What’s Ahead for Fair Lending in 2025?

Learn what’s new and what you need to know in 2025

The year 2025 marks a turning point in fair lending policies in the United States, especially with the change in federal administration and the advancement of artificial intelligence technologies.

The financial sector faces a landscape of regulatory uncertainty, ethical challenges, and new opportunities for financial inclusion. And you can learn more about the key rules you need to know in 2025.

Regulatory rollback: changes in the CRA and the CFPB

The repeal of the 2023 updates to the Community Reinvestment Act (CRA) was one of the main changes so far.

Previously, the rules aimed to modernize the evaluation of banks in the context of digital banking growth.

After a series of pressures, federal regulation returned to the older 1995 rules, with a more limited evaluation scope restricted to the physical surroundings of bank branches.

At the same time, the Consumer Financial Protection Bureau (CFPB) suffered significant cuts under the new government administration.

With the goal of reducing the workforce by nearly 100%, there are growing concerns about the weakening of oversight on predatory practices and credit discrimination—something that leaves many people uncomfortable.

The rise of “Buy Now, Pay Later” and the risks for vulnerable consumers

The “Buy Now, Pay Later” (BNPL) model continues to grow in the country. And this is raising major red flags.

A company like Klarna has already reported a 17% increase in credit losses just in the first quarter of 2025, totaling over $136 million.

And according to studies, the most affected populations are Black and Latina women, often without a full understanding of the risks involved.

Despite that, the current administration chose not to enforce a Biden-era rule that extended Truth in Lending Act protections to BNPL products, weakening oversight of these operations.

Artificial intelligence and algorithmic bias: a new area of focus

The increasing use of AI in credit decisions has raised serious concerns about algorithmic discrimination.

In 2024, the CFPB and other federal agencies issued guidance requiring financial institutions to test their models to identify and mitigate discriminatory biases.

The state of Colorado, for example, passed a law mandating annual AI impact assessments in credit decisions, effective February 2026.

Meanwhile, the Department of Housing and Urban Development (HUD) has already issued warnings about the use of algorithm-based advertising, which may violate the Fair Housing Act.

Small businesses and data collection: Section 1071 in focus

The implementation of Section 1071 of the Dodd-Frank Act, which requires data collection on small business lending, is scheduled to begin in July 2025 for large financial institutions.

There are still ongoing lawsuits, but the CFPB is moving forward with the rule, aiming to identify disparities in credit access for minority- and women-owned businesses.

However, critics argue that the rule imposes high costs on institutions and raises concerns about data privacy.

Best practices and private sector initiatives

In light of regulatory changes, some financial institutions are taking proactive steps to promote fair lending.

According to EY, effective practices include

1. Modernizing platforms and processes to go beyond regulatory compliance.
2. Conducting assessments using proxy data to identify gaps in underserved communities.
3. Reviewing banking presence strategies in low- and moderate-income areas.
4. Taking equality-focused actions and anticipating regulatory decisions.
   These initiatives demonstrate a commitment to equity, even in an uncertain regulatory environment.

Conclusion: a landscape of challenges and opportunities

The fair lending landscape in the U.S. in 2025 is marked by regulatory rollbacks, technological advances, and private sector initiatives.

While federal oversight declines, the risks of discriminatory practices increase, especially for vulnerable populations.

On the other hand, growing awareness of algorithmic bias and data collection on small business lending provides opportunities to promote greater transparency and financial inclusion.

The future of fair lending will depend on collaboration among regulators, financial institutions, and civil society to ensure that access to credit is equitable and fair for all.

You can keep following the more recent information.

Written by

Gabriel Gonçalves