CFPB Seeks Dismissal of Pending UDAAP Examination Manual Litigation
The CFPB on April 30, 2025, filed a joint stipulation to dismiss its appeal pending before the U.S. Court of Appeals for the Fifth Circuit regarding an agency policy that expands the scope of antidiscrimination oversight.
The Dodd-Frank Act, which established the CFPB, authorized the agency to issue regulations concerning, as well as enforce, a federal statute that makes it unlawful for a consumer finance institution to "engage in any unfair, deceptive, or abusive act or practice." In March 2022, the CFPB amended its Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) Supervision and Examination Manual to expand its examination of unfair practices to include discriminatory practices, whether intentional or inadvertent.
Several trade groups and financial institutions challenged the amendment, arguing that the CFPB lacked statutory authority to regulate discrimination and that it constituted a "legislative rule that failed to go through notice and comment" as required by the Administrative Procedure Act (APA). On Sept. 8, 2023, U.S. District Court for the Eastern District of Texas Judge J. Campbell Barker entered a final judgment granting summary judgment in favor of the plaintiffs and vacating the amended UDAAP Exam Manual, which the CFPB subsequently appealed to the Fifth Circuit.
The joint dismissal comes after the CFPB filed an unopposed motion for a 90-day stay of further proceedings, pending a review of ongoing litigation by CFPB Acting Director Russell Vought, which was granted by the Fifth Circuit. Vought's review has led to the termination of several enforcement actions previously pursued by the agency, as well as dismissal of challenges to its rules. As Holland & Knight previously reported, on April 15, 2025, the CFPB filed a joint motion for consent judgment, effectively vacating the agency's credit card penalty fees rule (the Late Fee Rule), which was challenged by trade groups and financial institutions. Similarly, on April 3, 2025, the CFPB supported the Revenue Based Finance Coalition's (RBFC) motion to stay an action challenging the small business loan data collection and reporting rule, as the CFPB anticipated that forthcoming rulemaking would resolve the subject of the litigation, also previously reported by Holland & Knight.
The Trump Administration's decision to step away from litigating matters involving the CFPB emphasizes its commitment to properly utilizing the rulemaking process to address pending concerns over various agency rules. The focus on properly utilizing the rulemaking process is further demonstrated by the CFPB's April 11, 2025, announcement that it will conduct a review of all guidance documents previously issued to ensure they do not circumvent APA's rulemaking requirements, as Holland & Knight previously reported. Although the CFPB has not yet announced substantive changes to agency rules or guidance documents, it has indicated that it plans to reopen at least some rulemakings, and it is likely that any forthcoming changes will be in line with the agency's commitment to focus its enforcement and supervision resources on "pressing threats to consumers, particularly servicemen and veterans." The CFPB also has issued supervision and enforcement reprieves in connection with certain rules that have either fully or partially become effective recently.
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