Right-Sizing Your Fair Lending Program After the Midterms

The November 2026 midterms produced a significant Democratic majority in both the House and Senate. As the presidency remains unchanged through 2028, the industry will face a divided government over the next few years. For fair lending and CRA programs, this shift will present a coming shift.

Recent Changes  

Federal agencies under current leadership narrowed the intensity of supervision and enforcement. Some key changes include:

• The CFPB’s 2026 Regulation B amendments removed the effects test from the regulation and stated that ECOA does not authorize disparate-impact liability.
• Section 1071 coverage was raised to institutions originating at least 1,000 covered small-business loans in each of the two preceding years, with a reduced data set and later implementation dates.
• Exam volume has declined, and open supervisory actions have been closed in large numbers.
• The OCC and FDIC have proposed CRA changes that raise certain thresholds and adjust community development expectations.
• Consumer regulatory requirements have been relaxed related to mergers and acquisitions as well as branching.

What May be Coming Next

Congressional committees chaired by members focused on consumer protection, lending practices, and agency accountability now have the power to schedule hearings, issue document requests and subpoenas, and conduct investigations. State attorneys general in several newly Democratic-led states can expand state-level activity. Private litigation and residual state-law theories remain available. Bank boards should continue to expect from senior management that compliance programs are real and risk-based rather than merely compliant on paper.

The appropriate response is right-sizing: aligning the intensity, frequency, and documentation of monitoring, analysis, and independent review with the institution’s actual residual risk while also preparing for the possibility of a more rigid regulatory environment.

What Right-Sizing Means in Practice

Residual risk remains the central concept. It is the product of inherent risk and the strength of controls. A program is right-sized when controls and monitoring are effective in lowering residual risk and can be clearly explained AND demonstrated to a board, a state inquiry, congressional staff, or a future examiner.

Key Calibration Steps Included:

• Refresh the fair lending risk assessment to reflect current residual risk in a more aggressive regulatory environment.
• Prioritize statistical monitoring and independent validation where residual risk remains elevated.
• Maintain the ability to scale analysis quickly.
• Continue geographic and redlining-related reviews at a level sufficient to demonstrate awareness of market outcomes.
• Document decisioning consistency and exception processes.
• For institutions preparing for 1071, concentrate on data analysis; those that will not report under the scaled back reg should consider implications of changes that would result in their having to report.

Prepare For Change

The uncertainty and turbulence of the current environment will likely remain. The regulatory reprieve of the last few years, including Regulation B and Section 1071 changes, have been agency actions. While the relief has been real, there have been no legislative changes that impact consumer compliance. Done at the agency level, therefore, these changes that have been favorable may now face legal challenges and remain subject to future administrative or congressional action.

The Practical Advantage

Institutions that can show a deliberate, residual-risk-based program will be positioned to handle intense or lighter federal activity. Ongoing monitoring tools, simulation capabilities, and auditable outputs make proportionate programs easier to sustain without constant manual effort. Independent statistical validation continues to serve as both a control and a ready source of evidence when external questions arise.

The next two years will reward programs that are sustainable for either a peak federal enforcement environment or one that can flex with less scrutiny while maintaining a solid program. Right-sizing is the disciplined path in which an institution understands, monitors, and manages its risk and retains the capacity to respond as the environment shifts.