On Friday, September 8, the United States District Court for the Eastern District of Texas ruled that the Consumer Financial Protection Bureau (CFPB) had violated its statutory authority with its 2022 revisions to its examination manual, which invoked UDAAP authority to “access companies’ data, algorithms, operations, premises and personnel for evidence of discrimination.”
The revisions, released on March 16, 2022, were accompanied by a blog post from CFPB Director Rohit Chopra. In the post, Director Chopra declared that the bureau was, “expanding its anti-discrimination efforts to combat discriminatory practices across the board in consumer finance.”
In a letter sent to the IBAT membership when this lawsuit was filed last September, IBAT Chairman Kyle Irwin expressed our concern that the CFPB’s actions would, effectively, create an “Equal Deposit Opportunity Act” when Congress has not authorized such a law.
“We believe that this overreach of the CFPB, among others, will have harmful impacts on our industry and the communities that we serve,” Irwin said.
Irwin added:
“IBAT and its members are fully committed to fair and equitable treatment of customers and future customers. We expect, however, that the CFPB should not engage in “unfair” regulation. We believe that the CFPB should comply with the Administrative Procedures Act (APA) when they desire to subject regulated entities to new rules. In this instance, the CFPB stepped over the APA and went directly to a press release and a revision to the Exam Manual.”
For the most part, the court agreed. However, it chose to center its opinion on an overreach of UDAAP authority by the bureau, as well as the unconstitutionality of the funding of the bureau. Finally, in what is now becoming the new norm, the court chose only to grant relief from the enforcement of examination manual revisions to the members of the plaintiff organizations. Those organizations include IBAT, U.S. Chamber of Commerce, American Bankers Association, Consumer Bankers Association, Texas Bankers Association and Texas Association of Business.
