October 13, 2022

U.S. Chamber, Trade Groups Suit Claims Consumer Financial Protection Bureau Exceeded Authority

Holland & Knight Alert
Anthony E. DiResta | Da'Morus A. Cohen


  • The U.S. Chamber of Commerce has aligned with several trade groups in a suit against the Consumer Financial Protection Bureau (CFPB) alleging it exceeded its statutory authority when amending its examination manual.
  • The Chamber of Commerce argues that the amendment will result in the disappearance of products from which consumers currently benefit.
  • CFPB is also being charged with violating the Administrative Procedure Act's notice-and-comment requirement.

The U.S. Chamber of Commerce and six trade groups have filed suit in the U.S. District Court for the Eastern District of Texas against the Consumer Financial Protection Bureau (CFPB) alleging the Bureau is exceeding its authority as granted by Congress.

The CFPB is an independent agency within the Federal Reserve. It has regulatory authority over the financial sector with rulemaking, supervision and enforcement authority. Its primary role is consumer protection. The CFPB authors the Supervision and Examination Manual (Manual), which is a guide for the oversight and review of regulated entities as it relates to their compliance with consumer financial protection laws.

The Lawsuit

The lawsuit was filed in connection with CFPB's update to the Unfair, Deceptive, Abusive or Practices (UDAAP) section of the Manual. This section of the Manual has been amended to provide CFPB regulatory authority over what constitutes unfair discrimination.

The allegations against CFPB are threefold. Plaintiffs are alleging that the updated Manual does not provide guidance on what may constitute unfair discrimination or disparate impacts. Specifically, the Manual allegedly fails to identify protected classes or what actions would not constitute discrimination. Due to the alleged ambiguity of the updated Manual, regulated entities are left with unclear guidance as to the products or services that may be offered to consumers.

Secondarily, as updated, the Manual provides the CFPB the right to examine entities for alleged discrimination. The plaintiffs allege that this exceeds the statutory authority provided to the CFPB by Congress in the Dodd-Frank Act.

Finally, in amending the Manual, the plaintiffs allege that the CFPB failed to comply with the notice-and-comment requirement of the Administrative Procedure Act (APA). Under the APA, prior to any substantive changes to a legislative rule, the CFBP must provide public notice and allow time for public comment. The plaintiffs argue that changes to the Manual were substantive and did not comply with notice-and-comment requirements.

It is the plaintiffs' position that if left unchecked, consumers will suffer as the result of these changes. It is alleged that regulated entities will no longer be able to provide products consumers benefit and enjoy, such as no-fee checking accounts, which are often given to more established individuals with a higher income thresholds and account balances.

The Takeaway

While the litigation process will take time to play out, it is important for regulated entities and other stakeholders in the financial sector to be aware of the CFPB's authority and current philosophy. It remains an essential task for regulated entities to ensure that their compliance protocols align with the expectations of key regulators, such as the CFPB. To that end, regulated entities should routinely examine their operations and compliance practices and procedures with the goal of reducing their risk profile as it relates to issues such as unfair discrimination and disparate impact.

How We Can Help

Holland & Knight's Consumer Protection Defense and Compliance Team includes a robust CFPB and Federal Trade Commission practice, with experienced attorneys who are recognized as thought leaders in the field. The firm has represented dozens of companies and individuals in federal and state investigations concerning advertising, marketing practices, privacy and data security, consumer credit, telemarketing and debt collection, saving clients from significant financial loss, public scrutiny, and having to make changes to their core business operations.

For more information or questions about the specific impact the CFPB's update to the UDAAP section of the Manual can have on you or your company, contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

Related Insights