On September 28, the U.S. Chamber of Commerce (Chamber), together with the Longview Chamber of Commerce, American Bankers Association, Consumer Bankers Association, Independent Bankers Association of Texas, Texas Association of Business, and Texas Bankers Association, filed a lawsuit in the Eastern District of Texas against the Consumer Financial Protection Bureau (CFPB) to prevent the amendment to the Unfair, Deceptive, or Abusive Acts and Practices (UDAAP) section of its examination manual. The groups are suing to stop the CFPB’s assertion that it has the authority to bring discrimination claims against financial institutions on products and services that aren’t protected by fair lending laws.
The exam manual suggests that CFPB examiners and enforcement attorneys could take action against financial institutions for alleged discrimination in checking and saving accounts, international remittances, and other noncredit products. In its press release, the Chamber opined that including disparate impact in the noncredit equation could result in the disappearance of products, such as no-fee checking accounts. According to the Chamber, these accounts are more often offered to customers with higher balances, which often are individuals further into their careers, and a disparate impact analysis could find that no-fee policies for customers with larger balances constitutes age discrimination.
The lawsuit alleges that by asserting it can bring these types of discrimination claims, the CFPB is exceeding the scope of its statutory authority and violating the Administrative Procedure Act (APA). As the Chamber explained: “Congress has not given the CFPB the power to do so, as allegations of discrimination are handled by other agencies through statutes such as the Equal Credit Opportunity Act, the Fair Housing Act, and the Home Mortgage Disclosure Act.” The complaint also argues that the CFPB’s funding mechanism is unconstitutional because it evades the congressional appropriations process.
American Bankers Association President Rob Nichols stated: “This is a step we did not want to take, but it was a necessary step given the extraordinary actions of the CFPB.”
As we blogged here, we were initially skeptical about the viability of the CFPB’s position, announcing that it had decided to interpret the word “unfair” in Dodd-Frank to prohibit discrimination. We thought that the CFPB’s interpretation of UDAAP was beyond its authority because it seems to ignore the legislative choice made by Congress to explicitly limit the reach of anti-discrimination concepts to specific areas when it passed legislation like ECOA, the Fair Housing Act, Title VII, the Americans with Disabilities Act. Our skepticism was reinforced after the Supreme Court issued its ruling in West Virginia v. EPA, as we posted here.
Troutman Pepper will continue to monitor this lawsuit and will provide further updates as they become available.
