A federal judge vacated last year’s ICBA-opposed Consumer Financial Protection Bureau actions expanding the bureau’s authority to examine banks for discrimination.
Court Ruling: U.S. District Court for the Eastern District of Texas Judge J. Campbell Barker ruled against the CFPB’s March 2022 update to its examination manual for evaluating unfair, deceptive, and abusive acts and practices, or UDAAPs. In Chamber of Commerce v. CFPB, Barker ruled that Congress did not authorize the bureau to monitor for discrimination beyond those areas specified in statute, such as in relation to credit products. ICBA commends the Independent Bankers Association of Texas for its participation in the lawsuit and leadership on this issue.
Exam Manual Change: In announcing the exam manual update last year, the CFPB said it would expand beyond credit products to counter discriminatory practices “across the board in consumer finance.” In the update, the CFPB said discrimination may meet the criteria for “unfairness,” consumers can be harmed by discrimination regardless of whether it is intentional, and discrimination can be unfair regardless of whether the conduct is covered by the Equal Credit Opportunity Act.
Joint White Paper: ICBA and other groups last year issued a joint white paper detailing why the change exceeded the bureau’s legal authority. In the paper, the groups said the CFPB lacks the legal authority to examine financial institutions for alleged discriminatory conduct under its UDAAP authority because it conflated the distinct concepts of “unfairness” and “discrimination.”
Outlook: With the CFPB exam manual applicable to institutions over $10 billion in assets, ICBA is encouraging:
Community banks subject to direct CFPB supervision to notify ICBA if the CFPB takes steps to enforce the vacated provisions in its exam manual.
Community banks not subject to CFPB examination to monitor for any changes in application of UDAAP during upcoming exams and to notify ICBA.
