The Consumer Financial Protection Bureau has effectively been shut down. Without a cop on the beat, can lenders abandon fair lending compliance? Nope. Here’s why:
- Fair Lending Laws Remain in Force: Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA) and other laws that protect consumers against discrimination are NOT dependent on the CFPB for their validity—they are statutes passed by Congress and remain enforceable regardless of the CFPB’s operational status.
- Other Regulators Still Enforce Fair Lending Laws – The OCC, FDIC, Federal Reserve, DOJ, HUD, FTC and state attorneys general all have authority to enforce fair lending laws. State regulators, in particular, are increasingly active, with states like California and New York pursuing aggressive oversight of lending practices.
- Private Litigation Risk – Private plaintiffs can bring lawsuits under ECOA, the FHA, and other anti-discrimination laws. Class action lawsuits and state-level enforcement actions are likely to increase if there’s a perception that federal oversight is weakening.
- The Pendulum Always Swings Back and Liability Lingers – If fair lending enforcement softens under the current administration, that doesn’t mean it won’t return with a vengeance under a future one. Financial institutions that neglect compliance now could find themselves unprepared (or worse, exposed) when enforcement ramps up again. Discrimination claims under the ECOA can be brought up to five years after the alleged violation—and if the government files suit, that period extends to six years. State laws may have even longer statutes of limitations. That means decisions made today could still be litigated well into the next administration, long after the political winds shift.
- Reputational and Business Risk – Even if regulators look the other way, consumers, investors, and the media won’t. Allegations of discrimination – even if proven false – risk public backlash, loss of trust, and damage to brand reputation. (If you doubt this, ask Goldman Sachs or Navy Federal).
- Fair Lending is More Than Just Compliance – Many lenders are realizing that bias testing, fairness optimization and alternative underwriting methods can actually expand market reach and improve risk management. Ensuring fair lending practices isn’t just about avoiding lawsuits—it’s also about making better lending decisions and reaching more qualified borrowers.
Advice for Lenders:
- Continue monitoring fair lending metrics.
- Stay informed about state-level enforcement trends.
- Plan for the long term: Assume enforcement will rebound.
- Document compliance efforts now to defend against future claims.
- Leverage fairness as a strategy: Use inclusive underwriting to tap new markets and build customer loyalty.
The CFPB being sidelined might change the immediate enforcement landscape, but fair lending obligations haven’t gone away—and ignoring them would be a high-risk, short-sighted strategy.
