ABA, associations seek summary judgment in CFPB lawsuit

The American Bankers Association and six other trade groups on Tuesday asked a federal court in Texas to grant summary judgment in their lawsuit against the CFPB for exceeding its legal authority when it expanded the definition of “unfairness” to encompass discrimination in the unfair, deceptive, or abusive acts and practices (or UDAAP) exam manual earlier this year. In a motion filed with the U.S. District Court of Eastern Texas, the groups asked the court to set aside the CFPB’s March update to the manual and permanently enjoin the agency from pursuing any examinations or enforcement actions based on the update.

Underpinning the groups’ argument was a recent ruling by a three-judge panel of the Fifth Circuit Court of Appeals, which covers Texas, earlier this year. The opinion in an unrelated lawsuit found that the CFPB’s funding structure violates the separation of powers clause of the Constitution. An appeal of the earlier ruling is pending before the Supreme Court; regardless of the outcome, ABA’s argument for summary judgment primarily relies on CFPB violations of the Administrative Procedure Act.

The groups sued the CPFB and agency Director Rohit Chopra in September after urging the agency to rescind the update, saying that the bureau’s UDAAP authority cannot be used to extend fair lending laws beyond the bounds set by Congress. In the recent motion, attorneys for ABA and other associations argued their members would suffer irreparable harm as institutions would be compelled to comply with the update or face legal action. They also argued that a permanent injunction wouldn’t harm the public interest, as “the public has a strong interest in the proper function of the banking industry nationwide.”