IN THIS ISSUE

Court Decisions Provide Strategic Options for Companies Facing FCA Investigations

• Recent Decisions Quashing DOJ Administrative Subpoenas Provide a Roadmap for Companies Facing DEI-Focused False Claims Act Investigations  

As reported in last week’s issue, the Department of Justice has initiated investigations under the False Claims Act (FCA) into corporate DEI programs across multiple industries, issuing civil investigative demands seeking extensive documentation related to diversity-related employment practices. These investigations create a significant compliance burden and legal exposure. At the same time, recent federal court decisions are clarifying limits on the government’s ability to use investigative tools in pursuit of policy objectives rather than actual fraud.

Between July 2025 and January 2026, multiple federal courts quashed or substantially narrowed administrative subpoenas the DOJ issued to hospitals and medical providers in unrelated enforcement actions. In those cases, courts found that the government failed to demonstrate a sufficient connection between the information demanded and any congressionally authorized enforcement purpose, sought information not relevant to a viable legal theory, or issued subpoenas that were overly broad and insufficiently defined.

The FCA expressly permits recipients of civil investigative demands to petition federal courts to modify or set aside those demands. While courts have historically afforded the DOJ significant latitude at the investigative stage, the recent hospital decisions make clear that this deference has limits. Courts evaluating administrative subpoenas continue to apply established standards, including whether the demand serves a lawful purpose, seeks information relevant to that purpose, and adequately describes what is being requested.

These rulings are instructive for companies facing DEI-focused FCA scrutiny. Investigative demands that target lawful practices the administration disfavors, rather than specific false claims or material misrepresentations tied to government payment, may be vulnerable to challenge. Demands that lack a clear theory of falsity, scienter, or materiality, or that seek sweeping categories of DEI-related materials untethered to actual claims for payment, raise similar concerns.

The recent decisions signal heightened judicial attention when enforcement tools are used to advance policy goals rather than to investigate concrete violations of law. For companies navigating FCA investigations, this emerging body of case law provides strategic options that did not exist even months ago and underscores the importance of early, disciplined assessment of the government’s asserted basis for inquiry.

ACTIONABLE STRATEGIES

1.  Require a clear connection between the demand and an FCA theory:  Civil investigative demands are not meant to support open-ended inquiry. When requests are broad or disconnected from a specific theory tied to government payment, companies should reassess scope and relevance before proceeding.
   
   
2.  Do not conflate lawful DEI programs with fraud risk:  Disagreement with employment or governance practices does not, by itself, create False Claims Act exposure. Clear internal distinctions between lawful activity and payment-related representations help frame appropriate responses.
   
   
3. Treat the initial response as a governance decision:  How a company responds at the outset sets expectations for the investigation. Early discipline around purpose, relevance, and proportionality reduces downstream risk and preserves strategic flexibility.

See also: Federal Enforcement Campaign Targets Corporate DEI as Legal Standards Remain Unchanged (Issue 46)

EXECUTIVE ORDERS & FEDERAL POLICY

Fair Lending Protections Under Attack as CFPB Rules Face Challenge 

• Coalition of 78 Civil Rights Organizations Urges Trump Administration Not to Eliminate Fair Access to Lending for Women, Underserved Communities 

OVERVIEW

In January 2026, America First Legal filed petitions with the Consumer Financial Protection Bureau (CFPB) seeking rescission of Regulation C, the rule implementing the Home Mortgage Disclosure Act’s mortgage data-collection requirements. Regulation C requires covered mortgage lenders to collect and report applicant information, including race, ethnicity, and sex, for certain loan applications and originations.

America First Legal, a conservative legal organization aligned with the administration, argued that Regulation C unlawfully compels disclosure of sensitive demographic information and pressures lenders to consider protected characteristics in ways that conflict with federal nondiscrimination law. The petitions contend that the rule facilitates disparate-impact enforcement and encourages race- and sex-conscious decision-making in mortgage lending.

The petitions were filed amid broader regulatory activity affecting fair lending enforcement. In late 2025, the CFPB proposed revisions to Regulation B, the rule implementing the Equal Credit Opportunity Act, that would limit reliance on disparate-impact standards and impose new restrictions on Special Purpose Credit Programs used to expand access to credit for underserved borrowers.

Those proposed changes prompted formal opposition from civil rights and consumer advocacy organizations. A coalition of 78 groups led by the National Fair Housing Alliance submitted comments warning that weakening disparate-impact enforcement and related data-collection tools would reverse decades of settled fair lending practice and reduce the federal government’s ability to identify discrimination in credit markets. The Center for Responsible Lending separately raised concerns regarding the CFPB’s rulemaking process and its potential effects on access to credit.

As of January 2026, the CFPB had not announced whether it would initiate rulemaking in response to the Regulation C petitions or how the petitions would interact with the agency’s pending fair lending proposals.

LEGAL INTERPRETATION

Regulation C implements the Home Mortgage Disclosure Act (HMDA), which Congress enacted in 1975 in response to public concern about credit shortages in certain neighborhoods, particularly urban areas, and the role that discriminatory lending practices may have played in restricting access to mortgage credit. HMDA authorizes the collection and public reporting of mortgage lending data to support regulatory oversight, inform investment decisions, and assist in identifying potential discriminatory patterns in housing finance.

America First Legal, a conservative legal organization aligned with the administration, has petitioned the Consumer Financial Protection Bureau (CFPB) to rescind Regulation C. The petition argues that requiring lenders to collect applicant demographic information exceeds statutory authority and pressures lenders to consider protected characteristics in violation of federal nondiscrimination law. The CFPB has discretion to consider petitions for rulemaking, but rescinding or materially revising Regulation C would require notice-and-comment rulemaking and a reasoned explanation under the Administrative Procedure Act.

The petition has prompted opposition from civil rights and consumer advocacy organizations, which argue that Regulation C is a core enforcement tool authorized by Congress and that eliminating mortgage data collection would impair the federal government’s ability to identify and address discriminatory lending practices. These groups contend that demographic data collection supports, rather than undermines, compliance with fair lending laws.

The Regulation C petition arises alongside the CFPB’s pending proposal to revise Regulation B, which implements the Equal Credit Opportunity Act (ECOA). ECOA prohibits discrimination in credit transactions on specified bases, including race and sex. The CFPB’s proposal would revise its regulatory interpretation by stating that ECOA does not authorize disparate-impact liability and by imposing additional limitations on Special Purpose Credit Programs. 

While these changes would affect how ECOA is administered, they would not amend the statute itself, which remains in force unless changed by Congress.

BRIDGE POV

The administration’s approach to civil rights enforcement reflects a sustained effort to dismantle regulatory frameworks that acknowledge and address structural inequities in markets. Enforcement has been narrowed toward only the most explicit and provable instances of intent, even where Congress authorized broader tools to ensure equal access and fair competition.

Fair lending data collection and disparate impact standards were not designed to advantage one group over another. They exist to identify barriers that distort markets, suppress demand, and exclude qualified borrowers from economic participation. Removing those tools does not create neutrality. It removes visibility into how markets operate and limits the ability to identify discriminatory outcomes.

The push to eliminate demographic lending data, restrict Special Purpose Credit Programs, and disavow disparate impact enforcement reflects a broader commitment to undoing mechanisms that level the playing field. Equal opportunity is being redefined in ways that preserve existing hierarchies by removing the tools that challenge them.

ACTIONABLE STRATEGIES

1.  Anchor fair lending practices in statute: Ensure lending policies, data governance, and compliance frameworks align with the requirements of HMDA, ECOA, and the Fair Housing Act, rather than fluctuating enforcement posture.
   
   
2. Maintain internal visibility into lending outcomes: Continue to monitor access, pricing, and outcomes across customer segments regardless of changes to federal reporting requirements. Internal data remains essential for risk management and governance.
   
   
3. Treat fair access as a business discipline: Position fair lending as central to market integrity, customer trust, and long-term growth. Organizations that continue to identify and address barriers to access demonstrate discipline and credibility in uncertain regulatory environments.
   
   

See also: Trump Issued an Executive Order on Disparate Impact Liability (Issue 10)

WORKFORCE & EMPLOYMENT

EEOC Moves to Rescind Harassment Guidance and Internal Voting Procedures  

• Former EEOC officials condemn agency’s move to drop anti-harassment guidance 

• EEOC to Weigh Rescinding Vote Procedures in Upcoming Hearing 

• Proposed Rescission of EEOC Voting Procedures
   

OVERVIEW

In late December 2025 and early January 2026, the Equal Employment Opportunity Commission initiated separate actions affecting both workplace harassment guidance and the agency’s internal decision-making procedures.

On December 29, 2025, the Equal Employment Opportunity Commission (EEOC) filed a submission with the Office of Information and Regulatory Affairs requesting approval to rescind the 2024 Enforcement Guidance on Harassment in the Workplace. The request seeks to cancel the guidance by issuing a final rule without providing a new notice-and-comment process. The 2024 guidance was issued following public comment and provided employers and employees with interpretive information about harassment protections under federal employment discrimination laws. 

Earlier in 2025, in litigation involving The Heritage Foundation challenges to federal agency actions, EEOC Chair Andrea Lucas characterized the harassment guidance as “significant guidance” and argued that any rescission or revision would require notice-and-comment procedures. Contrary to that position, the EEOC’s current request seeks to withdraw the guidance without initiating a new public comment process.

In early January 2026, public reporting indicated that the EEOC’s request was under review with the White House and that former EEOC and Department of Labor officials raised concerns about rescinding the guidance without a new opportunity for public comment.

Separately, on January 7, 2026, the EEOC announced it would consider rescinding its internal commission voting procedures at a public meeting scheduled for January 14, 2026. Those procedures, adopted in January 2025, outline timelines and requirements for how commissioners review and vote on policy guidance, litigation positions, and other agency matters. When announcing the proposed change, the EEOC did not provide a public link or access point for reviewing the existing procedures slated for rescission.The proposed change would revise or eliminate these procedures and would shift more decision-making authority to the office of the Chair.

As of mid-January 2026, neither the rescission of the harassment guidance nor the revision of voting procedures had been finalized.

LEGAL INTERPRETATION

The EEOC’s actions implicate the administrative process and the statutory structure of the agency as a multi-member commission.

Rescinding the 2024 Enforcement Guidance on Harassment in the Workplace would change the agency’s stated interpretation of how harassment standards are applied under the federal employment discrimination statutes the EEOC enforces. The guidance was issued following a public comment process and does not itself amend statutory law. Withdrawing it without a new opportunity for public input would alter the agency’s interpretive position and enforcement posture, while leaving underlying legal obligations unchanged.

Separately, rescinding or revising the EEOC’s internal commission voting procedures affects how the agency makes decisions on policy guidance, enforcement priorities, and litigation positions. The EEOC is structured by statute as a bipartisan, multi-member commission, and voting procedures function as an internal mechanism for commission review and approval. Changes to those procedures would not alter substantive protections under federal employment discrimination law, but would change how authority is exercised within the agency.

Neither action modifies the text of Title VII or other federal employment discrimination statutes. The effects are limited to interpretation, administration, and internal decision-making processes rather than statutory rights.

BRIDGE POV

These actions reflect a shift in how civil rights enforcement is being handled at the agency level. Rather than changing statutory law, the emphasis is on changing the processes that shape interpretation and enforcement.

Withdrawing harassment guidance without a public process reduces clarity about how existing law is applied. Rolling back internal voting procedures concentrates authority and limits internal deliberation in an agency Congress structured to operate through collective decision-making.

Earlier this year, the same leadership now moving to rescind the harassment guidance argued in court that the guidance was significant and could not be revised or withdrawn without notice-and-comment procedures. That position has now been abandoned. Process is being treated as mandatory when it constrains others and optional when it constrains the agency itself.

The effect is a redistribution of power inside the EEOC. Guidance can be reversed more easily. Decisions can be made with fewer internal constraints. Enforcement posture can shift without the same level of transparency or consensus. Statutory obligations remain, but the mechanisms that provided predictability and accountability are weakened.

Greater discretion sits at the top, and uncertainty increases across the system, even though the law itself has not changed.

ACTIONABLE STRATEGIES

1. Do not treat guidance changes as a reduction in legal obligations: Federal employment discrimination statutes remain in force. Maintain harassment prevention, investigation, and response frameworks grounded in settled law rather than current agency posture.
    
2. Build compliance programs that withstand volatility: As internal guardrails narrow, enforcement priorities may shift more abruptly. Programs designed for consistency and durability are better positioned than those calibrated to agency signaling.
    
3. Strengthen internal governance and documentation: When external process becomes less transparent, internal discipline matters more. Clear policies, consistent documentation, and defensible decision-making provide stability when federal process contracts.