Chopra defends decision to expand UDAAP definition

Appearing today before the Senate Banking Committee, CFPB Director Rohit Chopra pushed back against suggestions his agency exceeded 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, which is the subject of a lawsuit by ABA and other business groups.

Committee members Pat Toomey and (R-Pa.) and Steve Daines (R-Mont.) criticized the CFPB for allegedly redefining UDAAP to cover potential discriminatory conduct—including actions that have a disparate impact on protected groups—which they said wasn’t the intent of Congress when it authorized the creation of the agency in the Dodd-Frank Act. “In the 12 years since Dodd-Frank was enacted, neither Congress nor the CFPB has claimed that the legislation authorizes disparate impact under UDAAP,” Daines said. “Unfortunately, instead of implementing these changes in an open and very transparent rulemaking process, your bureau simply issued a press release announcing a very controversial change.”

Chopra told committee members that he disagreed that the changes were about disparate impact. “It is about injury, reasonable avoidability and countervailing benefits,” he said. As far as transparency, Chopra said the CFPB has sought to find ways to issue guidance that doesn’t have the force of law “but gives entities a sense of what current law requires.” In the case of the UDAAP manual, it “is guidance for examiners that when they are investigating potential discriminatory or other unlawful conduct, how might it implicate some of the existing laws that Congress has authorized and prohibited. In many situations, illegal conduct can violate multiple laws.”

In their lawsuit filed in September, ABA and other business groups argued that not only did CFPB exceed its statutory authority but it failed to go through legally required notice and comment procedures before implementing the update. More recently, the groups have asked a federal court in Texas to grant summary judgment in the case.