The U.S. Chamber of Commerce, along with six co-plaintiff banking associations, filed a lawsuit Sept. 28 in the U.S. District Court for the Eastern District of Texas challenging the CFPB’s recent update to the Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) section of its examination manual.
In March, the CFPB updated several sections of its examination manual targeting unfair discrimination in consumer practice under its UDAAP authority, including “discriminatory” acts or practices.
Central to the allegations in the complaint is that “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 [ECOA], the Fair Housing Act, and the Home Mortgage Disclosure Act,” the U.S. Chamber of Commerce said.
Among the main concerns raised in the complaint is that incorporating disparate impact into UDAAP will result in certain consumer products no longer being offered. “For example, no-fee checking accounts are more often offered to customers with higher balances, which often are individuals further into their careers as opposed to those who are just beginning to work,” the press release stated,” the U.S. Chamber of Commerce stated.
“A disparate impact analysis could find that no-fee policies for customers with larger balances constitute age discrimination against younger customers, and therefore banks may no longer be willing to offer such products to consumers for fear that they will be declared unlawful,” the U.S. Chamber of Commerce added.
The complaint further alleges the CFPB exceeded its statutory authority granted to it under the Dodd-Frank Act by “claiming it can examine entities for alleged discriminatory conduct under its UDAAP authority.” These updates further result in significant compliance costs, the complaint stated.
For example, in a blog post announcing the updates, the CFPB stated its examiners “will require supervised companies to show their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups. The CFPB will look at how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under ECOA.”
These updates also have broad implications from an enforcement standpoint, because it means the CFPB can now “examine for and enforce” its “novel interpretation” of what is unfair under UDAAP, the complaint alleges.
“As a matter of course, the CFPB shares violations it finds in examinations with the Enforcement Division, which results in enforcement opening investigations and lawsuits,” the complaint states. “The update is, thus, not a change that attempts to explain how the CFPB will examine an institution. Rather, it is a dictate that institutions must comply with or face legal action.”
Additionally, the complaint alleges the CFPB violated the Administrative Procedure Act’s procedural requirements by failing to go through proper notice-and-comment procedures when amending its manual.
The U.S. Chamber of Commerce and the co-plaintiff banking groups are urging the court to intervene. Stated the complaint, “This court’s intervention is needed to ensure that the CFPB is accountable to legal constraints, the rule of law, and the public as it pursues an aggressive agenda with far-reaching implications.” 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.