2024.
Cost-Benefit Analysis
The housing groups are also critical of the CFPB’s cost-benefit analysis, which is required under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Plaintiffs argue that the agency relied on unsupported assumptions about the rule’s benefits while ignoring documented harms to consumers, small businesses, and covered financial institutions.
The complaint also alleges the CFPB ignored impacts on small businesses as both lenders and borrowers, as well as impacts on smaller financial institutions, credit unions, and rural consumers.
Rulemaking Process
The complaint challenges the CFPB’s rulemaking process as rushed and legally flawed. Plaintiffs argue that the CFPB skipped required small-business review steps, gave the public only 32 days to comment during the Thanksgiving holiday and while another major ECOA proposal was pending, and refused to extend the deadline.
The lawsuit further alleges that the CFPB finalized the rule without completing required analyses or responding to significant public concerns.
The complaint cites evidence that Black and Hispanic mortgage applicants continue to face higher denial rates, including CFPB-published 2024 data showing Black mortgage applicants were rejected more than twice as often as white applicants.
Alleged Harm To Plaintiffs
The organizations that brought the case, including nonprofits and two fair lending consultancies, claim the CFPB rule is already causing them real harm. Fair lending consultancies allege they have lost work as financial institutions and other creditors adjust to the rule, while nonprofit organizations allege the rule undermines their mission to help people and underserved communities access credit fairly and equally.
NFHA claim the rule undermines tools and programs such as FairLens, its redlining toolkit, SPCP toolkits, Keys Unlock Dreams, and its Inclusive Communities Program. SolasAI alleges clients have paused engagements and that it delayed a capital raise because of the rule’s impact on demand for its disparate-impact products and services.
Plaintiffs are asking the court to set aside the CFPB rule under the Administrative Procedure Act, alleging that the rule is unjustified, unlawful, procedurally flawed, and beyond the CFPB’s authority. Plaintiffs also argue that the rule is invalid because it was issued under Vought, who they claim was not authorized to lead the agency under the Federal Vacancies Reform Act because former CFPB Director Rohit Chopra was fired — not dead, resigned, or unable to serve.
