The NCUA announced Thursday it was dropping “disparate impact” tests from its investigations of racial discrimination in lending, which will require discrimination to be proved by intent rather than just by results.
The NCUA said the action was in keeping with the “Restoring Equality of Opportunity and Meritocracy” executive order President Trump signed in April, which it said “directs federal agencies to eliminate the use of disparate impact liability in all contexts.”
Trump’s order said “disparate-impact liability all but requires individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability. It not only undermines our national values, but also runs contrary to equal protection under the law and, therefore, violates our Constitution.”
The Defense Credit Union Council applauded the move.
Jason Stverak, DCUC’s chief advocacy officer, said the group had written the NCUA in July to drop “disparate impact,” and commended the NCUA for focusing “on intentional discrimination (disparate treatment) rather than statistical outcomes.”
“By focusing on actual evidence of discrimination instead of abstract statistical disparities, the NCUA is aligning its approach with the broader federal shift toward merit-based, equal-opportunity lending oversight,” Stverak said. “This change will not only reduce unnecessary compliance burdens on community-focused institutions, it will also ensure credit unions are held to the same clear standards as banks.”
The NCUA said it had removed “all references to disparate impact liability from its Fair Lending Guide and other issuances,” and said its examination and supervision processes will no longer include reviews for disparate impact.
The NCUA also said it will no longer request, review or conclude or follow-up on:
- Matters related to a credit union’s disparate impact risk;
- Internal disparate-impact risk analysis; and
- Disparate-impact risk assessment processes or procedures.
“Consistent with applicable law, the NCUA will continue to conduct fair lending examinations and risk assessments and take appropriate action if evidence of disparate treatment or other violations are found,” the news release said.
Contact Jim DuPlessis at JDuPlessis@cutimes.com.
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