The CFPB is operating beyond its statutory authority and without accountability
The U.S. Chamber of Commerce filed a lawsuit in the Eastern District of Texas with co-plaintiffs American Bankers Association, Consumer Bankers Association, Independent Bankers Association of Texas, Longview Chamber of Commerce, Texas Association of Business, and Texas Bankers Association against the Consumer Financial Protection Bureau (CFPB) for exceeding its statutory authority when amending its examination manual.
The U.S. Chamber and co-plaintiffs are challenging the CFPB’s recent update to the Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) section of its examination manual to include discrimination and in particular disparate impact. Congress has not given the CFPB the power to do so, as allegations of discrimination are handled by other agencies through statutes such as the Equal Credit Opportunity Act, the Fair Housing Act, and the Home Mortgage Disclosure Act. The failure by Congress to grant such authority raises a “major questions” issue as recently decided by the Supreme Court.
Importing disparate impact into UDAAP will likely result in the disappearance of products consumers currently enjoy and benefit from. For example, no-fee checking accounts are more often offered to customers with higher balances, which often are individuals further into their careers as opposed to those who are just beginning to work. A disparate impact analysis could find that no-fee policies for customers with larger balances constitute age discrimination against younger customers, and therefore banks may no longer be willing to offer such products to consumers for fear that they will be declared unlawful.
“The Consumer Financial Protection Bureau is operating beyond its statutory authority and in the process creating legal uncertainty that will result in fewer financial products available to consumers,” said U.S. Chamber Executive Vice President and Chief Policy Officer Neil Bradley. “The CFPB is pursuing an ideological agenda that goes well beyond what is authorized by law and the Chamber will not hesitate to hold them accountable.”
Among other arguments, the U.S. Chamber and co-plaintiffs specifically are suing the CFPB for:
- Violating its Authority outlined in the Dodd-Frank Act. The CFPB is rewriting the law by amending its Supervision and Examination Manual and claiming it can examine entities for alleged discriminatory conduct under its UDAAP authority. This exceeds the statutory authority granted to it in the Dodd-Frank Act.
- Violating the Administrative Procedure Act’s procedural requirements. By failing to go through proper notice-and-comment procedures when amending its manual, the CFPB violated the APA’s procedural requirements.
“The CFPB has important responsibilities to protect consumers, including against discrimination, but rather than focusing on that work, the CFPB is attempting to pretend that they are Congress and impose new theories of disparate impact through an extra-legal process. By doing this, everyday consumers will find they have less access to banking and credit products as companies will be forced to divine what the CFPB may or may not say is now illegal under the undefined standard they have created,” said Bradley.
The U.S. Chamber and co-plaintiffs are urging the court to intervene to ensure the CFPB is held accountable to the rule of law and consumers. This will ensure consumers are protected and have access to financial products they rely on.
The U.S. Chamber’s full complaint against the CFPB can be viewed here.
Bruce A. Smith of Ward, Smith & Hill PLLC, Cameron T. Norris, Bryan K. Weir, and David L. Rosenthal of Consovoy McCarthy PLLC, and the U.S. Chamber’s Litigation Center served as co-counsel for the U.S. Chamber.