The US Chamber of Commerce and banking industry groups sued to stop the Consumer Financial Protection Bureau’s policy that would allow the agency to bring discrimination claims against financial firms on products and services that aren’t protected by fair lending laws.
The CFPB’s recently introduced policy of allowing examiners and enforcement attorneys to sue companies for possible discrimination in checking and saving accounts openings, international remittances and other products exceeded the agency’s authority, according to a Wednesday complaint filed in the US District Court for the Eastern District of Texas by the trade groups. The plaintiffs also included the American Bankers Association and the Consumer Bankers Association.
The CFPB announced the policy in a March update to its examination manual.
“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,” U.S. Chamber Executive Vice President and Chief Policy Officer Neil Bradley said in a statement.
The bureau was “pursuing an ideological agenda,” Bradley said.
A CFPB spokesperson said that the agency’s update to its exam manual was intended to provide transparency to the industry.
“The CFPB’s exam manuals allow banks to ensure they are following the law, and help make certain that consumers are receiving the fair and equitable treatment they deserve,” the spokesperson said.
Federal anti-discrimination laws—such as the Fair Housing Act, the Fair Credit Reporting Act and the Equal Credit Opportunity Act—protect consumers seeking mortgages, auto loans, credit cards and other credit products.
Deposit and checking accounts, credit reporting and other products aren’t covered by fair lending laws. The CFPB sought to address that gap by stating in its March manual update that discriminatory practices in these uncovered products would run afoul of the unfairness prong of the bureau’s Unfair Deceptive and Abusive Acts and Practices (UDAAP) authority.
Following the manual update, CFPB examiners could review banks and other companies’ books, records and compliance programs for evidence of discrimination in products not covered by fair lending laws. They then can refer possible violations to the bureau’s enforcement division if problems weren’t fixed.
The Chamber of Commerce and banking industry immediately cried foul, releasing a 21-page white paper claiming the CFPB had overstepped its bounds. UDAAP isn’t an antidiscrimination statute, the trade groups said.
The white paper and other trade group statements implied that they may sue.
The Chamber and the trade groups allege in their complaint that the CFPB’s examination manual changes should have been done through notice and comment rulemaking under the Administrative Procedure Act.
While the CFPB has argued that it was simply updating its interpretation of UDAAP in its examination manual, the changes amounted to a “legislative rule” requiring input from outside the bureau.
“The update is thus not a change that attempts to explain how the CFPB will examine an institution. Rather, it is a dictate that institutions must comply with or face legal action,” the complaint said.
The changes to CFPB examinations and UDAAP interpretation will cause companies to incur significant costs as they review and update their compliance plans and procedures, the complaint said. The agency provided no clear guidance on how to avoid running into trouble with examiners, it said.
Three Texas trade groups—the Independent Bankers Association of Texas, the Texas Association of Business and the Texas Bankers Association—are also plaintiffs in the lawsuit.
The plaintiffs are represented by Ward Smith & Hill PLLC, Consovoy McCarthy PLLC and the US Chamber of Commerce Litigation Center.
The case is Chamber of Commerce of the United States of America v. CFPB, E.D. Tex., No. 6:22-cv-00381, Complaint 9/28/22.