CFPB Proposes Major Changes to Regulation B

On November 13, 2025, the Consumer Financial Protection Bureau (the CFPB) published a Notice of Proposed Rulemaking (NPRM) that would significantly reshape key aspects of Regulation B, which implements the Equal Credit Opportunity Act (the ECOA). The proposal concludes that the ECOA does not authorize disparate-impact claims, redefines when “discouragement” of credit applicants may give rise to liability and tightens the rules for Special Purpose Credit Programs (SPCPs) run by for-profit lenders.

What the Proposal Would Change

1. Removal of Disparate-Impact Liability

The CFPB proposes removing disparate-impact liability from ECOA enforcement, restricting claims to those involving intentional (disparate-treatment) discrimination. Currently, under Regulation B, challenges based solely on a credit policy’s discriminatory effects (or impact), regardless of intent, are allowed. In the NPRM, the CFPB explains that it has carefully examined ECOA’s statutory text and has concluded that it does not authorize disparate-impact cases. Accordingly, it proposes to eliminate all references to disparate impact from Regulation B, including the Official Interpretations thereto. The CFPB also argues that this change will align Regulation B with a 2025 executive order aimed at deprioritizing disparate-impact enforcement across federal agencies, while expressing concern that continued authorization of disparate-impact liability could discourage innovation and lead creditors to make decisions based on protected-class outcomes rather than on creditworthiness. 

Should this proposed rule be finalized, it is not clear what effects it would have. Whether ECOA supports disparate-impact claims is a question of statutory interpretation and, in the Loper Bright decision, the Supreme Court was clear that resolution of the issue is a task for the courts without deference to agency interpretations. As a result, lenders cannot dismiss the risk of disparate-impact liability, even if the NPRM is finalized.

It is important to note that the NPRM does not affect the prohibition on intentional discrimination, including, for example, the use of a facially neutral factor as a proxy for race, sex, national origin or other protected characteristic. 

2. Narrowing the Scope of “Discouragement”

Regulation B currently prohibits any oral or written statement that discourages a “reasonable person” from applying for credit on a prohibited basis. The NPRM narrows that prohibition in two major respects: first, by focusing only on actual oral or written statements (rather than “acts or practices” broadly) and, second, by tying liability to whether the lender knows, or should know, that the statement would deter someone from applying for credit because of a protected characteristic. Even more specifically, the statement must cause a reasonable person to believe that the creditor would deny, or grant on less favorable terms, a credit application because of a prohibited characteristic.

Under the NPRM, general marketing campaigns, audience targeting or geographic focus would not, by themselves, constitute a discouragement violation simply because some people might view them negatively. In addition, statements intended to encourage certain applicants would not be considered discouragement of others. Therefore, a violation would hinge on specific, directed discouraging communications to applicants or prospective applicants.

3. Stricter Conditions on SPCPs for For-Profit Lenders

The NPRM proposes new restrictions on SPCPs offered by for-profit lenders. In particular:

• SPCPs could no longer use race, color, national origin or sex as eligibility criteria.
• When other non-prohibited but restricted characteristics (such as age or source of income) are used, lenders would be required to document rigorously why those criteria are essential to serve a special social need and why that need cannot be met using non-prohibited criteria.
• There would also be new documentation and record-keeping requirements—sponsors of SPCPs must explain the design of the program, justify the choice of characteristics and maintain evidence supporting that justification.

Credit extended under SPCPs before the effective date of a final rule would be grandfathered, meaning existing commitments would not automatically run afoul of the new standards.

Why This Matters for Lenders

These proposed changes are more than technical refinements—they represent a strategic shift in how fair-lending obligations under the ECOA will be enforced and understood.

• Risk Landscape: Eliminating disparate-impact liability could substantially reduce certain kinds of regulatory and litigation risk. Lenders relying on advanced underwriting tools, algorithmic models or risk-based pricing may find more freedom to operate without fear of statistical-effect-based challenges.
• Operational Flexibility: With a narrower discouragement standard, institutions may have greater latitude in marketing, outreach and branch decisions, provided that communications are carefully managed and do not convey an intent to discriminate.
• Strategic Reassessment of SPCPs: For-profit lenders with SPCPs will need to revisit program designs. Those currently using protected-class criteria may have to discontinue or rework their programs and others will need to strengthen their justification, adopt stricter documentation practices and prepare for more scrutiny.

Comments on the NPRM may be submitted until December 15, 2025. Please contact one of the authors or the Manatt professional with whom you work for assistance in preparing comments.