The Office of the Comptroller of the Currency (OCC) announced on July 14, 2025, that it will cease supervising banks for disparate impact liability.1 Accordingly, OCC examiners will not request, review, conclude on, or follow up on matters related to a bank's disparate impact related risk, risk analysis, or assessment processes or procedures.2 The OCC also removed references to disparate impact liability from its fair lending examination manual.
This policy shift follows President Trump's April 2025 executive order mandating the elimination of disparate impact liability across federal agencies and claiming that disparate impact liability forces companies to "engage in racial balancing to avoid potentially crippling legal liability."3 Given the Trump administration's approach, the OCC's policy shift is unsurprising. But the change means financial services companies should reconsider how they evaluate and address disparate impact risk, not only from the perspective of this revised federal regulatory lens, but also with the understanding that state attorneys general and private litigants will continue to pursue disparate impact claims as long as such claims remain legally viable.
Disparate Impact's Legal History
Disparate impact discrimination occurs when a facially neutral policy disproportionately affects a protected class and is otherwise unjustified.4 In contrast, disparate treatment discrimination occurs when protected class members are treated less favorablybecause oftheir protected status.5 Classic examples of policies resulting in actions based on disparate impact allegations include seniority-based pay raises6 and staff reductions.7 But federal agencies and private plaintiffs have also invoked disparate impact theories against financial institutions in cases involving mortgage pricing models8 and allegedly predatory lending offers.9
The OCC's decision to stop supervising disparate impact liability departs from long-standing precedent upholding disparate impact as a method for proving discrimination. Since 1971, the United States Supreme Court has recognized disparate impact as a way to prove discrimination under multiple federal statutes, including the Fair Housing Act (FHA).10 In fact, by the time of the Supreme Court's ruling inInclusive Communities, all eleven federal courts of appeals had similarly ruled that such claims were cognizable under the FHA.11 And, although never specifically addressed by the Supreme Court, the disparate impact theory has often been used to prove discrimination under the Equal Credit Opportunity Act.12
The DOJ and financial regulators have historically relied upon disparate impact theories to enforce antidiscrimination laws in the context of lending. For example, in 2015, the DOJ and the CFPB jointly alleged that a mortgage lender's loan pricing model disparately impacted African American and Hispanic borrowers, resulting in a $9 million settlement.13 In another case, the CFPB and the DOJ required a national bank to pay $169 million in 2014 to settle allegations that its failure to extend debt relief offers to those with Puerto Rico addresses or a preferred language of Spanish disparately impacted Hispanic borrowers.14
Private plaintiffs' disparate impact theories are similar to those brought by the government. In 2012, the ACLU filed a class action on behalf of African American homeowners in Detroit, alleging that an investment bank violated the FHA through its...
