A coalition of consumer protection groups filed a federal lawsuit to stop implementation of a new rule that would dismantle decades of safeguards against discrimination in lending practices.
The rule issued by the Consumer Financial Protection Bureau would weaken the Equal Credit Opportunity Act of 1974 by enabling creditors to discriminate against applicants based on age, marital status, national origin, race and religion.
In the federal action filed May 27, the National Fair Housing Alliance, Rise Economy, BLDS LLC and SolasAI asked the court to declare the rule arbitrary and illegal. The plaintiffs are represented by Democracy Forward, Relman Colfax PLLC and Public Citizen Litigation Group.
The rule “dramatically narrows existing prohibitions against discriminatory actions that would discourage prospective applicants from applying for credit. The final rule purports to usurp a court or jury’s responsibility to determine whether, when viewed in context, certain facially innocuous statements are in fact code-words or dog-whistles indicating discriminatory intent,” according to the filing in the U.S. District court for the District of Columbia.
The policy shift also “permits creditors to exclude consumers from applying for credit because of their protected class status, and it effectively immunizes many practices that contribute to the ‘redlining’ of neighborhoods and communities, i.e., intentionally avoiding lending in communities of color and otherwise discouraging people in those communities from applying for credit.”
The change is illegitimate because the bureau did not disclose any problems with current regulations around lending, the lawsuit says. Instead, the agency relied on “assertions and speculation” to implement the departure from five decades of effective precedence.
The bureau also failed to go through the rulemaking process required by federal law, limited time for public comment and refused to extend its shortened deadline, the suit charges.
Another objection in the lawsuit is that the bureau is being run by Russell Vought, director of the Office of Management and Budget and one of the chief architects of Project 2025. President Donald Trump appointed Vought as acting director of CFPB in February 2025. But because the previous director did not die or resign, Trump had no authority to appoint a successor: “Thus, the final rule was issued by a director who had no lawful authority to lead the CFPB or engage in rulemaking.”
Plaintiffs say they already have suffered “concrete harm” by losing consultation work with creditors and financial institutions adjusting to the regulatory change.
“This reversal by the CFPB is a continuation of this administration’s efforts to gut fair housing and lending protections,” said Lisa Rice, president of the National Fair Housing Alliance.
When the agency built to enforce civil rights and protect consumers walks away from the job, the rule of law remains.
“Eviscerating these guardrails will ultimately result in less credit access for many people, make our markets less sound, and cause our economy to be less productive. When the agency built to enforce civil rights and protect consumers walks away from the job, the rule of law remains. That is why we are in court.”
The rule represents an effort “to turn anti-discrimination law on its head,” said Rise Economy CEO Paulina Gonzalez-Brito.
“The CFPB was created to protect consumers and small businesses from financial abuse and discrimination, and this final rule would do real harm, setting us back in our collective efforts to ensure that all families and small businesses have a fair chance to achieve the American Dream.”
The rule change is the wrong move at the wrong time, added Democracy Forward President Skye Perryman. “At a time when communities across the country continue to face barriers to home ownership, small business lending and economic opportunity, the CFPB should be strengthening protections against discrimination, not dismantling them.”