A federal judge in Texas today granted summary judgment to ABA, the Texas Bankers Association, the U.S. Chamber of Commerce and several other co-plaintiffs in their challenge to the CFPB’s UDAAP exam manual, in which the bureau unlawfully expanded the statutory definition of “unfairness” to encompass discrimination. In a sharp rebuke of the agency, the judge issued a final judgment setting aside the CFPB’s March 2022 interpretation of its UDAAP authority.
The court granted additional protection to the plaintiffs’ members by issuing a final judgment prohibiting the CFPB from “pursuing any examination, supervision, or enforcement action against any member of a plaintiff organization based on the CFPB’s interpretation of its UDAAP authority.”
“While we’re still reviewing the final judgment and its full implications, we’re pleased with today’s U.S. District Court ruling that makes clear the CFPB exceeded its statutory authority when it ‘updated’ its exam manual and announced an open-ended and novel power to examine banks for alleged discriminatory conduct,” ABA President and CEO Rob Nichols said.
The judge agreed with ABA that the CFPB clearly exceeded its statutory authority under the Dodd-Frank Act. In addition, the judge upheld ABA’s challenge to the exam manual on the grounds that it was the product of an unconstitutionally funded agency. (Texas is covered by an appellate court ruling, currently being appealed to the Supreme Court, that found the bureau’s funding violates the Appropriations Clause of the Constitution.)
While ABA repudiates discrimination of any kind, it argued in the case that 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 set by Congress. “We strongly support the fair enforcement of nondiscrimination laws, but the bureau’s extraordinary expansion of its regulatory reach crossed the line,” Nichols added. “We hope this ruling sends a clear message to the bureau and all federal regulators that they must operate within the boundaries set by Congress.”