Less fair lending enforcement doesn’t mean lower stakes. That’s the takeaway from the Department of Justice’s (DOJ’s) $68 million settlement with Colony Ridge, a Texas-based land developer and lender.
While the administration has pulled back on fair lending enforcement overall, this settlement — stemming from a lawsuit originally filed by the DOJ and CFPB in 2023 and continued under the Trump administration — suggests the cost of violations is rising. What once seemed like acceptable risk can now trigger a crippling payout — one that threatens the future of your financial institution (FI).
Colony Ridge, a Texas-based land developer and lender, sold over 12,000 land installment contracts for developments in Liberty County, northeast of Houston. The company targeted Spanish-speaking borrowers through predatory practices that violated both the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA). Among the violations:
The result: the DOJ is holding Colony Ridge accountable for systematically targeting and exploiting vulnerable borrowers, particularly Spanish-speaking Hispanic buyers who were charged inflated rates for substandard property they couldn't afford.
Related: 7 Fair Lending Risks Every Financial Institution Needs to Know
The whopping $68 million settlement includes:
What makes the settlement so expensive? It’s not consumer restitution. The high price tag reflects a different approach to enforcement under the Trump administration, which emphasizes overt discrimination and comparative disparate treatment over broader disparate impact theories. Although overall enforcement activity has slowed, the settlements that do occur are increasingly structured to support broader policy goals, meaning institutions can face steep penalties far beyond the cost of consumer compensation.
The takeaway for lenders: once-manageable settlements could now be severe enough to seriously damage your bottom line.
Beyond the $68 million payment, Colony Ridge must implement a comprehensive fair lending compliance program, submit to regular oversight, adopt marketing restrictions, sell only to those with proof of lawful immigration status, and verify borrowers' ability to repay. The lender must also halt all residential land sales directly to consumers for three years. These operational restrictions fundamentally change how the company does business — costs that will continue long after the settlement is paid.
Despite a focus on overt discrimination and comparative disparate treatment, lending data remains a key risk indicator for regulators. While statistical disparities in approval rates, pricing, or loan terms don't automatically indicate a problem, they should trigger deeper analysis.
When statistical differences appear between protected and non-protected groups, match pair analysis examines applicants with similar credit profiles across demographic lines. This can reveal whether discretion is being applied inconsistently — potentially uncovering problematic patterns with individual loan officers, unevenly applied exception criteria, or policy gaps creating fair lending exposure.
The Civil Rights Division's investigation found that Colony Ridge intentionally targeted Hispanic consumers with a deceptive bait-and-switch, predatory scheme that used misleading advertisements and sales tactics, including misrepresentations about flooding risks. Colony Ridge also used seller-financed loans without verifying a borrower's ability to repay, significantly increasing the possibility of default and resulting in high foreclosure rates.
Proving the systematic nature of this scheme required data. The extremely high default and foreclosure rates, the disparities in who was targeted and how they were charged, and the patterns across 12,000+ contracts all demonstrated systematic discrimination rather than isolated incidents.
Related: Wells Fargo Settles Philadelphia Fair Lending Suit for $10 Million
Fair lending enforcement hasn't disappeared under the current administration — it's just become more selective. When regulators do pursue violations, the financial consequences are steeper than ever. The Colony Ridge settlement makes that clear: $68 million, plus operational restrictions that fundamentally change how the company does business, plus settlements structured to fund broader government priorities beyond consumer remediation.
For lenders, this is a critical shift. The compliance burden isn't just about what regulators are doing today — it's about whether your practices can withstand scrutiny when enforcement does happen. And with settlement costs potentially severe enough to threaten your institution's financial stability, the stakes have never been higher.
Now's the time to strengthen your fair lending program. Statistical monitoring, match pair analysis, and systematic review of discretionary decisions aren't just regulatory requirements — they're your early warning system.
Because while enforcement volume may be down, the cost of getting caught has gone up. That's a risk worth taking seriously.
Learn how to uncover and analyze your FI’s fair lending risk.