Less Enforcement Doesn’t Mean Less Risk By Robert Brosh, Director of Regulatory Compliance, Ncontracts When was the last time you reviewed your fair lending program? Did you do it because the risk warranted it, or because an examiner was coming? For many lenders, it’s tempting to stay stagnant in the current regulatory environment. Federal agencies are pulling back, disparate impact is deprioritized, and exams are less frequent. If the regulators aren’t pushing, why should we? It’s an understandable question, but the answer is more complex than it seems. The Department of Justice’s (DOJ’s) $68 million fair lending settlement with a Texas lender and developer in February 2026 is a useful starting point. Enforcement activity may be quieter overall, but when violations are pursued, the consequences are steeper than ever. Fair lending risk is shifting, not shrinking, and the lenders who recognize that now will be better positioned than those who find out the hard way. What’s Changed at the Federal Level The CFPB’s latest Fair Lending Report formalized what lenders knew and navigated throughout 2025. For example, the OCC deferred fair lending exams through Jan. 31, 2026, and the FDIC adjusted exam frequency based on asset size and compliance ratings. The CFPB also signaled it will no longer request expansive data sets unrelated to active exams. While these are real changes, the underlying laws haven’t changed. The Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA) remain intact. The 2015 Supreme Court ruling affirming disparate impact liability was grounded in the statute itself — not agency regulations — and current proposals to remove disparate impact from agency rules face a long road through the Administrative Procedures Act and likely litigation. The Federal Reserve, notably, hasn’t indicated it will stop analyzing disparate impact at all. Top takeaway: What your specific federal regulator is saying matters — and it’s worth tracking closely. The signals vary depending on who examines you, and they’re still evolving. The States Are Stepping In For lenders across the United States, keeping up with state-specific updates is crucial, as enforcement has largely shifted to the state level. Former CFPB Director Rohit Chopra is now advising state attorneys general, helping coordinate strategy around predatory lending, AI decisioning and areas where federal oversight has receded. States are increasingly sharing data, aligning legal theories and building coordinated enforcement programs. The activity is already visible: • New York expanded its consumer protection authority to address unfair and abusive lending practices, including pricing, underwriting and marketing practices. • New Jersey codified disparate impact under state law and issued AI governance guidance with explainability expectations that go beyond current federal requirements. • Massachusetts reached a $2.5 million settlement with a lender over AI-driven underwriting, focusing on model overrides without documented guardrails and on adverse action notices that didn’t adequately explain credit decisions. Top takeaway: A fair lending framework built around federal examiners alone may leave meaningful gaps. It’s worth understanding the posture of every state where you actively lend. What a $68 Million Enforcement Action Looks Like The DOJ’s February 2026 settlement with a Texas-based land developer and lender is the most recent example of the domino effect of a single fair lending enforcement action. The company sold more than 12,000 land installment contracts to borrowers in the Houston area, targeting Hispanic buyers with marketing almost exclusively in Spanish. The company charged interest rates well above market averages for the period, sold flood-prone property that often lacked basic infrastructure, and issued loans without verifying borrowers’ ability to repay — leading to high default and foreclosure rates. The settlement included infrastructure improvements, law enforcement investment in affected communities and operational restrictions that will change how the company does business for years. Top takeaway: Fewer cases don’t necessarily mean lower stakes. The consequences of violations can extend well beyond consumer remediation, creating additional operational and financial risks. FAIR LENDING in 2026 Colorado Banker 14
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