By Melissa Blaser, Partner, Wipfli
What does this mean for credit unions?
Federal enforcement of fair lending laws has changed under the Trump administration. After an April 2025 executive order established the White House’s priorities in this area, the Consumer Financial Protection Bureau (CFPB) and the Department of Housing and Urban Development (HUD) moved quickly to roll back disparate impact enforcement and shift other related policies.
However, credit union leaders should not view these regulatory actions in a vacuum. As you weigh how to respond, remember that future administrations will likely revert back toward traditional fair lending enforcement norms. In addition to federal laws, state laws may also impact your fair lending program and should also be considered.
Keep reading to learn more about what’s happened.
How Has the Trump Administration Changed Fair Lending Enforcement?
Under the Trump administration, federal regulators have moved to roll back historical fair lending enforcement practices. These actions have so far included major rule changes and failed litigation attempting to reverse legal precedents around redlining.
Key actions to be aware of:
In a 2025 executive order, the White House targeted disparate impact claims
In April 2025, the president issued an executive order titled “Restoring Equality of Opportunity and Meritocracy”. This order stated that federal agencies deprioritize enforcement of disparate impact liability, move to eliminate rules and regulations involving disparate impact liability and end proceedings that rely on the theory of disparate impact liability. Put plainly: This order essentially told federal regulators to stop enforcing disparate impact claims.
CFPB has issued a final rule to eliminate the “effects test”
After the president’s executive order was released, CFPB leaders proposed a rule to remove disparate impact from its regulations. This rule, which has recently been finalized and is scheduled to take effect on July 21, 2026, amends Regulation B, the implementing regulation for the Equal Credit Opportunity Act (ECOA). The new rule changes language around discouragement and, crucially, eliminates the effects test.
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The new rule removes “effects test” language and also contains an explicit statement that the Act does not recognize the “effects test”, eliminating disparate impact from Regulation B.
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The CFPB has argued that disparate impact does not need to be included within Regulation B because it was not explicitly covered by the ECOA.
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It should be noted that there is already litigation against this final rule, which may affect when or if it goes into effect.
In early 2026, HUD proposed eliminating its own disparate impact standard rule
On February 13, 2026, HUD announced plans to remove its own disparate impact standard rule, with department leaders arguing that disparate impact should be a matter for the courts. The move was not entirely unexpected, as HUD has typically issued new rules around disparate impact whenever the opposing party regains the White House, including four notable rule changes in recent decades.
CFPB also withdrew from a joint ECOA rule affecting noncitizens
In 2023, the CFPB and DOJ issued a joint statement clarifying that under Regulation B, creditors should not maintain a blanket policy on lending to noncitizens but rather weigh credit decisions on an individual basis. However, on February 12, 2026, the CFPB withdrew from that statement, arguing that the ECOA does not put any limits on immigration or citizenship considerations when making lending decisions.
After settling a redlining case in 2024, the CFPB made a failed attempt to reverse its own settlement
In 2024, the CFPB settled a redlining case with Townstone Mortgage. However, in 2025, the CFPB’s new leadership essentially switched sides, asking a judge to reverse the agency’s own settlement agreement. CFPB lawyers argued that statistical analysis alone was not sufficient to justify enforcement (despite the CFPB itself finding evidence of overt discrimination).
This represented a major shift in policy:
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Historically, statistical analysis has been the first step in a fair lending analysis to determine if disparities in a creditor’s lending between prohibited basis groups exist. This step is then normally followed by testing of peer data to discover if disparities also exist in peer data sourced from other lenders in the same area.
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If peer lenders have been successful in issuing loans to prohibited basis groups, regulators traditionally then conduct additional testing to uncover the root cause of the creditor’s disparities and determine whether some form of discrimination has occurred.
The courts did not approve the CFPB’s attempt to overturn the Townstone Mortgage settlement. However, the agency’s position towards redlining enforcement has clearly changed – departing significantly from historical norms.
How Should Your Credit Union Adapt to This New Fair Lending Enforcement Environment?
Your compliance and lending teams should carefully consider what this shift in fair lending enforcement could mean for your credit union. For example:
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Should you remove disparate impact language from your policies, procedures and risk assessments?
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Should you reconsider your lending and underwriting policies?
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Is it still necessary to do a statistical analysis of your lending data?
Weigh both current and future regulatory expectations
As you assess your own policies and procedures in light of the federal enforcement shift, be aware that the current administration’s policy will almost certainly change the next time the White House switches parties. Future regulators will likely return to more traditional disparate impact enforcement norms.
Consider that state fair lending laws and court precedents create risks
While Regulation B no longer recognizes disparate impact, many states have their own fair lending laws that do. Federal courts also recognize disparate impact (as HUD itself acknowledged in its disparate impact announcement). So while federal regulators may no longer be in play here, state oversight and litigation remain meaningful risks.
Take a risk management-based approach to disparate impact
As with most things, your credit union will likely benefit from going beyond simple compliance to a more active risk management-based approach. Before you make any changes to your fair lending and underwriting policies, research state regulations and evaluate the risk of litigation and weigh the likelihood of future federal policy reversals.
Nothing lasts forever, and the disparate impact enforcement rollback will almost certainly pass as well.
Connect with Wipfli to learn more.
