Major Proposed Changes to Regulation B: The CFPB Proposes Significant Amendments to Fair Lending Standards

The CFPB issued a proposed rule on November 13, 2025, that amends provisions related to disparate impact, discouragement of applicants, and SPCPs under ECOA and Reg B. In this blog post we summarize the proposed changes (and offer a particular warning regarding ECOA/Reg B vs FHA and state laws).

Overview

A proposed rule issued by the Consumer Financial Protection Bureau (CFPB) concerning the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B seeks to significantly amend Regulation B in three key areas: first, by determining that disparate impact (or "effects test") claims are not authorized under ECOA; second, by narrowing the prohibition on discouragement to focus on statements expressing an intent to discriminate and clarifying that targeted encouragement is not prohibited; and third, by imposing new restrictions and prohibitions on Special Purpose Credit Programs (SPCPs) offered by for-profit organizations, notably restricting the use of race, color, national origin, or sex as eligibility criteria.

Summary of Proposed Amendments to Fair Lending Standards

The Consumer Financial Protection Bureau (CFPB or Bureau) has issued a proposed rule (Docket No. CFPB-2025-0039) outlining major amendments to Regulation B, which implements the Equal Credit Opportunity Act (ECOA). These proposed changes aim to clarify the obligations imposed by the statute and facilitate compliance.

Drawing on information gathered during a 2020 Request for Information (RFI) and consistent with recent Executive Orders, the Bureau is proposing amendments across three critical areas: disparate impact, discouragement of applicants, and Special Purpose Credit Programs (SPCPs).

Here is a summary of the most significant proposed changes affecting creditors and consumers:

Disparate Impact (The "Effects Test")

The most profound statutory shift involves the concept of disparate impact liability, often referred to as the "effects test."

The Proposal: Eliminating Disparate Impact Claims

The Bureau has preliminarily determined that the ECOA statute, under the best reading of its text, does not authorize disparate-impact claims.

Previously, Regulation B relied on legislative history to support the idea that the "effects test" was applicable to credit worthiness determinations. The effects test allows plaintiffs to challenge facially neutral policies that result in a disproportionately adverse effect based on a prohibited basis (like race or sex).

The proposed rule would delete the language in Regulation B indicating that the effects test applies and add language stating that the Act does not recognize it for determining discrimination.

Rationale and Impact:

• The Bureau preliminarily determined that the text of ECOA lacks the "effects-based" language ("otherwise make unavailable" or "otherwise adversely affect") found in other anti-discrimination statutes, such as the Fair Housing Act (FHA) or Title VII.
• The Bureau notes that facially neutral practices are prohibited only "to the extent that facially neutral criteria function as proxies for protected characteristics designed or applied with the intention of advantaging or disadvantaging individuals based on protected characteristics".
• The CFPB is concerned that requiring creditors to focus on disparate impact outcomes may lead them to consider prohibited characteristics when developing policies, running contrary to ECOA’s purpose of preventing discrimination.

Discouragement

Regulation B currently prohibits creditors from making oral or written statements that would discourage a reasonable person from applying for credit on a prohibited basis. The Bureau proposes to narrow this prohibition to focus more clearly on explicit discriminatory intent.

Key Proposed Changes to Discouragement Provisions:

1. Defining Statements and Excluding Practices: The rule proposes clarifying that "oral or written statement" means spoken or written words, or visual images (such as symbols, photographs, or videos). Importantly, the Bureau preliminarily determined that business practices alone—such as decisions about where to locate branch offices or where to advertise—do not constitute prohibited discouragement under this provision.
2. Narrowed Standard for Liability: A statement is prohibited discouragement only if the creditor "knows or should know" that the statement would cause a reasonable person to believe the creditor would deny credit, or grant it on less favorable terms, because of the applicant’s prohibited basis characteristic(s). This focuses the prohibition on statements that are the proximate cause of the applicant's belief about receiving credit on discriminatory terms.
3. Encouragement is Not Discouragement: Encouraging statements directed by creditors at one group of consumers is not prohibited discouragement as to applicants or prospective applicants who were not the intended recipients. For example, statements directed at one group encouraging them to apply for credit are not prohibited discouragement.
4. Narrowing Prohibited Language: The description of prohibited discouraging statements is narrowed to refer only to those that "express" a discriminatory preference or policy of exclusion (removing "imply or suggest").

Special Purpose Credit Programs (SPCPs)

SPCPs are credit programs offered by for-profit organizations to meet special social needs. Currently, these programs may require participants to share common characteristics that would otherwise be prohibited bases (like race or sex). Citing substantial changes in the legal landscape and credit markets since ECOA’s passage, the Bureau proposes significant new prohibitions and restrictions on these programs.

Prohibitions on Use of Certain Prohibited Bases:

The Bureau proposes to prohibit an SPCP offered by a for-profit organization from using the common characteristic of race, color, national origin, or sex, or any combination thereof, as a factor in determining eligibility.

The Bureau preliminarily determined that 50 years of legal prohibitions have reshaped markets, making it unlikely that consumers are now "effectively denied credit" specifically because of their race, color, national origin, or sex in the absence of such SPCPs.

New Restrictions for All Other Otherwise Prohibited Bases (e.g., religion, age, marital status):

For SPCPs offered by for-profit organizations that use other prohibited bases as eligibility criteria, the rule proposes several new restrictions aimed at ensuring the program’s necessity:

• Evidence of Need: The written plan must now provide evidence of the need for the SPCP.
• Necessity Explanation: The written plan must explain why the targeted class would not receive such credit in the absence of the program under the organization’s standards of creditworthiness.
• Justification for Prohibited Basis Use: If the program uses an otherwise prohibited basis (e.g., age or religion), the written plan must explain why meeting the special social needs necessitates using that specific characteristic and cannot be accomplished through a program that does not use an otherwise prohibited basis.
• Participant-Specific Evidence (New Requirement): The organization must provide evidence for each participant who receives credit that, without the program, the participant would not receive such credit as a result of those specific characteristics.

Important Lender Caveat

The proposed changes relate primarily to the Equal Credit Opportunity Act (ECOA) and Regulation B; it is noted that creditors are still liable under other anti-discrimination statutes, such as the Fair Housing Act (FHA) and similar state laws.

• FHA and Disparate Impact: The proposed rule focuses on amending Regulation B/ECOA to state that the ECOA statute itself does not authorize disparate impact claims. In contrast, the sources explicitly mention that the Supreme Court has held that disparate-impact claims are cognizable under the Fair Housing Act (FHA). The Supreme Court concluded that the FHA’s language, such as "otherwise make unavailable" in section 804(a), supports recognizing disparate-impact claims.
  • The CFPB believes that removing disparate impact liability under ECOA would not completely eliminate incentives for covered persons to implement fair policies, because "covered persons are still liable under other antidiscrimination statutes such as the FHA and state laws similar to ECOA".
• FHA and Discouragement: Similarly, when discussing the proposed revisions to limit liability for discouragement under Regulation B, the sources note that while the revisions reduce legal exposure under ECOA, the legal risk under other statutes, such as the FHA and state laws similar to ECOA, remains unchanged.

In essence, the proposed rule amends only Regulation B, which implements ECOA, but acknowledges that the FHA and similar state laws continue to impose fair lending obligations and legal liability (including disparate impact liability) on creditors, which limits the potential costs to consumers of reducing protections under ECOA. Critically, the rule being proposed by the CFPB does not affect the existing rules or enforcement framework related to the FHA that still apply to HMDA reportable data.