The Office of the Comptroller of the Currency is removing disparate impact liability from fair lending guidance for banks under its supervision, the agency said Monday.
The OCC’s supervisory process for fair lending compliance cannot examine financial institutions over disparate impact risk, internal disparate-impact risk analysis, or disparate impact risk assessment processes or procedures, the agency said.
However, the OCC will continue to conduct its regular fair lending risk assessments, analyze Home Mortgage Disclosure Act data for potential disparate treatment, and conduct risk-based fair lending reviews. It will take appropriate action if any disparate treatment is identified, the agency said.
“The OCC expects banks to provide fair access to financial services, treat customers fairly, and comply with all applicable laws and regulations,” James M. Gallagher, senior deputy comptroller for the office of the chief national bank examiner, said in the press release.
Disparate impact refers to when a bank implements a facially neutral policy — one that appears non-discriminatory on its surface but disproportionately excludes or burdens certain groups that are protected under the Fair Housing Act and the Equal Credit Opportunity Act.
The new examination policy will apply to community banks, as well as national banks, federal savings associations and federal branches or agencies of foreign banking organizations. The OCC has begun removing references to disparate impact liability from the “Fair Lending” booklet of the comptroller’s handbook and other places.
The OCC’s dropping the disparate impact consideration is a follow-up to President Donald Trump’s April executive order, which called for agencies to eliminate the use of disparate impact liability in all contexts, “to avoid violating the Constitution, Federal civil rights laws, and basic American ideals.”
The EO, which the White House said aimed to guarantee equal opportunity rather than equal outcomes — and treat people as individuals, not as components of any particular race or gender — revoked prior presidential approvals of specific Justice Department regulations that supported the use of disparate-impact liability.
Additionally, the order directed the U.S. Attorney General and all federal agencies, including the Equal Employment Opportunity Commission, to repeal or amend regulations pertaining to disparate impact liability, and to “deprioritize” enforcement that imposes disparate impact liability.
The Trump administration has pivoted from the Biden administration’s regulations and policies to focus more on what it deems “free-market competition.” The Department of Housing and Urban Development under Trump has eliminated the Biden-era interagency policies designed to address racial bias in lending, including the reconsideration of value procedures, which were based on the Property Appraisal and Valuation Equity task force launched in 2021.
The present administration has proposed a 44% cut to HUD programs in FY26 budget, including eliminating the local Fair Housing Initiatives Program, allocating $26 million for the state/local Fair Housing Assistance Program, and allocating only $55 million for HUD’s Office of Fair Housing and Equal Opportunity, which cuts $31 million from its current budget.
The disparate impact rollback also follows the OCC’s initiatives to take reputational risk out of bank exams.
