By Ray Birch
WASHINGTON—Two new CFPB proposals released with no formal announcement are signaling the most dramatic potential rewrite of federal fair-lending rules in more than a generation—and raising significant questions for credit unions about what comes next.
The proposals, posted quietly for publication in the Federal Register, would reshape long-standing elements of Regulation B and scale back the Bureau’s Section 1071 small-business data-collection rule. But according to Brandy Bruyere, partner at Honigman LLP and a longtime compliance expert for credit unions, these moves land at a moment when the CFPB’s own future is uncertain—meaning credit unions should “monitor, not modify” their programs for now.
Bruyere said the Reg B proposal offers an unusually clear window into the Administration’s preferred direction for fair-lending enforcement, particularly its focus on disparate treatment—“open or blatant discrimination,” as she described it. But the biggest shift is the Bureau’s proposal to strip out any reference to the disparate-impact standard, which examines whether a neutral policy disproportionately affects a protected class.
In practice, disparate impact arises when a facially neutral requirement—such as very high minimum credit scores or income thresholds—skews outcomes for younger borrowers or lower-income communities. The legal test doesn’t end there; lenders can still justify such policies if they’re grounded in legitimate business needs and no less discriminatory alternative exists.
Bruyere noted that while the test is familiar to many regulators, “there’s not a lot of law on this in ECOA,” and federal examination manuals have long treated disparate impact as a gray area—not itself a violation, but something to evaluate within a broader fair-lending risk framework.
“That’s why,” she said, “to some extent I wonder if this is a solution seeking a problem.”
The proposal would also narrow the availability of special purpose credit programs, further define what constitutes discouragement in lending interactions, and—if finalized—almost certainly invite legal challenges. Bruyere said the changes could even push more states to adopt their own fair-lending standards, creating a fragmented landscape that credit unions would have to navigate.
Section 1071: Scaling Back To The Statutory Minimum
The second proposal would overhaul the CFPB’s Section 1071 small-business data-collection rule, cutting it down to “more modest requirements,” as Bruyere summarized. Among the key changes:
- Raising the origination threshold from 100 to 1,000 covered transactions for two consecutive years
- Narrowing the definition of a small business from $5 million to $1 million in gross annual revenue
- Reducing the number of required data points, including trimming demographic fields
The revisions align with the Bureau’s broader deregulatory push. Bruyere noted the CFPB currently has “over a dozen” items on its agenda aimed at scaling rules back to the statutory baseline, including possible changes to mortgage servicing and loan-originator compensation.
But Can the CFPB Actually Finish The Job?
Even as the CFPB signals aggressive regulatory revisions, Bruyere emphasized a looming practical problem: the Bureau may run out of money before it can finalize anything.
Earlier this week, the CFPB acknowledged in a court filing that it cannot legally request new funding from the Federal Reserve under its existing self-funding mechanism. Instead, it’s been drawing down what remains of its balances and anticipates exhausting all funds by early 2026.
“If you don’t have staff and you can’t spend money, I don’t know how you keep writing rules,” Bruyere said.
Under the Anti-Deficiency Act, the Bureau cannot operate outside appropriations except to protect human life or property—an argument Bruyere doubts courts would extend to general consumer-protection activities.
Brandy Bruyere
If funding truly runs out:
- These proposals could stall on the docket, unfinished
- Congress could shift the CFPB to appropriations—but Bruyere said that would give lawmakers the power both to fund and defund the agency at will
- States could step into the vacuum with their own enforcement—which, for credit unions, risks a patchwork of rules far more complex than current federal standards
What Credit Unions Should Do Now
For credit unions, Bruyere’s message is simple: don’t change your fair-lending program yet.
“Right now, not much” changes operationally, she said. “It’s a monitoring situation.”
She expects any final rule to face immediate litigation, and even if federal regulators stop examining for disparate-impact or discouragement concerns, reputation risk and member-service commitments still matter.
“Keeping an eye on your product creation and making sure you’re serving your full membership—this is really just part of the credit union way,” she said.
For now, Bruyere advises credit unions to:
- Track the proposals closely
- Expect delays or litigation
- Avoid making policy changes until the future of the CFPB becomes clearer
- Prepare for potential state-level shifts if federal requirements weaken or stall
“We’re still in wait-and-see mode,” she said. “It’s going to continue to be politically messy, overly detail-oriented, and rely on legal principles most people find dreadfully boring. But for now, credit unions should hold steady and watch how today’s proposals—and the CFPB itself—hold on.”