On November 13, 2025, the Consumer Financial Protection Bureau (CFPB) released a Notice of Proposed Rulemaking (NPRM) amending Regulation B – the regulation implementing the Equal Credit Opportunity Act (ECOA). The proposed rule addresses three principal areas: (1) it clarifies that ECOA does not authorize disparate-impact liability; (2) it further defines “discouragement” under 12 CFR Part 1002.4(b), and (3) it establishes new prohibitions and restrictions related to special purpose credit programs (SPCPs).

Disparate Impact

As part of its broader effort to clarify the scope of ECOA and Regulation B, the CFPB proposes amendments to Regulation B clarifying that ECOA does not authorize disparate-impact liability.

In the NPRM, the CFPB begins by acknowledging that the United States Supreme Court has recognized disparate-impact claims under certain antidiscrimination laws. For instance, in Griggs, the Supreme Court held that disparate-impact claims are cognizable under Section 703(a)(2) of Title VII of the Civil Rights Act of 1964, which prohibits discrimination in employment practices. Griggs v. Duke Power Co., 401 U.S. 424, 91 S. Ct. 849, 28 L. Ed. 2d 158 (1971). And in the fair lending context, in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc., the Supreme Court held that disparate-impact claims are recognizable under the Fair Housing Act and established three elements with respect to a disparate-impact claim. Texas Dep’t of Hous. & Cmty. Affs. v. Inclusive Communities Project, Inc., 576 U.S. 519, 135 S. Ct. 2507, 192 L. Ed. 2d 514 (2015). With respect to ECOA, however, the NPRM notes that the Supreme Court has not addressed whether disparate-impact claims are cognizable under ECOA.

The NPRM also notes that the text of ECOA does not expressly authorize disparate-impact claims, nor does it include an “effects test” used in similar statutes to invoke such claims. Nonetheless, the legislative history of ECOA, including a Senate report accompanying the 1976 Act, have been previously cited to support the authorization of disparate-impact claims. The NPRM seeks to clarify that this interpretive basis is insufficient to authorize disparate-impact liability under ECOA.

Accordingly, the CFPB proposes removing language in Regulation B, specifically § 1002.6(a) and its accompanying commentary, indicating that disparate-impact liability or the “effects test” may not be applicable under ECOA. The CFPB also proposes adding language clearly stating that ECOA does not recognize the “effects test.” The NPRM notes that the proposed amendments are consistent with the statutory purposes of ECOA and intended to align Regulation B more closely with the statutory purposes of ECOA.

Notably, the proposed amendments align with the April 2025 executive order issued by President Trump titled “Restoring Equality of Opportunity and Meritocracy,” which essentially announced a plan to eliminate the use of disparate-impact liability and required all federal agencies to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability.” Taken together, the proposed amendments provide regulatory certainty and reinforce a consistent framework for assessing disparate impact liability under ECOA and Regulation B.

Definition of “Discouragement”

The NPRM also seeks to clarify and define the term “discouragement” under 12 CFR § 1002.4(b), which currently provides that “[a] creditor shall not make any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application.”

This effort follows recent developments in the Townstone matter, where the Seventh Circuit held that liability under ECOA extends to prospective applicants – largely basing its decision on ECOA’s use of the term “discouraging” in reasoning that Congress intended to include discouraging an application for credit as a violation of the ECOA. See Consumer Fin. Prot. Bureau v. Townstone Fin., Inc., 107 F.4th 768, 774, 777 (7th Cir. 2024). The CFPB and Townstone later entered into a settlement agreement, which both parties sought to vacate in March 2025. Against this backdrop, the NPRM states that the discouragement provision “has been interpreted to prohibit conduct that it is not necessary or proper to prohibit to prevent the circumvention or evasion of ECOA’s purposes.” As such, the CFPB proposes to realign the discouragement provision with the written text of Regulation B and intends to do so in three key ways.

First, the CFPB plans to define what constitutes an “oral or written statement” as provided for in Regulation B. While 12 CFR § 1002.4(b) does not define “oral or written statement,” the official comment provides that “[i]n keeping with the purpose of the Act – to promote the availability of credit on a nondiscriminatory basis – § 1002.4(b) covers acts or practices directed at prospective applicants that could discourage a reasonable person, on a prohibited basis, from applying for credit.” The CFPB now views this interpretation as overly expansive and proposes to amend Regulation B to make clear that “oral or written statements” refers solely to spoken or written words or visual images such as symbols, photographs, or videos – as opposed to a creditor’s acts or practices, such as business decisions regarding branch locations, advertising, or community development. The CFPB also proposes to replace current references in the official comment to “acts or practices” or “practices” with references to “oral or written statements” or “statements.”

Second, the CFPB proposes to more precisely define what constitutes a statement to an applicant or prospective applicant. The CFPB clarifies that a creditor does not engage in prohibited discouragement merely by directing encouraging statements toward certain applicants or prospective applicants. Rather, discouragement occurs when a creditor makes any oral or written statement “directed at” applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from applying for credit.

Third, and in the same regard, the CFPB proposes to define the standard for showing prohibited discouragement. The CFPB proposes to revise Regulation B to provide that a statement is prohibited discouragement only if a creditor “knows or should know” that the statement would cause a reasonable person to be discouraged. Further, under the appropriate standard, discouragement occurs only if the creditor’s statement “would cause a reasonable person to believe that the creditor would deny, or would grant on less favorable terms, a credit application by the applicant or prospective applicant because of the applicant or prospective applicant’s prohibited basis characteristic(s).”

Special Purpose Credit Programs

Relying on language in ECOA permitting “any special purpose credit program offered by a profit-making organization to meet… standards prescribed in regulations by the Bureau,” the CFPB proposes both prohibitions and restrictions to SPCPs offered or participated in by for-profit creditors under Regulation B. According to the CFPB, the proposed prohibitions and restrictions more closely align Regulation B with ECOA’s purposes and congressional intent.

At the outset, in the NPRM, the CFPB makes clear that the proposed restrictions amending 12 CFR § 1002.8(a)(3) are independent of and in addition to the prohibitions amending 12 CFR § 1002.8(b)(3). Further, the prohibitions and restrictions would immediately become effective if and when a final rule were to become effective.

Proposed Restrictions

The proposed restrictions amending 12 CFR § 1002.8(a)(3) fall into three general categories: (1) modifications to the written plan requirements; (2) changes regarding the class of persons a SPCP is designed to benefit; and (3) revisions relating to the determination of need for a SPCP. 

As it relates to the written plan, the CFPB intends to retain the long-standing requirement that a SPCP be established and administered pursuant to a written plan that identifies the class of persons that the program is designed to benefit and sets forth the procedures and standards for extending credit pursuant to the program. However, the NPRM notably expands what the written plan must include. More specifically, the CFPB proposes to require a SPCP’s written plan to:

• provide evidence of the need for the SPCP;
• explain why, under the for-profit organization’s standards of creditworthiness, the class of persons would not receive such credit in the absence of the program; and
• explain why meeting the special social needs addressed by the program necessitates that its participants share the specific common characteristic that would otherwise be a prohibited basis and cannot be accomplished through a program that does not use otherwise prohibited bases as participant eligibility criteria.

The CFPB also proposes revisions relating to how creditors may define the class of persons eligible to benefit from a SPCP. Currently, 12 CFR § 1002.8(a)(3)(ii) requires a SPCP “to extend credit to a class of persons who, under the organization’s customary standards of creditworthiness, probably would not receive such credit or would receive it on less favorable terms than are ordinarily available to other applicants applying to the organization for a similar type and amount of credit.” The CFPB proposes to strike the clause that begins with “or would receive it on less favorable terms…” and strike the terms “customary” and “probably.”

Finally, the NPRM proposes restrictions addressing the process for determining need for a SPCP by striking the phrase “or would receive it [credit] on less favorable terms” in 12 CFR § 1002.8(a)(3)(ii). The CFPB intends to continue to clarify that a determination of the need for a SPCP “can be based on a broad analysis using the organization’s own research or data from outside sources, including governmental reports and studies.”

Proposed Prohibitions 

The proposed prohibitions would amend 12 CFR § 1002.8(b). Currently, 12 CFR § 1002.8(b)(2) provides that all SPCP “participants may be required to share one or more common characteristics (for example, race, national origin, or sex) so long as the program was not established and is not administered with the purpose of evading the requirements of the Act…”

The CFPB proposes amendments prohibiting a SPCP offered or participated in 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 for the program. Further the CFPB proposes, to the extent a SPCP requires participants to share one or more common characteristic that would otherwise be a prohibited basis, the creditor must provide evidence that the participant would not receive such credit as a result of such specific characteristics.

In support of the proposed prohibitions, the CFPB notes that “it is no longer appropriate (in light of ECOA’s purpose of preventing discrimination) or that it is no longer necessary or proper (in light of changed circumstances and ECOA’s purposes) for the SPCP standards in Regulation B to permit such SPCPs to use the common characteristics of race, color, national origin, or sex as eligibility criteria.”

Takeaways Going Forward

Comments to the proposed rule are due on December 15, 2025. The CFPB proposes that a final rule related to this proposal would have an effective date of 90 days after publication in the Federal Register.

Should the proposed rule take effect in its current form in 2026, there will be significant, new considerations for creditors to address. For instance, where compliance reviews have centered upon ECOA disparate impact in the past, it is likely that creditors will instead focus more ECOA compliance resources on disparate treatment. Advertising and marketing strategies might also change as a result of this new guidance as to discouragement. In addition, creditors will need to reevaluate their SPCPs for compliance with the new written plan requirements and with new prohibitions against administering SPCPs based on common characteristics of race, color, national origin, or sex. These changes, if implemented, will create significant compliance challenges within the consumer financial services industry.