Disparate Impact

By Charlsey Zyne

August 12, 2025

Federal regulators may be easing off disparate impact enforcement, but lenders can still face disparate impact liability from other sources. The recent Executive Order on “Restoring Equality of Opportunity and Meritocracy” simply reshuffled where the risk lives; it did not erase it. The OCC has stopped examining banks for disparate impact and the CFPB has indicated it will focus only on intentional discrimination, yet private plaintiffs can still sue based on disparate impact under the Fair Housing Act (FHA) and the Equal Credit and Opportunity Act (ECOA).

State attorney generals and state regulatory agencies are also free to keep enforcing their own, often broader, fair lending laws. California continues to recognize disparate impact liability in housing, and Massachusetts just wrung a settlement from a student-loan servicer whose AI underwriting model allegedly harmed protected classes. Because neither field nor conflict preemption bars states from offering greater protections than federal law, there is no reason to believe that states will not continue to recognize disparate impact as a legally cognizable harm.

The federal posture, however, can flip again. A new administration (or even the current administration under political pressure) could revive stalled matters so long as the statute of limitations has not run. The FHA gives the DOJ eighteen months after a practice ends to file suit. This means that actions taken while federal disparate impact enforcement is being deprioritized could still be the subject of enforcement actions in the future.

While federal enforcement priorities may have changed, the underlying statutes have not. Lenders should keep the models, keep running the bias analytics, and keep preserving documentation. Abandoning disparate impact testing and dropping these safeguards could allow for prosecution now or in the future.

About the Author

Charlsey Zyne

Charlsey Zyne is an Associate Attorney at SW&M, focusing on Contracts, FinTech, and Real Estate matters. She brings a wealth of experience advising clients on contract negotiations, corporate governance, intellectual property disputes, and business formation. Her practice spans multiple industries, […]

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