Chamber of Commerce of the United States of America v. Consumer Financial Protection Bureau
Date: Nov. 16, 2023
Issue: Whether CFPB’s revised exam manual expanding its unfair, deceptive or abusive acts or practices (UDAAP) authority to include discrimination violates the Dodd-Frank Act and Administrative Procedure Act (APA).
Case Summary: The Fifth Circuit entered an order granting the CFPB’s request to stay (pause) further proceedings in its appeal against the American Bankers Association and a group of trade associations, until the U.S. Supreme Court reaches a decision in Community Financial Services Association of America v. CFPB.
In March 2022, CFPB announced it considers discrimination to be a UDAAP. The CFPB sought to examine for discrimination and whether companies are adequately “testing for” discrimination in their advertising, pricing and other activities. The manual update directs examiners to use the agency’s UDAAP authority to access companies’ data, algorithms, operations, premises and personnel for evidence of “discrimination,” including “disproportionately adverse impacts on a discriminatory basis,” or evidence of insufficient internal monitoring for those outcomes. On Sept. 28, 2022, ABA and its co-plaintiffs sued the CFPB in the Eastern District of Texas, urging the court to vacate the manual update and enjoin the bureau from conducting any examinations or enforcement actions based on it.
Judge Campbell Barker of the Eastern District of Texas granted ABA’s motion for summary judgment and denied the CFPB’s motion to dismiss and its alternative motion for partial summary judgment. Applying the major-questions doctrine, Judge Barker ruled CFPB exceeded its statutory authority under the Dodd-Frank Act. Also applying the Fifth Circuit precedent in Community Financial Services Association of America v. CFPB, Judge Barker ruled the CFPB’s funding structure is unconstitutional under the Appropriations Clause. Earlier this year, the U.S. Supreme Court granted the CFPB’s certiorari petition requesting review of this Fifth Circuit decision. As to remedies, Judge Barker vacated manual update and granted injunctive and declaratory relief to ABA members and its co-plaintiffs’ members. The court also enjoined the CFPB from pursuing any examination, supervision, or enforcement action against ABA members and its co-plaintiffs’ members based on the CFPB’s perceived authority under Dodd-Frank act to investigate allegations of discrimination.
On Nov. 6, 2023, the CFPB appealed Judge Barker’s decision to the Fifth Circuit. CFPB later requested to delay the proceeding, arguing the funding issue is controlled by the Supreme Court decision in Community Financial. The CFPB also argued pausing the proceeding would best preserve the resources of the court. The CFPB asserted the district court awarded plaintiffs the declaratory relief they sought, and in turn, plaintiffs would not be prejudiced by delaying the resolution of the appeal. ABA did not oppose CFPB’s motion.
Bottom Line: The U.S. Supreme Court’s ruling in Community Financial will be released before June 2024.