The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have proposed new regulations under the Community Reinvestment Act (“CRA”). Since 2020, the banking agencies have proposed significant overhauls to the CRA regulations, but with little agreement on the actual changes. Comments on the latest attempt are due by October 13
Illinois Prohibits Disparate Impact Discrimination
Illinois Governor Pritzker signed the new Civil Rights Safeguard Act (Senate Bill 3777) on July 31, 2026 to codify disparate impact as an available theory of discrimination, including in providing financial services.
The state’s Human Rights Act currently provides that it is a civil rights violation for a financial institution, on the grounds of “unlawful discrimination,” to deny services to a person, or to provide a person with different services, including denying or varying the terms of a loan, or using lending standards that have no economic basis. (The Human Rights Act also prohibits discrimination in other realms, including employment, real estate transactions, and public accommodations.) A “financial institution” for this purpose includes a bank, credit union, insurance company, mortgage banking company, or savings and loan association that operates or has a place of business in the state.
The new Civil Rights Safeguard Act amends the Human Rights Act, including by revising the state’s definition of “unlawful discrimination.” The new definition clarifies that “unlawful discrimination” includes discrimination against a person, “whether by purpose or effect,” because of his or her actual or perceived protected status. Accordingly, for example, even if a financial institution has no intention to discriminate in its provision of loans or other services, if its lending standards or other activities have the effect of treating persons differently on a protected basis, it appears those standards or activities could implicate fair lending scrutiny in Illinois.
Continue Reading Illinois Prohibits Disparate Impact DiscriminationHUD Launches Fair Housing Investigation into Special Purpose Credit Program
On March 24, 2026, the Department of Housing and Urban Development (“HUD”) announced that it is launching an investigation under the federal Fair Housing Act into a state-sponsored special purpose credit program (described below) that reportedly uses race as an eligibility factor.
The Washington Homeownership Resource Center runs the Covenant Homeownership Program (the “Program”), which the state legislature created in 2023 to “address the history of housing discrimination due to racially restrictive real estate covenants in Washington state.” The Washington legislation provides that generations of systemic “redlining, racially restrictive covenants, mortgage subsidies and incentives” created barriers to mortgage credit and homeownership for black, indigenous, and people of color and other historically marginalized communities in Washington. To remedy those circumstances, the legislature created a down payment and closing cost assistance program for eligible first-time homebuyers, repayable upon the sale or refinancing of the home, and forgivable after a period of time for certain eligible households.
According to the Program’s website, persons eligible for the Program are those who lived in the state before 1968 (or have a parent or grandparent who did), are first-time homebuyers who meet the income guidelines (up to 120% Area Median Income), and are a member of a racial group identified through the organization’s mandated study.
HUD asserts that the Program may violate the Fair Housing Act, which prohibits housing and mortgage financing discrimination based on race, among other factors. HUD Secretary Turner stated that the agency will vigorously enforce the Act and seek to eliminate illegal racial preferences.
Continue Reading HUD Launches Fair Housing Investigation into Special Purpose Credit ProgramNew York Enhances UDAAP Authority with FAIR Business Practices Act
On December 19, 2025, New York Governor Hochul signed the Fostering Affordability and Integrity Through Reasonable (“FAIR”) Business Practices Act. The FAIR Business Practices Act adds prohibitions against “unfair” and “abusive” acts or practices to the state attorney general’s arsenal, which otherwise expressly addressed only such acts or practices that are “deceptive.”
The state Attorney
New California CARS Act
The new California Combating Auto Retail Scams (CARS) Act, which Governor Newsom signed on October 7, 2025, mirrors the thwarted efforts of the Federal Trade Commission (“FTC”) to address concerns about unfair or deceptive acts or practices among motor vehicle dealers. The California CARS Act will become effective on October 1, 2026, and will prohibit dealers from making misrepresentations about the costs or terms of purchasing, financing, or leasing a vehicle, or about any costs, limitation, benefit, or other aspect of any add-on product or service.
Applicability
The California CARS Act will constitute a new title within the state’s Civil Code[1] and will apply generally to motor vehicle dealers in the state. However, the new protections will not apply to “commercial purchasers” of vehicles, meaning those that purchase five or more vehicles from the dealer per year for use primarily for business or commercial purposes. They also will not apply to vehicles with a gross vehicle weight rating of 10,000 pounds or more.
Total Price
One of the key aspects of the California CARS Act (as with the FTC’s fallen CARS Rule) is the requirement to disclose the “total price.” Specifically, the Act will require dealers to disclose, clearly and conspicuously in connection with the sale or financing of a vehicle, the vehicle’s total price. That total price includes the total sales price of the vehicle, excluding taxes, fees, and charges; any dealer price adjustment; and the cost of any item installed on the vehicle at the time of the advertisement or communication. It does not include any deduction for a rebate. The total price must be included in any advertisement of a specific vehicle for sale, or that represents any monetary amount or financing term for a specific vehicle. In addition, the total price must be included in the first written communication with a consumer about a specific vehicle, such as the dealer’s first response to a consumer regarding the vehicle. The total price disclosure requirement does not, however, apply to used vehicles sold at auctions.
Other Disclosures
In addition to the disclosure of the total price of specific vehicles in advertisements and communications, dealers must disclose in any written representation during a negotiation to purchase or lease a specific vehicle that any add-on products or services the dealer mentions are not required. The disclosure must be clear and conspicuous and in writing. If the negotiation is taking place primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean, the disclosure that the consumer may purchase or lease the vehicle without the add-on product or service must also be provided in that language.
When making any written representation about the amount of monthly payments to purchase or lease a specific vehicle, the dealer must disclose in writing the amount the consumer will pay after making all those monthly payments. If the dealer makes written comparisons between payment options that include lower monthly payments, the dealer must explain that those lower payments often increase the total amount the consumer will pay.
Continue Reading New California CARS ActMassachusetts AG Settles Fair Lending Action Based Upon AI Underwriting Model
While federal regulatory agencies retreat from enforcing disparate impact discrimination, at least one state agency has stepped forward. Massachusetts Attorney General Andrea Joy Campbell announced on July 10, 2025 a settlement with a student loan company, resolving allegations that the company’s artificial intelligence (“AI”) underwriting models resulted in unlawful disparate impact based on race and immigration status.
The disparate impact theory of discrimination in the lending context has been controversial. It has been 10 years since the Supreme Court held in Inclusive Communities that disparate impact is available under the Fair Housing Act if a plaintiff points to a policy or policies of the defendant that caused the disparity. In the fair lending context, then, disparate impact applies to mortgage loans. However, for other types of consumer credit – like auto loans or student loans – a plaintiff or government enforcer claiming discrimination would need to rely on the Equal Credit Opportunity Act (“ECOA”). While ECOA prohibits discrimination against an applicant with respect to any aspect of a credit transaction, there has been much debate over whether it applies to discrimination in the form of disparate impact. The federal government for years relied heavily on ECOA to bring credit discrimination actions. The Biden Administration pursued a vigorous redlining initiative against mortgage lenders. The government used the vast amount of data obtained under the Home Mortgage Disclosure Act (“HMDA”) and compared the activities of various lenders within a geographic area to determine whether a lender was significantly lagging its peers in making loans to certain protected groups. The government then looked to the lender’s branch locations, advertising strategies, the racial/ethnic make-up of its loan officers, and other factors to assert that the lender had discouraged loan applicants from protected classes. Through that redlining initiative, the government settled dozens of cases, resulting in well over $100 million in payments.
HMDA data provides extensive, if imperfect, demographic data on mortgage lending activities and has been key to building claims of lending discrimination, particularly disparate impact. However, that level of data is not generally available for other types of lending, like student loans. Without such data, the Office of the Massachusetts Attorney General (“OAG”) in this case reviewed the lender’s algorithmic rules, its use of judgmental discretion in the loan approval process, and internal communications, which the Attorney General described as exhibiting bias.
Disparate Impact Based on Race, National Origin
In that review, the OAG looked back to the scoring model the lender used prior to 2017, which relied in part on a Cohort Default Rate – the average rate of loan defaults associated with specific higher education institutions. The OAG asserted that use of that factor in its underwriting model resulted in disparate impact in approval rates and loan terms, disfavoring Black and Hispanic applicants in violation of ECOA and the state’s prohibition against unfair or deceptive acts or practices (“UDAP”). The public settlement order did not provide the level of statistical disparities. In addition, until 2023, the OAG asserted that the lender also included immigration status in its algorithm, knocking out applicants who lacked a green card. That factor “created a risk of a disparate outcome against applicants on the basis of national origin,” and as such violated ECOA and UDAP according to the OAG. The settlement order prohibits the lender from using the Cohort Default Rate or the knock-out rule for applicants without a green card (although it appears the lender had discontinued those considerations years ago).
Continue Reading Massachusetts AG Settles Fair Lending Action Based Upon AI Underwriting ModelCalifornia Enacts Servicing Requirements for Subordinate Residential Mortgages
On June 30, California Governor Newsom signed Assembly Bill No. 130 (“AB130” or the “Bill”). Effective immediately, the Bill added a new section to the California Civil Code to codify that certain actions constitute unlawful practices when taken by a “mortgage servicer” in connection with a subordinate mortgage. The Bill also adds a number of certification and disclosure requirements that mortgage servicers must adhere to in connection with nonjudicial foreclosures of subordinate mortgage loans.
At the outset, it is important to note that the Bill defines the term “mortgage servicer” broadly to include the current mortgage servicer and any prior mortgage servicers. Thus, the Bills’ requirements—including certifications that a mortgage servicer is required to record in connection with certain foreclosures—cover the activities of both the current servicer of a subordinate mortgage and any prior servicer of that mortgage.
Unlawful Practices for Subordinate Mortgages
Under the newly created Section 2924.13, a “subordinate mortgage” is defined to include a security instrument in residential real property that was, at the time it was recorded, subordinate to another security interest encumbering the same residential real property. The new section does not distinguish between loans for a consumer or business purpose. Pursuant to the new section, the following conduct constitutes an unlawful practice in connection with a subordinate mortgage:
Continue Reading California Enacts Servicing Requirements for Subordinate Residential MortgagesCourt Declines to Allow CFPB to Vacate Townstone Settlement
On June 12, 2025, Judge Valderrama of the federal district court for the Northern District of Illinois denied the joint motion to vacate the stipulated final judgment reached between the Consumer Financial Protection Bureau (“CFPB”) and Townstone Financial, Inc., in an action alleging violations of the Equal Credit Opportunity Act (“ECOA”).
As explained in Mayer
Buckle Up for New Regulatory Activity in Motor Vehicle Sales and Financing
Although the Fifth Circuit Court of Appeals vacated the Federal Trade Commission’s (“FTC”) Combating Auto Retail Scams Trade Regulation Rule (“CARS Rule”) on January 27, 2025, the FTC and state attorneys general continue to target the auto sales and lending industries through enforcement actions and legislation. Among those efforts, the California legislature is considering its
CFPB Seeks to Vacate Townstone Redlining Settlement
In an unprecedented move, the Consumer Financial Protection Bureau’s (“CFPB” or “Bureau”) Acting Director is seeking to vacate the Bureau’s settlement with Townstone Financial (“Townstone” or the “Company”), which was entered by the US District Court for the Northern District of Illinois on November 7, 2024. In a press release, Acting Director Vought stated that the CFPB “abused its power, used radical ‘equity’ arguments to tag Townstone as a racist with zero evidence . . . to further the goal of DEI in lending via their regulation by enforcement tactics.”
Continue Reading CFPB Seeks to Vacate Townstone Redlining Settlement