This year's fair lending landscape feels different. Fewer consent orders. Less comprehensive exams. Federal agencies are explicitly stepping back from enforcing disparate impact.
But fair lending risk isn't disappearing — it's shifting. States are stepping in to fill the regulatory gaps. Federal agencies are pivoting priorities. And your financial institution (FI) still needs to lend, grow, and compete while staying compliant.
The question isn't whether you still have to do fair lending. It's how you show you're doing the right amount, for the right reasons, at the right time — when the signals keep changing.
Here are the fair lending areas your FI should focus on in the year ahead.
Enforcement Update: On February 10, the DOJ settled with a Texas lender for $68M over discriminatory marketing and predatory lending targeting Spanish-speaking borrowers.
Related: Uncover fair lending risks to build a stronger program. Download the free whitepaper.
What's changed on the federal level: a recap
The CFPB's 2024 Fair Lending Report (released in December 2025) formalized what institutions have been navigating all last year: a big regulatory shift. Disparate impact liability is out, related investigations and consent orders were terminated, and enforcement is now limited to cases with direct evidence of intentional discrimination.
Federal banking regulators followed suit:
- The OCC deferred fair lending exams through January 31, 2026, and removed the policy requiring examiners to perform fair lending risk assessments during every supervisory cycle for community banks.
- The FDIC changed exam frequency based on asset size and compliance rating.
- The NCUA implemented defined-scope exams for smaller credit unions and risk-based exams for all others.
- The CFPB will no longer request expansive data sets unrelated to exams.
However, the Federal Reserve didn’t mention fair lending in its supervisory statement and hasn't said it will stop analyzing disparate impact. It said that it reserves the authority to refer cases to the Department of Justice.
Top takeaway: Agency leadership is following the president's lead in varying degrees. Pay close attention to what your specific regulator is saying and track changes as they happen. Automated compliance solutions, such as Ncomply, provide real-time regulatory updates tailored to your FI's size, examiner, and geography.
Related: Emerging Risks in Banking 2026
Why disparate impact still matters
Despite federal regulatory changes, disparate impact remains valid law. While the Department of Housing and Urban Development (HUD) and the CFPB are proposing to remove disparate impact from their regulations, these are proposals subject to the Administrative Procedures Act and likely to be litigated.
However, the underlying laws haven't changed and can't change without Congressional action. The 2015 Supreme Court ruling in Texas Department of Housing v. Inclusive Communities Project was based on the Fair Housing Act itself, not HUD's regulations. That precedent stands.
And here's what keeps fair lending risk very real:
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Private litigation: Both the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) give individuals the right to sue. Private litigation risk is real. Attorneys can review your HMDA data, identify statistical disparities through analytics software, and file claims with a relatively low initial threshold.
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State enforcement: State attorneys general and state agencies can bring claims under disparate impact theory — and they're increasingly coordinated in doing so. With former CFPB Director Rohit Chopra now advising state Attorneys General, expect more coordinated enforcement strategies using shared data and legal theories.
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Statutes of limitations: ECOA violations have a 5-year statute of limitations; FHA violations have 2 years. Lapsed controls and growing disparities may not be an exam problem today, but they could be issues for private plaintiffs, state AGs, or future administrations.
Top takeaway: Don't let your risk controls lapse just because federal enforcement has. Disparities that aren't problematic today could be litigated by state AGs, private plaintiffs, or future administrations tomorrow.
Related: Find out how Nrisk can help your FI evaluate, measure, and report on risk in real time. Take a product tour.
The state fair lending surge
How many states do you actively lend in? How many of those state attorney general websites have you visited in the last six months?
If your FI is like most, you tend to think federally first. Now is the time to focus on the state level, as more states assert independent enforcement authority and examine AI models, digital marketing, redlining, pricing discretion, and third-party relationships.
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New York expanded its consumer protection law, giving the AG clearer authority over unfair and abusive conduct. The signal: lending-related risk can surface through investigations that aren't labeled "fair lending" but still implicate pricing, underwriting, marketing, and customer treatment.
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New Jersey codified disparate impact under state law and issued explicit guidance on algorithmic decisioning, with clear expectations for AI explainability and governance documentation — requirements that go beyond current federal demands.
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Massachusetts reached a $2.5 million settlement following an investigation into underwriting practices. The state focused on human discretion layered on top of models, overrides without clear guardrails, and adverse action notices that didn't clearly explain decisions. As a result, the lender must implement comprehensive model governance, testing, documentation controls, and ongoing reporting.
Related: What is AI Auditing and Why Does It Matter?
Why state coordination is accelerating
In late 2025, former CFPB Director Rohit Chopra joined the Democratic Attorneys General Association as senior advisor, leading the Consumer Protection & Affordability Working Group. This means states are now comparing notes, aligning priorities, and coordinating enforcement strategies — using shared theories, data, and playbooks focused on predatory lending, unfair fees, AI decisioning, and gaps from federal rollbacks.
Top tip: The CFPB enforcement playbook under Rohit Chopra didn't disappear — it moved to the states. Expect a similar focus on AI, pricing discretion, and digital channels, just with state AG letterhead.
Related: How to Keep Up with State Regulations
What your fair lending program needs in 2026
Despite deregulation rhetoric, baseline expectations remain: fair lending risk assessments, training, governance documentation, and risk monitoring. But in a quieter enforcement environment, defensibility requires a clear decision framework.
If you can't answer these questions, risk is already present:
- Can we explain our fair lending program to a new examiner in 15 minutes?
- Can we explain why something stopped?
- Can we explain what would cause us to restart it?
- If our program changed in the last 12–18 months, can we clearly explain why?
- Can we explain who owns fair lending decisions today — and where judgment is applied?
- Do our documentation and data tell the same story as our narrative?
Related: What You Need to Know Ahead of Your FI's Next Exam
The role of AI governance
AI is where fair lending risk accelerates the fastest. Your governance framework needs:
- Inventory: Every model or tool that touches credit decisions, including vendor solutions
- Testing: Pre-deployment validation, ongoing monitoring, and drift triggers
- Explainability: Adverse action reasons that map to model outputs
- Vendor controls: Audit rights, change notices, and data access for fair lending reviews
FIs that can't explain their AI governance — or that rely on "black box" vendor models without oversight — are creating indefensible fair lending exposure.
Top tip: Documentation is your defense. Conduct regular fair lending risk assessments to identify gaps. Ensure your lending compliance framework can withstand scrutiny from any direction — federal, state, or private litigation.
The upside of risk: fair lending as strategic risk management
FIs often see risk as a problem to eliminate. In reality, success comes from setting a risk appetite and taking risk deliberately, with controls in place.
Consider two banks in similar markets. Conservative Bank's risk appetite allows for a delinquency rate of 4%. Conservative Bank maintains 1.2% delinquency with a 42% approval rate — earning $11.7M. Growth-Oriented Bank's risk appetite allows for a delinquency rate of 3.7%. Growth-Oriented Bank maintains 3.5% delinquency with a 68% approval rate — earning $28.9M.
Conservative Bank prides itself on being "safer" than Growth-Oriented Bank and highlights its lower delinquency to the board. But here's what it's missing: it shouldn’t be comparing itself against Growth-Oriented Bank, but rather its risk appetite. By shying away from risk and leaving a 2.8% gap between its appetite and actual delinquency rate, Conservative Bank is leaving interest income on the table. When looking at Growth-Oriented Bank's data, that interest income could be millions.
When there's a statistical disparity like this, there's an opportunity to evaluate whether you can safely revise your underwriting and pricing guidelines for specific demographics or geographies.
Related: The Upside of Risk by Michael Berman
Your fair lending focus moving forward
Fair lending hasn't gone away — it's quieter but less calm. That’s why it’s crucial for FIs to build fair lending programs that are defensible enough to weather state coordination and future federal shifts, strategic enough to identify growth opportunities, and documented enough to explain decisions when scrutiny comes.
Want more insights from our regulatory experts? Watch the Fair Lending Update webinar.
