CBA, Leading Financial Groups Pursue Legal Action Against CFPB For Unlawful Changes To UDAAP Exam Manual

The Consumer Bankers Association (CBA), American Bankers Association (ABA), U.S. Chamber of Commerce, Independent Bankers Association of Texas (IBAT), Texas Bankers Association, Longview Chamber of Commerce, and the Texas Association of Business today jointly filed a lawsuit against the CFPB, challenging the legality of recent changes made by the agency to the Unfair, Deceptive, or Abusive Acts or Practices (UDAAPs) examination manual. In a new statement, CBA President & CEO Lindsey Johnson said:

“CBA and our members firmly oppose discrimination in any form and remain fully committed to expanding access to financial products among underserved communities across this nation. We wholeheartedly support fair, objective, and transparent enforcement of civil rights and fair lending laws, but recent changes made to the UDAAP Exam Manual by the CFPB represent an enormous self-expansion of the agency’s authority that stands contrary to law and the intent of Congress.

“Not only do these actions raise profound substantive and procedural legal concerns, they also threaten banks’ ability to deliver the products and services millions of Americans rely on to meet their financial needs. If the CFPB believes additional authority is necessary to address alleged discriminatory conduct, we stand ready to work with legislators and the Bureau to ensure the just administration of the law.”

What’s Happening

On March 16, 2022, the CFPB revised its examination manual to reflect a new belief that the “unfairness” prong of the UDAAP definition can be applied to conduct the CFPB deems discriminatory. Throughout the course of many decades, Congress never used the statutory concepts of “unfairness” and “discrimination” interchangeably. Rather, they are distinct, and each has a well-established meaning and scope of application.

Why it Matters

Congress did not authorize or intend for the CFPB to “fill gaps” between the clearly articulated boundaries of antidiscrimination statutes with its UDAAP authority.

• The CFPB’s action has created significant uncertainty in the financial marketplace to the detriment of consumers and banks alike.
• These changes affect every consumer product and service banks offer today and could limit access to the financial tools millions of hardworking Americans rely on to meet their needs.

Because these changes constitute the issuance of a substantive rule without following the required notice-and-comment process, the CFPB’s actions were procedurally invalid under the Administrative Procedures Act (APA) and must be set aside as unlawful. Moreover, the CFPB’s actions are also subject to challenge on substantive grounds as “not in accordance with law” and “in excess of statutory jurisdiction.

What We’re Doing

CBA and other leading financial groups have called on the Bureau to rescind recent changes made to the UDAAP examination manual. In a white paper sent to the CFPB in June, we conveyed why the Bureau’s actions stand contrary to existing law and are procedurally deficient. To date, the CFPB has maintained its position. 

Recognizing the impact these actions may have on banks and the millions of consumers they serve, today we filed a lawsuit challenging the CFPB’s position on several grounds including the agency’s lack of statutory authority and failure to follow appropriate policymaking procedure.

To learn more, click HERE.