The Impact of the ECOA Proposal
Following the release of the proposal, Nikitra Bailey, the Executive Vice President of the National Fair Housing Alliance (NFHA), testified before Congress to express her opposition to the proposed changes. Bailey has now shared a video on YouTube outlining her concerns, emphasizing the importance of the Equal Credit Opportunity Act (ECOA) in preventing discrimination based on factors such as race, gender, and age. She highlights how the ECOA has empowered individuals, especially women, to access fair loans without discriminatory barriers.
Industry veteran Faith Schwartz, CEO of Housing Finance Strategies, shared Bailey’s video on LinkedIn, urging mortgage leaders to provide feedback to the Consumer Financial Protection Bureau (CFPB) before the comment period deadline on Dec. 15. The response on LinkedIn indicates that many in the industry were unaware of the proposal’s implications and expressed shock at the potential changes.
Details of the Proposal
The proposal aims to remove the CFPB’s recognition of disparate impact claims and redefine what constitutes discouraging applicants, limiting lenders’ liability for actions that may deter individuals from seeking credit. It also proposes revisions to the standards for Special Purpose Credit Programs (SPCPs) to facilitate targeted lending to underserved groups.
While the CFPB states that the changes aim to clarify lenders’ obligations and enhance compliance, critics, including fair lending advocates, warn that the proposal could restrict access to credit for marginalized communities. NFHA released a public statement vehemently opposing the changes, with President and CEO Lisa Rice denouncing the proposal as detrimental to fair lending practices and economic justice.
Rice argues that eliminating the “effects test” under the ECOA would impede efforts to address systemic bias in lending and enable discriminatory practices. The proposal, if implemented, could undermine civil rights enforcement and jeopardize economic progress.
A Directive from the Trump Administration
The proposal aligns with an April 2025 directive from the Trump Administration, instructing federal agencies to refrain from using disparate-impact liability in enforcing civil rights laws. The directive aims to promote merit-based decision-making in business practices without the fear of disparate impact lawsuits hindering fair employment practices.
The CFPB is soliciting public feedback on the proposal until Dec. 15, inviting stakeholders to weigh in on the potential implications of the proposed changes.