FDIC removes disparate impact standard from exam manual

The Federal Deposit Insurance Corporation (FDIC) has removed all references to “disparate impact” from its Consumer Compliance Examination Manual, narrowing the scope of how potential discrimination is assessed in banking oversight.

In a Financial Institution Letter, the agency announced that examiners will now evaluate compliance with the Equal Credit Opportunity Act and Fair Housing Act solely through evidence of disparate treatment, which requires proof of intentional discrimination.

The updated sections include 1.1, 2.1, and 4.1 of Section IV-Fair Lending Laws and Regulations and Section VII-1.1 Unfair, Deceptive, and Abusive Practices – Federal Trade Commission Act/Dodd-Frank Act. This removes all references to disparate impact and how to evaluate disparate impact risk.

The move follows an executive order issued by President Trump on April 23, 2025 entitled, “Restoring Equality of Opportunity and Meritocracy”.

“Disparate-impact liability all but requires individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability,” the Executive Order stated.  “It not only undermines our national values, but also runs contrary to equal protection under the law and, therefore, violates our Constitution.”