On April 22, the Consumer Financial Protection Bureau (CFPB) published a final rule (Rule) amending Regulation B that materially narrows the scope of fair lending liability under the Equal Credit Opportunity Act (ECOA). The Rule makes three primary changes: (1) establishing that disparate-impact liability, referred to as the "effects test," is not cognizable under ECOA; (2) limiting the scope of prohibited "discouragement" under Regulation B; and (3) prohibiting or restricting the ability of special purpose credit programs (SPCP) to target customers on the basis of specific characteristics, such as race, sex, or religion. The CFPB’s Rule largely implements the proposed rule issued last November. To read more about the proposed rule, read Steptoe’s client alert here.
Disparate-Impact Liability
Currently, Regulation B explicitly states that the legislative history of ECOA indicates that Congress intended disparate-impact liability, which it refers to as the "effects test," to apply to a creditor’s determination of creditworthiness.1 The official CFPB commentary further defines disparate-impact theory, stating that an act may be prohibited under ECOA and Regulation B "because it has a disproportionately negative impact on a prohibited basis, even though the creditor has no intent to discriminate and the practice appears neutral on its face, unless the creditor practice meets a legitimate business need that cannot reasonably be achieved as well by means that are less disparate in their impact."2
In its Rule, the CFPB "determined that, under the best reading of the statute, disparate-impact claims are not cognizable under ECOA."3 Accordingly, the final rule removes contrary language in Regulation B and its commentary and affirmatively provides that ECOA does not recognize disparate-impact liability.4
Discouragement
Currently, Regulation B prohibits a creditor from making "any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application."5 However, the official CFPB commentary clarifies that this provision "covers acts or practices directed at prospective applicants."6 Further, the commentary provides that "[a] creditor may affirmatively solicit or encourage members of traditionally disadvantaged groups to apply for credit, especially groups that might not normally seek credit from that creditor."7
In its Rule, the CFPB "preliminarily determined . . . that . . . the [discouragement] provision has been interpreted to reach conduct not necessary to prevent circumvention or evasion of ECOA’s purposes."8 For example, it took issue with commentary referring to "acts or practices" where Regulation B actually discusses "oral or written statements."9
As such, the Rule would add language "clarifying that ‘oral or written statement’ means spoken or written words, or visual images such as symbols, photographs, or videos," while replacing references to "acts or practices" in the commentary with references to statements instead.10 Further, the Rule would revise regulation and commentary language to "clarify that affirmatively encouraging one group of consumers to apply for credit does not discourage others who were not the intended recipients of the message" and delete the comment allowing creditors to affirmatively solicit or encourage members of traditionally disadvantaged groups.11 These changes materially narrow the scope of conduct that may constitute "discouragement" under Regulation B.
Finally, the Rule adopts a standard limiting prohibited discouragement to oral or written statements directed at applicants or prospective applicants that the creditor knows or should know would cause a reasonable person to believe it would deny credit or offer less favorable terms based on a prohibited characteristic.
The CFPB declined to further define this standard, emphasizing that application will be "situationally specific" and resolved by a fact finder. As a result, establishing discouragement now requires proof of scienter in addition to the reasonable-person standard, introducing a meaningful evidentiary hurdle for plaintiffs.
SPCP Requirements
An SPCP is a program authorized under ECOA that is permitted to request and consider information about a shared characteristic (such as race, national origin, or sex) in credit transactions either "for the benefit of an economically disadvantaged class of persons" or "to meet special social needs."12
The Rule expressly prohibits SPCPs from considering "race, color, national origin, and sex" as eligibility criteria.13 The CFPB reasoned that "an SPCP that bases eligibility on protected class membership inherently discriminates against ineligible individuals," and that such discrimination is inconsistent with ECOA’s purposes.14 The Rule also imposes conditions on the use of religion, marital status, age, or income derived from a public assistance program as eligibility criteria.15
Takeaways
This Rule, as well as the proposed rule preceding it, stem from the White House’s executive order issued last year targeting disparate-impact liability.16 Last year the Office of the Comptroller of the Currency removed references to disparate-impact liability in the "Fair Lending" booklet of the Comptroller’s Handbook and other issuances.17 And the Department of Justice rescinded certain regulations implementing Title VI of the Civil Rights Act of 1964 to eliminate disparate-impact liability.18 Accordingly, the Rule is best understood not as an isolated action, but as part of a coordinated federal effort to eliminate disparate-impact liability from federal regulatory frameworks, with additional actions likely to follow.
Although the Rule states disparate-impact theory is not cognizable under ECOA, the theory remains under numerous state laws. States have taken independent steps to implement disparate-impact liability under state law and regulation. For example, the New Jersey Attorney General’s Office Division on Civil Rights adopted rules on disparate impact discrimination under New Jersey law last year.19 And last year, after the White House published its executive order, the Massachusetts Attorney General announced a settlement with a student lender for fair lending violations stemming in part from "the use of artificial intelligence (AI) models that could lead to disparate harm to Black, Hispanic, and non-citizen applicants and borrowers."20 As a result, institutions should view the CFPB’s Rule as shifting the locus of fair lending risk—from federal supervision to state enforcement and private litigation—rather than eliminating that risk.
As to discouragement claims, the Rule materially narrows the theory by adding a scienter requirement and adopting a reasonable-person standard tied to whether a statement would be understood to signal likely denial or less favorable terms on a prohibited basis. The Rule also limits the doctrine to "oral or written statements," eliminating broader "acts or practices" theories and materially reducing risk from general marketing asymmetries or outreach. However, the Rule does not create a safe harbor. Statements—including UI/UX design, marketing copy, disclosures, scripts, or AI-generated outputs—remain actionable where they could reasonably be interpreted as signaling likely denial or less favorable terms on a prohibited basis. The practical effect is a shift in compliance focus from program-level conduct to message-level scrutiny of customer-facing communications. AI-driven customer interactions (e.g., chatbots, prequalification tools, and dynamic marketing) are likely to become a primary vector for fact-intensive discouragement claims.
With respect to SPCPs, the Rule represents a significant departure from prior regulatory guidance, which had encouraged targeted SPCPs. SPCPs must now be structured around facially neutral eligibility criteria tied to economic disadvantage or other permissible proxies—not protected-class membership itself. Programs explicitly targeting racial or gender groups therefore face substantial invalidation risk under federal law. Institutions must reassess whether existing or planned programs can be recast using geographic, income-based, or other economically grounded criteria, or alternatively supported under alternative legal frameworks (including, where applicable, state law). Institutions that have not already conducted a comprehensive inventory of their SPCPs should do so promptly, with a view toward re-underwriting eligibility criteria and documenting a defensible, non-discriminatory rationale.
While the Rule materially narrows federal fair lending exposure, it increases structural complexity—particularly for customer-facing communications and SPCP design—and shifts enforcement risk to states and toward more fact-intensive private litigation.
Footnotes
1. See 12 CFR 1002.6(a).
2. 12 CFR comment 6(a)-2.
3. Equality Credit Opportunity Act (Regulation B), 91 Fed. Reg. 21620, 21629 (Apr. 22, 2026).
4. See id.
5. 12 CFR 1002.4(b).
6. 12 CFR comment 4(b)-1 (emphasis added).
7. 12 CFR comment 4(b)-2.
8. 91 Fed. Reg. 21638.
9. See id.
10. 91 Fed. Reg. 21645.
11. 91 Fed. Reg. 21646, 21648.
12. 12 CFR 1002.8(a); see also 12 U.S.C. § 1691(c).
13. 91 Fed. Reg. 21652.
14. 91 Fed. Reg. 21652-53.
15. 99 Fed. Reg. 21649.
16. Exec. Order 14281, 90 Fed. Reg. 17537(Apr. 23, 2025).
17. Off. of the Comptroller of the Currency, Fair Lending: Removing References to Disparate Impact (July 14, 2025), https://www.occ.gov/news-issuances/bulletins/2025/bulletin-2025-16.html.
18. Rescinding Portions of Department of Justice Title VI Regulations, 90 Fed. Reg. 57141 (Dec. 10, 2025).
19. N.J. Off. of the Att’y Gen., AG Platkin Announces Division on Civil Rights Adopts Landmark Rules on Disparate Impact Discrimination Under New Jersey Law (Dec. 17, 2025), https://www.njoag.gov/ag-platkin-announces-division-on-civil-rights-adopts-landmark-rules-on-disparate-impact-discrimination-under-new-jersey-law/.
20. Off. of the Att’y Gen., AG Campbell Announces $2.5 Million Settlement With Student Loan Lender For Unlawful Practices Through AI Use, Other Consumer Protection Violations (July 10, 2025), https://www.mass.gov/news/ag-campbell-announces-25-million-settlement-with-student-loan-lender-for-unlawful-practices-through-ai-use-other-consumer-protection-violations.
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