OCC says it will no longer examine banks for disparate impact

The OCC announced that it removed references for disparate impact liability from the “Fair Lending” booklet of the Comptroller’s Handbook, started removing references in other materials, and instructed examiners that they should no longer examine for disparate impact.

Background: A bank may violate fair lending laws by creating a disparate impact when a neutral policy or practice results in disproportionate burdens on or illegally excludes a protected class.

ICBA View: ICBA strongly supports equal access to credit while consistently supporting amending fair lending laws to clarify that disparate impact without a finding of intentional discrimination does not violate fair lending.

• ICBA in May strongly encouraged HUD Secretary Scott Turner to revisit the 2013 Disparate Impact Rule to ensure fair enforcement of the Fair Housing Act, reduce regulatory burdens on community banks, and promote a merit-based approach to housing policy.

• A 2024 ICBA white paper provides an in-depth look at trends in fair lending and explores concepts such as disparate impact.

• A 2018 ICBA blog post urged action as part of an ICBA grassroots campaign on the fair lending rule.

What It Means for Community Bankers: Although the OCC and other agencies won't be prioritizing disparate impact, it's still a cognizable claim, so banks should retain policies that mitigate disparate impact.