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District court rules against CFPB’s UDAAP authority
Friday evening, a federal judge in Texas granted summary judgment in a case challenging the CFPB’s unfair, deceptive, or abusive acts or practices (UDAAP) exam manual. The plaintiffs in the case, including the American Bankers Association, U.S. Chamber of Commerce, and others, challenged that the bureau and its director, Rohit Chopra, unlawfully expanded the statutory definition of “unfairness” to include discrimination.
The U.S. District Court for the Eastern District of Texas issued a final judgment against the CFPB’s March 2022 updated interpretation of its UDAAP authority. In protecting the plaintiffs’ members, the court further moved to prohibit 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 the ruling applies only to members of the plaintiff organizations, it is a step in the right direction to impose proper checks and balances over the bureau.
NAFCU has long supported fair enforcement of non-discrimination laws, but continues to highlight that the bureau’s updated UDAAP authority sets a dangerous precedent and is another clear example of extreme regulatory overreach that was not intended by the Congress when the bureau was established in 2010 as part of the Dodd-Frank Act.
NAFCU strongly supports legislative improvements to change the structure of the CFPB from an unaccountable, single director to a bipartisan commission and to require the bureau to go through the congressional appropriations process to increase accountability and transparency. In July, NAFCU, CUNA, and the American Association of Credit Union Leagues (AACUL) filed a joint amicus brief urging the U.S. Supreme Court to uphold the U.S. Fifth Circuit Court of Appeals ruling that the CFPB’s funding structure is unconstitutional. Oral arguments for the case will be heard Oct. 3.
In a recent survey of NAFCU members on the CFPB and its effectiveness, results show that 94 percent of respondents overwhelmingly agree that Congress needs to reform the CFPB.