ABA, trade groups: CFPB exceeds authority with exam manual update

In a joint white paper issued today, the American Bankers Association, Consumer Bankers Association, Independent Community Bankers of America and the U.S. Chamber of Commerce detailed why the CFPB’s recent “update” to its UDAAP exam manual and its announcement that it would begin examining financial institutions for alleged discriminatory conduct using “unfairness” exceeds the bureau’s legal authority. The groups urged CFPB to rescind the new examination manual and explained why the bureau’s unfair, deceptive and abusive acts or practices, or UDAAP, authority cannot be used to extend the fair lending laws beyond the bounds carefully set by Congress.

Congress, the white paper explained, does not use the statutory concepts of “unfairness” and “discrimination” interchangeably. On March 16, the CFPB “conflated the concepts by announcing, via a UDAAP exam manual ‘update,’ that it would examine financial institutions for alleged discriminatory conduct that it deemed to be ‘unfair’ under its UDAAP authority,” the groups wrote. The change is “contrary to law and subject to legal challenge” as well as potential congressional action, the groups added.

“It represents an enormous self-expansion of the CFPB’s authority that stands contrary to law and the intent of Congress,” the associations wrote, adding that the bureau has “taken the law into its own hands.” Changes “that alter the legal duties of so many are the proper province of Congress, not of independent regulatory agencies, and the CFPB cannot ignore the requirements of the Administrative Procedures Act and Congressional Review Act. The CFPB may well wish to fill gaps it perceives in federal antidiscrimination law. But Congress has simply not authorized the CFPB to fill those gaps.”