On January 12, the CFPB received a petition from a nonprofit law firm urging the Bureau to rescind Regulation C, 12 C.F.R. § 1003, and Appendix B to Part 1003. The petition argued that Regulation C, which requires mortgage lenders to collect and report data on applicants’ ethnicity, race, and sex, exposes applicants to potential discrimination by both government and private actors in purported violation of federal civil rights law and the Constitution. The petition stated that rescinding this rule is crucial to maintaining fair, merit-based lending.
Any interested person can petition the CFPB to issue, amend or repeal a rule under 5 U.S.C. § 553(e) and 11 C.F.R. § 200.2. The law firm’s petition noted how the CFPB implemented Regulation C to enforce the HMDA, which mandates the collection of demographic data as outlined in Appendix B. Bank regulators have historically used this data to, among other things, identify institutions, loan products, or geographic areas with racial disparities significant enough to require investigation under antidiscrimination statutes.
The petition contended that Regulation C acts as a “surveillance tool,” pressuring lenders to balance lending to reliable borrowers with government-mandated racial and sexual quotas, raising Equal Protection concerns. It further asserted that when federal agencies use Regulation C-mandated data to target public investment and influence private capital flows, they engage in race- and sex-based governmental discrimination, again raising Equal Protection concerns. Pointing to the U.S. Supreme Court’s decision on race-based admissions to universities, the petition argued that the CFPB lacks a compelling interest to justify maintaining these specific data collection practices, thus aiding federal agencies in engaging in race- and sex-based governmental discrimination.
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